Green Packet: Another USD51 million raised but can it continue to do this?

This is something I did not see it coming. Green Packet has raised another USD50 million. This time from 2 boutique Private Equity firms - Kendall Court and Leafgreen Capital (names that we do not hear often).

On my own calculation, Green Packet and Packet One (subsidiary) have raised in excess of RM1.1 billion since 2006 (not inclusive of its own IPO fund raised). I am actually quite amazed with their ability to raise funds. If any, their persistence and survival instinct surpassed my belief.

Total funds raised via multi-type facilities

I have even written that I foresee the company will be facing liquidity crunch. While my forecast is true, what it manages to surprise me is the ability to raise funds. At its market capitalization of RM325 million today, its total fund raising for the WIMAX and 4G LTE initiatives of more than RM1.1 billion way surpassed the valuation given by market. If at all, the story line from the market with the valuation attached is that the group may not be able to survive as it it continuing to suck cash while the business has yet to see any future profits or cashflow positive.

For now let's not even look at profit. A business like this where lots of cash have been sunk in, we expect high revenue growth especially for the investors, lenders etc. Do we see it?

Where is the high Growth?

I am actually quite perplexed. Do the investors think that by Packet One going IPO, it will solve the problem? Telco is continuous investments (see Maxis, Digi, Celcom) and the most important thing is where is Green Packet's position now? It's RM1 billion is nothing compared to what the 3 plus TM can generate in a year in terms operational cashflow.

Let me give you a hint, even a country as large as US, the third player - Sprint is facing it tough to compete against AT&T and Verizon. Name me a country where there are 5 large telcos surviving together in the long run. (I can only think of India but the Indian story is different due to its licenses issued by states. Even then it is consolidating.) Someone is bound to fall and Malaysia already has those 3 names plus TM and not to mention YTL continuing to pitch its old 4G story.