If one reads this announcement superficially, as some did, it does look like previous non-vetted announcements that never eventuated, with a lot of fluff in there.
However, if read carefully and linked with the previous one, one can see that the pieces of the puzzle are now starting to fall into place in Indonesia.
- I suspect the delays in delivery were due to TV2U inability to order the equipment earlier, probably due to lack of funding and suppliers wanting payment before shipping. The injection of funds by Cancun Trading may have helped resolve that situation, probably stimulated by the perspective of a customer like Indosat. This is my personal conclusion but I may be wrong.
- Now, the equipment is delivered and is being installed, and payment of 65% of the $800,000 (as per previous announcements) has been received (Quoting announcement: "TV2U today receiving a substantial payment from PGASCOM totalling 65% of the funds owed under the contract."). This is not hype as it has to appear on TV2U's next financial report (most likely the 2018 Annual Report). In my opinion, anyone holding who truly doesn't believe this payment to be real better plan on leaving fast because TV2U will be in a world of pain with the ASX if their announcement is misleading.
- Will it alleviate the need for another CR? Maybe, maybe not. If the equipment was paid for with the Cancun funds then a CR is likely. It also depends on how quickly and how much revenue TV2U will receive starting July 2018 (assuming all goes well with Indosat) and most importantly starting August 2018, when the World Cup frenzy is over and the customer base stabilises. But at least by then investors would know specifically what they are investing in, compared to those who invested on a promise (like myself).
- According to the announcement, integration with PGASCOM's communication equipment (satellites, cables, etc.) with the head-end is expected to start 14 May. The installation and commissioning should be completed a week after that, i.e. by 21 May. This supposes that the decoders and related equipment would have also been installed by then. This means that by end May at the latest we should see a ready and fully operational platform.
- TV2U's announcement did not mention Smartfren or Forjiflix, leading me to believe that they have been either dropped or postponed and we are now talking about Indosat Ooredoo. However TV2U could not mention Indosat specifically in the announcement because the contract has not been signed yet. If the first customer is Smartfren they would have stated it because it was already announced and part of the equation.
- Assuming all goes well, we should see the migration of the Indosat iStream software from the iVANX staging platform to the actual live production platform installed at PGASCOM. If the platform is ready by 1 June, they may still be able to offer a week or two of free trials. I think that would be a smart move if for nothing other than stress testing the platform under a real live load, but that free trial will be Indosat's decision.
- This also means that matters related to content have been resolved. If the platform is ready by end May, the transmission of the World Cup is no longer an issue. The integration of free to air channels is also not an issue. What remains is premium live channels and VOD where little info is available. However, unlike Brazil, this is no longer TV2U's responsibility, it is the customer's responsibility as each customer may want to negotiate and offer different content (the way Telstra and Optus do). Indosat Ooredoo would have more clout than TV2U in such negotiations. That does not preclude TV2U from negotiating content separately in the future and offering it to their customers, but the pressure is no longer on TV2U now.
- After the first customer goes live, it would be plain sailing for TV2U in Indonesia. Any new customer is a bonus and additional revenue. The platform is in place and tested (may need some scaling to deal with added traffic, but that is not an issue) and as soon as the software and its customisation are ready, new customers can go live. This could be a matter of weeks, or a couple of months at most, once a contract with a new customer is signed. We should not see long delays as we've seen in the past.
- If regulations allow it, PGASCOM's network or Indosat's network would offer an opportunity for TV2U to extend to Singapore, using the same platform. They would be competing with another Ooredoo subsidiary there (StarHub) but competition is healthy
There is clearly a promising change in strategy. That's how I perceive it anyway but it may have been TV2U's strategy or plan for a while but bungled by poor announcements and delays. Whatever the case may be, TV2U and PGASCOM have now clear roles in the game, and the addition of a customer like Indosat will complete the puzzle.
I see this as a very positive announcement, even more so than the pre-announcement about Indosat, because the platform availability issue has been resolved. My sentiment changed to Buy, in fact I already increased my holding.
All in my opinion of course
