Binasat’s game-changing teleport facility

Telecommunication support services provider Binasat Communications Bhd is banking on its new satellite teleport facility at Technology Park Malaysia in Bukit Jalil here to be a game changer for the company.

Sited on 0.65 hectare (1.6 acres), the teleport facility would help Binasat open new doors and move up the value chain.

With the land secured, requisite licences in hand and adequate funds raised from its initial public offering in January, its managing director Na Boon Aik said it is now installing antennas on the farm to give its development master plan a finishing touch.

The group will next submit its development master plan to the Kuala Lumpur City Hall within the next three months, and construction works will then ensue, he added.

The infrastructure, which will cost Binasat some RM15 million, is expected to be commissioned by early 2020, Na told The Edge Financial Daily in an interview.

A teleport facility is the main ground station of a satellite network that serves as the main connection point between the satellite and a terrestrial network, such as the internet or a wide area network.

Na likened the teleport infrastructure to the “backbone” of the industry. With the teleport, Binasat will be able to provide customers with new services such as satellite downlink services for video content, managed satellite network services, uplink and downlink services to send and receive video data between Malaysia and other countries or region, thereby creating opportunities for new revenue streams.

The group’s focus on this particular segment of the industry was partly motivated by its less competition and cost pressures faced by telecommunication companies (telcos) as of late, the management shared.

“Not everyone provides satellite connectivity, so chances are that our teleport facility will not only be used by Malaysian communications service providers, but also by those in the region,” said Binasat chief executive officer Zulamran Hamat.

“As a matter of fact, we have been talking to several satellite operators and are about to close the working collaboration or understanding before we put up the gateway,” he added.

Binasat is involved in the last mile delivery of the business, principally catering to end-users. This includes providing telecommunications supporting services to satellite, mobile, and fibre optic networks, such as installing very-small-aperture terminals (VSATs), base transceiver stations (BTS), and internal cabling and fibre migration.

The group captures a 57% share in the local market in the business of satellite ground station maintenance as at October 2017, and has installed a total of 6,250 VSATs and 10,500 BTS to date.

As the group awaits the completion of the teleport facility, Na said Binasat will be facing near-term challenges.

“The financial year ended June 30, 2018 (FY18) was challenging for us because of the change of government and policies. The current market [environment] is still not that great. Telcos are looking to cut cost. Although they actually need to spend, they are doing so quite conservatively,” he explained.

Over the past three years, Binasat has delivered consistent double-digit growth year-on-year (y-o-y) for both its top and bottom lines. The group grew its revenue of RM39.44 million in FY15 to RM54.52 million in FY17, while net profit more than doubled to RM10.03 million over the period, from RM4.73 million in FY15.

In FY18, Binasat registered a 4.9% y-o-y growth in revenue to RM57.19 million. Net profit, however, fell 9.9% to RM9.03 million although it would have been RM10.39 million if one-off listing expenses were excluded.

In view of the cost-cutting measures among clients, Na said the group is conservatively projecting net profit to grow by between 5% and 10% in FY19.

Nonetheless, Binasat finds comfort in knowing that nearly half or 48.7% of its revenue are recurring income — mainly from providing operations and maintenance services for its clients that include major players in the industry such as Maxis Broadband and Huawei Technologies.

It currently has in hand over 10 major contracts, secured early this year and last year. Each contract will last a period of between one and three years, according to Zulamran.

And despite the market saturation, it expects to see continued demand for its services as telcos are committed to upgrading their network capacity, coverage and fiberisation work, to meet government policies and consumers’ need for data and network speed.

“In terms of subscriber base, I’d say the industry is mature. But the need is still there. Technology keeps changing every two or three years and that’s beneficial to us. For one, mobile networks have just completed the 4G LTE (long term evolution) upgrade and now everyone’s talking about 5G,” said Zulamran.

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