Axiata-Your Deepavali Plan,please?

The plan by India’s second largest mobile operator, Reliance Communications to offer the cheapest tariff in the country is expected to pressure Axiata’s associate, Idea Cellular so says ECM Libra Investment Research today.

The disruptive plan, which allows both prepaid and postpaid users to make calls at only US $1 cent/min (RM0.36) nationwide, would see Axiata facing significant pressure on margins and downside risks to revenue and subscriber growth.

In a research note, ECMLibra said on average subscribers paid US $2 cents/min for local calls, while national long-distance calls were at about US $3 cents/min.

ECM Libra speculates Axiata is expected to respond quickly to avoid problems and maintain its growth trajectory, as the next several weeks coincide with Deepavali and the wedding season in November and December.

A decision is crucial to ensure it does not lose out as mobile usage and new subscriber additions will likely surge during the period.

However, being only the fifth largest among 11 players, Idea may not have the clout to go head-to-head with Reliance in a price war.

Reliance currently operates on a subscriber base of 84.8 million with an Earnings Before Interest, Taxes, Depreciation, and Amortization (Ebitda) margin of 39.1 per cent.

Idea on the other hand has 50.1 million subscribers and a Ebitda margin of only 28.9 per cent.

The market leader, Bharti Airtel, leads with 110.9 million subscribers and Ebitda margins of 40.6 per cent.

So, what is you Deepavali plan, Axiata?

Think Tangram.........

Time Flies!

See how Time flies!

On achieving the court's sanctions for its restructuring plans, Time Engineering (Time)took wings today. Opening at 28 sen, it became the volume leader by mid-day and further up-trended in the afternoon for a glorious price increase of some 27% today. With the restructuring in place, most of its debts have been wiped out in one felled stroke and its only loans are to a development bank that charges it a friendly two percent interest. Also, The option to sell off Time.dotcom at a good price within certain price and limits stays put to protect shareholders' interest. Interestingly, the number of shares will not be diminished but the par value will be converted to 20 sen from one ringgit.


We shall see how much will be the re-rating before it stabilizes.

Australia Leads!

Is it a red herring or is Australia showing us the way out of global recession?

When the Reserve Bank of Australia’s raised interest rates yesterday, it created a tsunami of sorts with a rally on commodity prices and strong gains in European and North American share markets indicating a positive sign for the global economy.

The RBA lifted rates by 25 basis points to 3.25 per cent.

The Australian stockmarket jumped in early trading today (7 Oct)amid growing confidence about the global economic recovery.

The resources sector was leading the bourse higher after gold bullion shot up to a record $US1045 an ounce in New York. Banking stocks were also stronger.

US stocks leapt higher at the opening bell overnight after a surprise interest-rate increase by the RBA drove a pullback in the US dollar.

The Australian dollar peaked at US89.20 cents in New York, its highest level in nearly 14 months, and in domestic trade this morning was at US89c.

ABN Amro Morgans adviser, Lisa Jarvis, said Australian stocks, currency and bonds were hot property at the moment.

“Money from America is trying to find a home in Australia,'' she said.

“Our currency is stronger than the US. The US dollar is losing ground each day.

“Everyone is looking for appreciating assets... and we have the highest interest rates now. Asian markets will play it, too.”

On Wall Street, the the Dow Jones Industrial Average closed up 131.50 points, or 1.37 per cent, at 9731.25. In two sessions, the Dow has jumped 243.58, or 2.57 per cent, marking its largest two-day gain since the two days ended July 16.

So those who invested in the Aussie dollar is laughing all the way to the bank, this time so much louder, I am sure!

More Serious Unemployment in the US

More jobs were cut in September 2009 than expected, read a Reuter's report.

Experiencing the worse recession in 70 years, US employers unexpectedly cut more jobs in September than in August, underscoring the fragility of the economy’s recovery from its worst recession in 70 years as businesses remain cautious about the future.

The Labour Department said yesterday non-farm payrolls dropped by 263,000, marking the 21st straight monthly decline and helping to lift the unemployment rate to a 26-year high of 9.8 per cent from 9.7 per cent in August.

While the contraction in employment was worse than the 180,000 drop economists surveyed by Reuters had predicted, many believed it did not signal the start of a reversal in the trend toward stabilisation of the labour market.


Economists said September’s reading was distorted by a 53,000 drop in government employment, likely reflecting cutbacks by state and local governments, many of which are facing deep budget problems caused by the recession.

“We are more inclined to view September as a temporary setback than as a signal that the decelerating trend in job losses has stalled out,” said Stephen Stanley, chief economist at RBS in Greenwich, Connecticut.

US stocks ended lower as investors viewed the jobs data as more evidence of a slower recovery from recession.

Despite the signs of economic weakness in the jobs report, US Treasury debt prices fell, pulling up the yield on the 30-year bond from five-month lows as investors took profits before next week’s US$78 billion (RM273 billion) in debt auctions.

The jobless numbers might be bad news for US President Barack Obama’s attempt to reform the US healthcare system, as Congress will want to limit spending on a health sector overhaul if the economy is taking longer to recover.

While Obama’s overall approval ratings have stabilized at 50 per cent or above since August, deepening unemployment could drag them down, and polls continue to show significant opposition to his handling of healthcare.

The government has put in place a US$787 billion stimulus package to help the economy and the administration has hinted a second package might not be needed for now.

“Today’s job report is a sobering reminder that progress comes in fits and starts — and that we’re going to need to grind out this recovery step by step,” Obama told reporters.

The government revised job losses for July and August to show 13,000 more jobs were lost than previously reported.

A turnaround in the jobs market is viewed as the missing link in recovery from the longest and deepest slump since the Great Depression of the 1930s. The economy is believed to have started growing in the third quarter.

Since the start of the recession, the number of unemployed people has soared 7.6 million to 15.1 million, the department said. While the pace of job losses has moderated from early this year, companies are still not hiring on a big scale.

“I don’t think it argues against a modest recovery in the US economy ... but this is why we are not in a rapid V-shaped recovery,” Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh.

Among the main culprits behind the big drop in non-farm payrolls in September was the service-providing sector, which shed 147,000 jobs. Retail employment fell 38,500.

A gauge of labour market slack that measures both the officially unemployed and discouraged job seekers rose to a record 17 per cent in September from 16.8 per cent in August. The report also showed 5.4 million people had been unemployed for more than six months.

Some analysts reckon the unemployment rate would have breached the 10 per cent mark last month were it not for the fact that the labour force fell by 571,000, a sign that some discouraged job seekers had given up the search for work.

The labour market slack and the anaemic rise in wages suggest that inflation remains a distant threat for now and the Federal Reserve will probably delay withdrawing some of the support it is giving the economy.

A Reuters survey yesterday showed firms that deal directly with the US central bank believe the Fed will not raise its benchmark overnight lending rate, currently near zero, until after the jobless rate has peaked. The jobless rate is seen peaking either late this year or early 2010.

Still, there were a few encouraging spots in the report. Manufacturing unemployment slowed and the number of newly unemployed people in the country eased to 2.97 million, the smallest in a year.

“It’s yet another sign that the pace of layoffs has been slowing,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, Princeton, New Jersey.

The average workweek, which closely correlates with overall output and gives clues on when firms will start hiring, dipped to 33 hours from 33.1 in August. Average hourly earnings inched up to US$18.67 from US$18.66. — Reuters

Almost 100 Banks are closed in the US

As of Oct 3, three more banks joine the failed league, bringing the total to 98 this year. Regulators continue to shutter financial institutions that are overwhelmed by bad loans and liquidity problems.

According to a just released Reuters report,the Federal Deposit Insurance Corp said that Warren Bank in Michigan was closed, with Huntington National Bank of Ohio taking over its deposits. It had US$538 million (RM1.9 billion) in assets and US$501 million in deposits.

Jennings State Bank in Minnesota was also shut down, with Central Bank in that state assuming its deposits. It had US$56.3 million in assets and US$52.4 million in deposits.

The third bank closed by bank regulators was Southern Colorado National Bank, with Legacy Bank in the state taking over its deposits. It had US$39.5 million in assets and US$31.9 million in deposits.

All the branches of the institutions will open today under their new owners and customers can continue to use cheques, automated tellers and debit cards to access their funds.

Combined, the three latest failures are expected to cost the FDIC's insurance fund a total of about US$293 million.

Earlier this week the FDIC took steps aimed at shoring up the depleted insurance fund by proposing that banks prepay three years of their regular assessments.

The insurance fund's balance dipped negative as of this week, as a spike in bank failures have been draining the FDIC's resources. The agency said it expects the total bill for bank failures to come to US$100 billion from 2009 through 2013.

The prepayment of assessments will give the FDIC an additional US$45 billion in liquidity, and was seen as an attractive alternative to charging banks a hefty special fee.

Banks will prepay the assessments at the end of this year, but not have to recognise the fees as an expense on their books until they are normally due.

The FDIC insures accounts up to US$250,000, and notes that those deposits are fully protected, despite a negative insurance fund balance.

The agency also has the option of tapping a US$500 billion line of credit with the US Treasury. It last borrowed from Treasury during the savings and loan crisis of the late 1980s and early 1990s.

The FDIC said it expects failures to peak in 2009 and 2010, and that industry earnings will recover in 2011. Chairman Sheila Bair has said failures are a lagging indicator, and that the banking industry will continue to suffer, even as the economy shows encouraging signs of healing.

Looks like the American financial system is further assailed by the hidden spiraling forces of the sub-prime after almost a year of the collapse of the Lehman Brothers.

Shocking US Unemployment Statistics

U.S. September unemployment rate hit the highest level since June 1983 and payrolls had now dropped for 21 consecutive months.

The U.S. Labor Department posted that U.S. employers cut a deeper-than-expected 263,000 jobs in September, lifting the unemployment rate to 9.8 percent. The report fueled fears the weak labor market could undermine economic recovery.

Meanwhile, U.S. factories orders fell 0.8 percent in August, worse than economists' expectation, reported the Commerce Department on Friday. The decline followed a 1.4-percent July increase. Economist had expected that the demand for manufactured goods might grow 0.7 percent in August.

Analysts said that factories will remain under pressure because of weak consumer spending as American households deal with the rising unemployment.

Poor Broadband Quality?

KUALA LUMPUR, Oct 2 – Malaysia was ranked a poor 48 out of 66 countries for Internet broadband quality in a study conducted by Oxford University and sponsored by Cisco.

The global study on broadband quality conducted by Oxford’s Said Business School listed Malaysia among countries which had Internet speeds which were “below today’s applications threshold.”

Malaysia is listed in the same category but above countries like the United Arab Emirates, Philippines, Pakistan, Morocco, Vietnam and Indonesia. China, Malta, Brazil and Thailand are among countries just ahead of Malaysia in broadband quality but still in the same low category.

Countries like Singapore, Britain, Australia, Spain, Turkey and the Ukraine were listed above Malaysia as having Internet speeds “meeting needs of today’s applications.”

Switzerland, the United States, Russia, Taiwan and Hong Kong “comfortably enjoy today’s applications. Crucially, Korea, Japan, Sweden, Lithuania, Bulgaria, Latvia, Netherlands, Denmark and Romania were identified as countries with broadband speeds that were “ready for tomorrow.”

The study was conducted between May and July this year and Broadband Quality Scores (BQS) were awarded based on 24 million records sourced from speed tests.

A similar study conducted last year established that download speeds of 3.75 Mbps and upload of 1 Mbps was the quality requirement needed for today’s applications such as social networking, video steaming, video chatting and file sharing.

For what was classified as “tomorrow’s requirements” speeds of 11.25 Mbps for downloads and 5 Mbps for uploads was needed for visual networking, HD video streaming, consumer telepresence, large file sharing and HD IPTV applications.

According to the study, the research team had found that broadband quality was linked to social and economic benefits and that countries with high broadband quality have broadband on their national agenda.

In a statement earlier today, the DAP’s Lim Kit Siang described the study as confirmation of Malaysia’s unchecked plunge in international IT competitiveness.

“Internationally, broadband quality has moved from one of penetration, i.e. who had broadband connection and who did not, to broadband speed but Malaysia is till bogged down in the initial stage.

“Some six months ago, when Datuk Dr Rais Yatim was also appointed Communications Minister apart from his other portfolios of Information, Culture and Arts, I had called on him to give top priority to turn Malaysia into a broadband power, both in broadband penetration rate as well as in broadband speed if Malaysia is to enhance its competitiveness to take its rightful place in the global arena.

“I had asked what Malaysia’s national average broadband speed was, because nobody was talking about 2Mbps – we are lucky if we get 512 or 256kbps without disruption!”

Malaysians in selected areas will get access to high-speed broadband only by the first quarter of next year.

Residents of Taman Tun Dr Ismail, Bangsar, both in Kuala Lumpur, Subang Jaya and Shah Alam have been promised broadband speeds of 10 Mbps and above under the High-Speed Broadband (HSBB) project.

Residents in high-worth economic zones such as the rest of the Klang Valley and Iskandar Malaysia are expected to get the service later with 1.3 million households expected to have access by 2012.

The HSBB project is a public-private partnership between Telekom Malaysia and the government. Telekom is expected to invest RM8.9 billion of its own funds while the government will put in RM2.4 billion.

Telekom has so far claimed RM290 million from the government for work done.

Malaysia currently lags behind advanced countries in terms of quality and affordability of its broadband offerings, which has been confirmed by the Oxford University study.

While some countries such as Japan, Hong Kong, South Korea, Sweden and Finland have been enjoying speeds up to 100 Mbps for several years now, most Malaysian still make do with speeds of 1 Mbps or less.

Recently, Singapore, China and Australia have also upped the stakes in this strategic sector and announced massive initiatives to wire up their countries with fibre optics.