The unfolding tragedy of Jaring, Malaysia’s first ISP

• Sold for a bargain RM2mil to Utusan Printcorp, which has driven it to liquidation
• Poser over Ministry of Finance nod to sell Malaysia’s pioneer ISP for low price

EMPLOYEES of Jaring Communications Sdn Bhd, Malaysia’s pioneer Internet service provider (ISP), must be feeling punch-drunk.
 
Just about a year ago, they were steeped in the euphoria of having a new owner and potential savior in the shape of Utusan Printcorp Sdn Bhd, with its managing director Norhisam Mohamed Nor coming on board as chief executive officer of the ISP.
 
In his first town-hall meeting with Jaring staff, Norhisam giddily declared, “We will buy Telekom Malaysia one day,” referring to the country’s biggest telco and its biggest rival in the early days of the Internet in Malaysia.
 
Now however, these employees are suffering from the nightmare decision by Malaysia’s Ministry of Finance that inexplicably allowed Norhisam to buy Jaring.
 
For since that town hall in early 2014, the loss-making Jaring has sunk even further into debt, with the new management showing little interest in clearing its books, let alone growing the business.
 
Current and former staff have also lodged complaints with various parties, seeking desperately to draw attention to their plight.
 
Just recently, Tenaga Nasional Bhd (TNB) workers came, escorted by two police cars, to switch off power at Jaring’s headquarters in Bukit Jalil in Kuala Lumpur, due to over RM1 million (about US$265,000) in unpaid bills. Jaring managed to convince the national power utility company not to pull the plug.
 
Between that, and wondering if salaries will be paid on time, employees are at their wit’s end.
 
The company has over 200 creditors, claims a former senior executive, and not paying off its debts finally caught up with it in November 2014 when it was slapped with a liquidation notice by CIMB Bank, to which it owed RM10 million (US$2.85 million), and Approved Restorers Sdn Bhd.
 
Jaring was turned over to a liquidator, KPMG Deal Advisory Sdn Bhd, which in May this year terminated the employment of 97 Jaring workers with less than 10 days’ notice. [Click letter to enlarge]
 
Norhisam has not responded to questions Digital News Asia (DNA) sent him via email, nor to text messages or phone calls.
 
However in a recent development, he is challenging the liquidation notice, with a court date set for the week of July 6.
 
Damage done from liquidation notice
 
The damage has been done. The public fallout has cost Jaring dearly, with staff telling DNA that some current customers are jittery over its future.
 
One even pulled out from giving it a RM1-million contract, says a former Jaring staffer who used to manage that account. He was one of those who lost their jobs in May. [RM1 = US$0.27]
 
More significantly, new business opportunities have also been lost. Jaring has not been able to invest in new infrastructure for customer wins, and as a result has lost millions in potential revenue, says one of its managers.
 
Initially resigned to their fate, Jaring staff who recently lost their jobs are now contesting the legality of the termination. The Public Services Department has set a July 3 meeting for the former employees and Jaring management to work this out.
 
From what DNA has learned, the mood within the remaining 200 Jaring employees has also changed. Fear and resignation of their fate has turned to a simmering resentment at the Malaysian Government.
 
This is especially so at the Ministry of Finance (MOF), which not only sanctioned the purchase of Jaring at the shockingly low price of RM2 million, but has subsequently ignored all entreaties over the fate that has befallen it.
 
Jaring started as a division of what was then known as the Malaysian Institute of Microelectronics Systems (Mimos) of the Prime Minister’s Department, before it was spun off as a separate entity. Both were corporatised, the latter as Mimos Bhd.
 
Jaring was wholly owned by Ministry of Finance Inc before being sold to Utusan Printcorp.
 
“We feel abandoned, like the unwanted stepchild,” said one Jaring executive, adding, “We don’t deserve this.”
 
They are also seeking answers to why MOF sold Jaring to Norhisam, and why was it sold so cheaply.
 
Many are also now asking why the MOF turned down a number of past offers for Jaring. And some who want to know why MOF was not supportive of past management teams’ turnaround plans.
 
“I joined Jaring a few years back under a previous CEO who was brought in by MOF itself to turn Jaring around, but when we presented our plans to them, a number of key elements were not approved by MOF, severely hampering our ability to execute our turnaround,” laments a senior IT executive who is now with a listed company.
 
Bleeding red ink
 
A key part of Malaysia’s Internet history is linked with Jaring, says the IT executive. “I think many of us will remember that clicking sound your dial-up modem makes when you used the Internet in those early to mid-1990s, through Jaring.
 
“They introduced the Internet to Malaysians. That is significant.”
 
However, the IT executive also acknowledges that Jaring was not able to keep up with the times and customer needs, and that goes to the heart of its problems that led to it losing money every single year. Some estimate its losses at between RM6 million and RM10 million a year.
 
Another former senior executive tells DNA that the biggest weakness at Jaring was never its technical capabilities, but its sales and even collections.
 
“I got the impression that sales staff never really pushed for business. Most were content to go after the Government and government-related companies only.”
 
Describing the ISP business as a cash-flow business, the executive feels that Jaring was never aggressive enough in going after sales or in innovating.
 
Collection was also poor. While some of that can be blamed on some government clients being slow to make payments, incentives were also aligned wrongly, he says.
 
“Commissions were paid based on sales and not collections. I felt this was wrong,” he adds.
 
Feeling abandoned
 
“To date, not a single team from MOF has come to visit us to hear us out,” says a Jaring manager who survived the first round of culling, but fears he may not be so lucky the next time around.
 
Jaring staff are also requesting that MOF allow them to see the terms of the agreement between the ministry and Norhisam, with some questioning his management ability.
 
In fact, Jaring staffers have compiled a history of four deals Norhisam has done, and are sharing this with the media and various government agencies they are appealing to for help.
 
In May 2014, Malaysian Malay Printing Entrepreneurs Association deputy president Sulaiman Ali claimed that Utusan Printcorp had sacked all the staff of printing company Dawama Sdn Bhd with no due compensation being given to them, news portal FreeMalaysiaToday reported.
 
RM40mil offer turned down
 
Jaring cannot be such a lost cause that the MOF had to sell it for the low price of RM2 million. According to a former senior executive, it earned around RM110 million in 2013.
 
Which is why the Norhisam deal shocked the entire industry, including Jaring staff who point out that a few years back Puncak Semangat, a corporate vehicle owned by tycoon Syed Mokhtar Al-Bukhary, had actually put in a bid to buy out Jaring for RM40 million.
 
That deal was rejected by MOF. DNA has learnt that MOF was not comfortable with some of the conditions that came attached.
 
These included an extension of some of the government jobs Jaring was responsible for, not taking on any of its debts, and critically, allowing Puncak Semangat to reduce headcount by at least 50.
 
DNA knows of one company which made an all-cash offer at least five times the Norhisam sale price a few years back, but that came to naught as well.
 
As at press time, MOF still has not responded to DNA’s questions, but has acknowledged receiving them. Chief among our questions was: Why was Jaring sold to Norhisam at such a low price?
 
Customers affected
 
Despite its troubles, Jaring still has over 40 corporate customers it is providing broadband and various connectivity services to, including the central bank, Bank Negara Malaysia, various government bodies, and a large number of public universities.
 
“For the universities especially, where Jaring is the primary broadband provider, closing us down will have a huge impact on their operations,” says a Jaring executive.
 
A large number of government agencies are also still dependent on Jaring, and there is even a multinational in the logistics space that is a big customer.
 
But how long they will stay is the big question, even if Norhisam wins a stay order against the liquidation.
 
The bigger questions looming is the role MOF has played in the Jaring tragedy. And it has chosen to remain silent.
 
Editor’s Note: For a chronology of events at Jaring since Utusan Printcorp took over in January 2014, coupled with some background on Jaring, download this document that was prepared by Jaring staff who wish to remain anonymous for fear of retribution.
 
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