Monday, January 30

REDtone plans to allocate 2/3 from its rights issue for East Malaysia

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KUALA LUMPUR: REDtone International Bhd (REDtone) said that will be undertaking a rights issue and aims to raise a total of RM41.522 million from the exercise.Out of the total, it will be putting aside RM39.12 million for its overall expansion plans and will be allocating 2/3 out of this amount for its East Malaysian expansions.

The conversion price of its irredeemable convertible unsecured loan stocks (ICULS) that was released to the Bursa Malaysia a few hours prior to the media briefing was fixed at RM0.25.

The broadband service provider had also set a RM0.25 exercise price for its warrants, which are exercisable into one REDtone share per warrant.

REDtone’s group managing director, Wei Chuan Beng told The Borneo Post that, “We have been in the East Malaysian market for the past two years. REDtone has been riding on WiMAX in addition to other hybrid technology to deploy its broadband services in East Malaysia. East Malaysia is quite an interesting market. It has pockets of entities that can afford more than others.”

“What we are doing now is that we are serving the needs of these adopters, as we call them. We are definitely working on making our customer base in East Malaysia bigger but you have to understand that the cost of implementation in East Malaysia is very much higher if compared with Peninsular,” expressed Wei and added that this glitch has not disheartened the company yet as it is looking for ways to work around the cost constraints.

He said that the proceeds raised from its rights issue will be used to accelerate its roll-out plan to offer broadband-on-demand in line with orders received and that will be part of its ongoing expansion for the network-on-demand.

“We have invested more than RM25 million in research and development to date and we will focus on the East Malaysian market in a progressive way,” he stated.

He explained that currently in East Malaysia, the company is using a mixture or hybrid of WiMAX, Point to Point, Point to Multipoint links, microwave and or integrated satellite technology to connect one spot to another in rural or far areas.

REDtone registered a profit after tax and minority interest of RM1.58 million for its second quarter year ended 30 Nov, 2009, which was a surge of 32 per cent compared with its first quarter results of RM1.2 million.

As for its revenue, its second quarter results increased by 9.3 per cent to RM21.2 million from RM19.4 million in the first quarter. The East Malaysian market contributed about RM2 million and eight to nine per cent respectively.

Wei disclosed, “Over the past 12 months, the number of data and broadband customers who are from the business and government sectors have doubled to over 1,000, which works out to be approximately 500,000 users. Out of which 50,000 users are our East Malaysian customers.”

He added that with so much positive feed back on its offerings, the company is optimistic in achieving anywhere between 50 to 100 per cent growth in the number of broadband customers over the next year.

Currently, the broadband segment contributes 20 per cent to the group’s revenue, with East Malaysia contributing about 20 per cent out of that.

“Despite only 10 per cent in revenue contributed by East Malaysia, we have to in terms of capital expenditure allocate 2/3 out of RM39.12 million for our East Malaysian expansion. We are still committed to provide our services there. We are also hoping the state government would be able to assist us in this manner.

“We are also looking into possible partnerships or joint ventures that will be able to facilitate our progress in East Malaysia,” said Wei and added that any kind of support to lower its cost of expansion there will thereafter directly beneficial to customers.

REDtone’s raising of funds through ICULS and warrants was done to minimise the immediate dilution effect on the company’s earnings per share, which would rise from a full equity issue.

REDtone expected its abridged prospectus to be issued on Feb 4, 2010 and will be targeting the listing of and quotation of its ICULS and warrants in Bursa Securities this March.

Also present at the media briefing was REDtone’s group chief executive officer, Zainal Amanshah.