Green Packet, MYTV in contract dispute

TheEdge Tue, Mar 26, 2019 05:00pm - 5 years View Original


MYTV Broadcasting Sdn Bhd is embroiled in yet another dispute, this time with Green Packet Bhd for non-payment of 200,000 set-top boxes (STBs) and non-fulfilment of obligations under a contract signed in January last year.

Last November, the broadcast service provider got into a dispute with Telekom Malaysia Bhd for failing to pay RM60 million for services rendered. As a result, MYTV saw its broadcasting services in several states suspended.

On Feb 4, Green Packet issued a notice of arbitration to MYTV, seeking payment for the first batch of 200,000 STBs that were supplied to the latter, as well as for the company to take up the supply and delivery of the remaining 1.4 million STBs.

Not many are aware of the dispute between the two companies as the announcement was somewhat hidden within Green Packet’s Feb 26 quarterly results announcement, under “material events subsequent to the end of the quarter”.

Few details of the arbitration case were provided as the company did not make any separate announcement on material litigation.

Green Packet merely said the notice of arbitration was issued pursuant to “Clause 42 of the agreement” dated Jan 23 last year, for the design, supply, assembly, testing and acceptance of DVB-T2 (T2000) STBs.

Under the contract, purchase orders may be issued by MYTV to the contractor from time to time for the supply of up to 3.6 million STBs, provided that no further purchase orders will be issued after the expiry of two years.

On Jan 23 last year, Green Packet announced that it had clinched a RM272 million contract to supply 3.6 million STBs to MYTV, a company that is controlled by tycoon Tan Sri Syed Mokhtar Albukhary, which was awarded a concession by the government to operate the infrastructure and network facilities for digital terrestrial TV services.

The orders were expected to help loss-making Green Packet — a communications and technology services firm founded by technopreneur Puan Chan Cheong in 2000 — to return to the black in the financial year ended Dec 31, 2018 (FY2018).

However, Green Packet’s turnaround plan seems to have hit a snag due to the contract dispute.

“This contract was supposed to be a significant revenue contributor to Green Packet. But now, it seems like there will be no positive financial impact on the group until the dispute is resolved,” a senior media analyst tells The Edge.

For perspective, purchase orders for 1.6 million STBs will be directly issued by MYTV, while the remaining two million STBs will be from the Malaysian Communications and Multimedia Commission (MCMC) in the form of back-to-back orders.

Recall that MYTV was awarded the licence under the National Broadcasting Digitalisation Project to develop and manage the infrastructure and network facilities for digital terrestrial TV (DTT) services in Malaysia, in a move to migrate the country’s terrestrial broadcasting from analogue to digital.

 

What went wrong?

According to industry sources, MYTV appears to be running into financial difficulties, but the DTT project will proceed as the company is likely to source the STBs from other vendors.

“Syed Mokhtar claimed that he had invested close to RM500 million (in MYTV), mainly to build the network and infrastructure, but the company somehow does not have enough money to execute the DTT project,” a source tells The Edge.

The senior media analyst says MYTV is stuck in its current predicament because it is not investing enough in its business. “At one time, it was trying to get some vendors to finance the company,” the analyst adds.

Although Green Packet stepped in to help MYTV to fast track the DTT project in January last year, the broadcasting firm is said to be facing some financial difficulties, and orders and payments were delayed.

When contacted by The Edge, both Green Packet and MYTV declined to comment on the dispute. Court documents, meanwhile, are not publicly available as arbitration to resolve disputes is held behind closed doors.

A check on the MYTV website shows that the company has commenced distribution of free decoder sets to Bantuan Sara Hidup Rakyat recipients nationwide until the end of this month.

MYTV is responsible for developing a digital multimedia broadcasting hub and a network of high, medium and low-powered digital TV transmitters. The initiative is under the purview of the Ministry of Communications and Multimedia and monitored by MCMC.

Overall, MYTV will be installing 60 main transmitters and 40 gap fillers to provide signal coverage to 98% of the population.

Analogue switch-off (ASO) is the process by which older analogue TV broadcasting technology is converted to and replaced by digital TV.

Switching to digital TV is necessary as the world migrates from analogue to digital broadcasting. Going digital will allow the government to free up frequency spectrum that can be used for higher quality and efficient mobile services.

With DTT, a lower cost of capital expenditure can be expected as there is no need to lay hybrid fibre coaxial cables, rent additional transponders or launch new satellites. With the reduction of infrastructure costs, broadcasters will be able to concentrate their financial resources on producing content.

Asean member countries have been collectively aiming for ASO in phases between 2015 and 2020. To ensure signal harmonisation, countries with interconnected borders, including Malaysia, Thailand, Singapore, Indonesia and Brunei, have agreed to a 2018 ASO target.

It is part of the national agenda to transform the country’s broadcasting industry through digitisation with the aim of improving living standards as the country gears up for developed nation status by next year. It is also one of the key initiatives in the 11th Malaysia Plan.

 

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