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CMC Infocomm Understood
Asean Equities Review had the opportunity to catchup with the Management of CMC Infocomm Limited. This is a company that had launched its IPO on 31 Jul 2015. It is to be listed on the Catalist Board in Singapore on 13 Aug 2015. The public offer is for 2.4 million shares at 25 cents each. We caught up with the Management to better understand the company’s and its business.
CMC Infocomm is a Telecom System Integrator. It is in the business of helping Telcos such as Singtel, M1 and Starhub install their mobile telecom infrastructure such as base stations and other mobile network infrastructure. The Telcos are thus their customers and the equipment vendors such as Nokia, Ericsson and Huawei are their partners. CMC Infocomm then installs and maintains these mobile networks. One of their key capabilities is a strong knowledge of in-building mobile coverage.
CMC Infocomm’s business used to be owned by Keppel T&T which used to be a significant shareholder in M1. The business has since been bought out while retaining the key management and operations team. Hence M1 remains an anchor customer of CMC Infocomm. They have also done work for other 2 Telcos in Singapore and the region.
Their focus is on the wireless space and not the wired space. Thus they are not involved in the next generation broadband network rollout. Their work is in the deployment of the handphone network. This progressed from 2G to 3G to HSPDA to 4G and subsequently 5G. The thirst for mobile bandwidth has seen shorter cycle times between the various generations of mobile network technology. CMC Infocomm’s business is thus driven by the upgrading of mobile infrastructure by the Telcos. In this regard, they are able to provide complete solutions to Telcos.
Besides Singapore, CMC Infocomm has also undertaken projects in Thailand and Philippines.
Some interesting competitive strengths of CMC Infocomm that we noted in our conversation are as follows.
Firstly, CMC Infocomm has been in the business for 20 years and has undertaken over 80 projects in the mobile space for their Telco customers. This track record extends beyond Singapore to Thailand and Philippines. In Singapore, they have done work for all 3 Telcos. This is no mean feat given how fiercely competitive the Telco Industry is in Singapore.
In Singapore, each Telco has its own related company to help it with its integration work. Singtel has NCS and Starhub has Telechoice. Thus it is not easy for another system integrator to engage the other Telcos. One standout project for CMC Infocomm is the Gardens by the Bay indoor and outdoor coverage project in May 2012. This was jointly awarded by the 3 Telcos.
Secondly, CMC Infocomm has positioned itself as the preferred partner to the 3 key mobile equipment vendors. They are Nokia, Ericsson and Huawei. This involves understanding the equipment and being able to design deployment networks for each type of equipment. As networks get more and more complex this engineering design expertise is an asset. The successful deployment of new networks in Singapore then becomes a track record for deployment of similar networks in other Southeast Asian countries. This is where the equipment vendors have the incentive of bringing an established integrator like CMC Infocomm into these Southeast Asian countries with them.
Thirdly, the revenue associated with the deployment of these mobile networks tends to be lumpy. This is because most of the infrastructure expenditure is upfront. While there is maintenance revenue, this is not as sizeable as when a new mobile network is rolled out. One mitigating factor in its business is that Singapore is usually the first adopter for the new mobile network while the other countries in the region are the later adopters. If CMC Infocomm can clinch some of these regional projects, they will be able to smooth out the lumpiness of their earnings.
Lastly, in order to complete the value chain, CMC Infocomm are looking to expand into the wired line integration business. This is complementary as they would be upselling services to the same customers. There are also plans to take on more projects in Malaysia and Indonesia going forward.
GET TO THE POINT : The demand for mobile bandwidth is strong and CMC Infocomm is a direct beneficiary of that demand. And if Telcos in this part of the world upgrade their networks at faster pace, we should see good growth for CMC Infocomm. Also if IDA in Singapore decides to award a 4th Mobile Operator licence, then CMC Infocomm as a neutral and competent integrator could benefit.
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