Monday, November 22, 2010

IPO watch – XOX Bhd

Source: Trade Shares or Stocks in Bursa Malaysia

XOX Bhd is planning to raise about RM40 million in its initial public offering (IPO), making it Malaysia’s first full-fledged mobile virtual network operator (MVNO) to be listed on the local stock exchange.

The IPO, which is awaiting the Securities Commission’s (SC) final approval, comes as the stock market has hit record highs and has absorbed mega IPOs like the two units of oil giant Petronas.

It will also test investors’ appetite for MVNOs, mobile phone operators that rent air time from incumbent operators like Celcom Axiata, Maxis or DiGi, which operate in a highly saturated market.

But MVNOs target a niche that is either neglected or difficult to enter by incumbents. For XOX, its expertise lies in the urban Chinese market.

XOX’s prospectus is expected to be launched in December or the first quarter of next year. AmInvestment Bank is arranging the IPO which involves 53 million new shares.

“We are very excited about the IPO. Hopefully we can get the SC approval soon,” chief executive officer Ng Kok Heng told Business Times in Petaling Jaya, Selangor recently.

It will use the money for marketing, working capital as well as to upgrade infrastructure and equipment.

Ng believes the IPO could help XOX realise its full potential.

“As an MVNO, we are the thickest because we offer a full range of service. We have voice and we also have third-generation (3G) data services that are very close to the services provided by the incumbents.

“Later, we plan to add on more things for our customers such as contents. We hope to offer more than what the incumbents are offering,” Ng said.

An MVNO is a company that offers mobile phone services like phone calls and text messaging, but does not have its own licensed frequency allocation of radio spectrum. Nor does it necessarily have all the infrastructure to provide mobile telephone services.

In XOX’s case, it offers the services by riding on Celcom Axiata Bhd’s network.

Malaysia now has four MVNOs which are Tune Talk Sdn Bhd, Merchantrade Asia Sdn Bhd and REDtone International Bhd. Although REDtone is also listed, its main business is not solely focused on MVNO, as it also offers services like broadband and discounted calls services for business owners.

XOX now has more than 250,000 customers, with customers spending an average of RM27 a month.

Recently, the company unveiled its Hybrid package – which basically combines both prepaid and postpaid features. Its prepaid customers can have a credit limit beyond what they have preloaded.

“We have a convergence charging system. As for the credit limit, we are very prudent about it and we have the mechanism to extend the credit limit for the serious and genuine customers,” said Ng.

Its Hybrid package has more offerings, including transferring of credits among numbers within the family package as well as data services.

“This means, if a father and son use the package, the father can monitor the son’s usage and mobile spending. When the son runs out of credit, he doesn’t have to go out and buy a reload card. All he can do is transfer from his credit.

“So, we are basically targeting two groups of people. The prepaid segment, as well as the postpaid customers who want the convenience,” said Ng.

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