Select-TV getting Asia into IPTV through telcos

Malaysia-based IPTV solutions company Select-TV may not have hit many headlines since it began in 2006, but it blipped on e27′s radar when Intel Capital announced on 16 November that Select-TV was among the 18 start-ups that it would be investing US$77 million in.

The amount invested by Intel Capital was undisclosed, although Elfred Yu from Select-TV recently told e27 that together with another round of funding Malaysian Venture Capital (Mavcap), the total amount raised was about US$5 million.

Select-TV itself is no spring chicken, and has been quietly making strides across Asia, particularly in the Middle East, Vietnam, Thailand, and Singapore, where it has been forging partnerships with telecommunication companies interested in making a content play. Where Malaysia is concerned, however, is it makes up only a fraction of Select-TV’s revenue – perhaps explaining the lack of local press coverage.

We spoke to Select-TV’s CEO CS Goh on what the company has done so far over the past four years, and how it seeks to grow rapidly in the coming year as the IPTV space becomes increasingly competitive in Asia.

Could you explain to us what Select-TV does, and where its business is focused at?

We provide end-to-end IPTV solutions, and started providing our services for Star Cruises and hotels when we launched in 2006, with most of our markets outside Malaysia. We’ve been gaining good ground with the hospitality market, and after landing a few good deals in the Middle East – The Emirates Palace Hotel, The Burj Khalifa and the Yas Island Ferrari Theme Park – our reputation has increased, and we’re now recognised as a premium service provider.

Then, nearly two years ago, we decided to move into the home markets. Six months back we started pitching to telcos and we landed our first deal with M1 in Singapore to provide home IPTV. Since then, we’re now in Vietnam, and Oman as well, but we’re still trying to break into Malaysia.

Where homes are concerned, we’re seeing the big boys coming in from China and Europe jumping into IPTV, but we noticed a big flaw. IPTV services are targeting telcos that are interested in going into content, but they don’t think through the business viability of such a move.

Many telcos are jumping in because they have the infrastructure, but that’s one of the largest mistakes and explains why there are so many failures in the IPTV space. Telcos have to understand that when they go IPTV, they have to ask themselves: what are you going to do to encourage and increase the average revenue per user to justify that 200% increase in penetration cost compared with incumbent content providers like Astro and Starhub? Many of them trying to compete head-on in terms of channels, and with that they’re choosing a battlefield that the enemy has mastered.

So when we designed our product, we needed to come up with something that was viable. We came up with creative solutions and services that avoided direct comparisons with incumbent channels – we focus purely on on-demand video, and also provide about 100 other add-on services across the markets. In Thailand, for instance, where there are many free-to-air channels, users can opt to pay 100 baht a month for a service to record programmes. Other services include a Feng Shui service and stock market services.

We can also now take on the role of an outsource partner, where if the telcos don’t have the core competency to run an IPTV service, they’ll let us run it. We’re growing from being just a technology provider to becoming a total outsource partner.

What’s your subscriber base like?

We have about 40,000 individual subscribers, and target another 150,000 by the end of next year – which isn’t much, considering that our Vietnam telco client is targeting 700,000 customers overall. Seeing that our product is a niche one, we’re aiming for about 20% of that number. Most of our client base is in Thailand, Vietnam, and the Middle East, and currently about 90% of our total turnover comes from outside Malaysia.

Why not Malaysia?

We tend to lack the aggressiveness when it comes to new technologies, but I made a pledge early on to get at least 30% of our revenue from Malaysia. We’re looking to complement HyppTV (the IPTV service by Telekom Malaysia) to come up with a viable business model for the IPTV space, as we definitely see a gap that can be captured.

Consider the new generation of viewers that don’t sit in front of the TV, but watch content on their own time – this is the generation that we are catering to, a generation that allows for an entry point for a newcomer besides the incumbent, like Astro. But for that to happen, there needs to be someone that’s ready and focused on this market.

What would the recently raised funds be put into?

It would go mostly into the company’s growth, including setting up more regional offices and marketing more aggressively. We’re starting to position ourselves more strategically, and with a larger size we can tackle new markets like North America and Canada, where we just had a confirmed order of 30,000 units.

Besides funding, what else does Intel Capital do for Select-TV?

Intel opens up markets that we never dreamed of – thanks to them, we’re getting new opportunities almost every week, like meeting up with potential telco clients from Poland and other emerging countries. You’d be surprised at how well the infrastructure is in these countries; while we were busy laying copper, they were busy doing something else – like having a war – so they had a blank slate to begin with and started laying out fibre straight away instead of tackling legacy issues.

Is your company profitable right now?

Yes, it has been profitable for the past three years, and last year we managed RM3.5 million profit after tax, and we’re hoping to hit more this year. Over the past three years, the hospitality sector contributed to a bulk – about 90% – of our core business, but since last year, the telcos now pick up about 50% of our revenue, and we foresee it making up about 70%, thanks to the sheer volume of their subscribers.

What’s the future of IPTV in Asia and Malaysia?

People say there will never be enough space for another box in the same house, but I disagree. Your broadband connection, for instance, also needs a box which provides you another content service. In Malaysia, the problem is that we’re too concerned about the technology side of things – about laying out fibre, for instance, but the fact is that we don’t need to have fibre to the home (FTTH) first.

What we need is a solid backbone and a DSL 2+ connection – and copper is more than enough to deliver HD content. What we’re doing in Vietnam is carried out through DSL lines –delivering 180 channels, including High Definition content. It can be done, there’s no need to have FTTH first. So we want to make that a workable operating business first, and when fibre is ready, all we need to do is upgrade the offering.

How much funding has Select-TV received thus far?

We’ve raised about RM20 million in funding over the years, with Malaysia Debt Ventures Bhd (MDV) providing RM6 million for project financing initially, which we’ve paid up, and after that provided us with another RM3 million line.

While we do qualify for an IPO, we thought the cost was too high and the market isn’t really that strong. Besides, the money from Mavcap and Intel has raised more than an IPO would’ve and it costs less. Investors like Intel do not see small-scale IPOs – they like to see things grow large enough for a big substantial IPO. So we aim to grow three to four times bigger than we are now to capture a larger IPO, and hopefully become one of the largest players in IPTV in Far East, if not the world.

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