Operations Review
Extracted from Annual Report 2007
ArianeCorp stayed focused on its commitment to establish a firm foothold in the complex and sophisticated arena of regional retail and wholesale VoIP telecommunications. The acquisition of CarrierNet served the Group's business well by immediately increasing its suite of wholesale, retail and VoIP telephony products and services in key markets throughout the Asia Pacific. Together with the acquisition of Uni3, the Group was able to enjoy a stronger competitive offering and positioning within the telecommunications sector.
The acquisitions also boosted the Group's operational income and cash flow, enabling it to shift from being a pure asset-based play to one with a balanced line-up of asset and operational engagements.
Several organic growth initiatives came to fruition in FY2007. The Group's expansion into new geographical markets was matched by efforts to develop and acquire new products for niche customer segments. The Group also strived for greater operational efficiencies by streamlining workflows and tightening cost controls.
Expansion into new markets with new products
The Group continued to make inroads into China's telecommunications sector with the incorporation of ArianeCorp China Limited, a wholly owned subsidiary of the Group. New strategic partnerships with China Netcom, China Telcom and UT Starcom enabled it to accelerate its growth plans for its Chinese retail and wholesale telecommunications businesses.
The Group was able to offer superior quality China terminations at a lower cost. This, in turn, improved the overall quality of its VoIP business in this market. In exploring the potential of Eastern China, the Group embarked on a PHS/VPN mobile project in Suzhou with China Netcom. Accordingly, it will also continue to look for other strategic alliances to foster the growth of its calling card and other retail VoIP businesses in China.
Additional notable alliances were established in Vietnam, India and Indonesia, where the Group developed strong working relationships with local telecommunications companies. These partnerships enabled it to add reliable, high quality telecommunication links as part of its retail offerings. To date, CarrierNet Vietnam, the Group's newly established representative office in Vietnam, has already secured contracts with key Vietnamese telecommunications players.
In Indonesia, the Group was able to establish termination links with local telecommunications companies that provide high quality circuits into Indonesia.
With these connections, the Group is now well poised to capitalize on opportunities to improve its share of the Indonesian retail market, and continues to be vigilant for strategic partnerships in this area.
New offices will be established in Cambodia, Japan and Malaysia to identify and build strategic partnerships with local telecommunications companies, and to capitalize on in-market developments in complementary sectors. While the Group is negotiating to acquire a local CDMA 450 MHz license in Cambodia, it is also working with a local associate to improve the cost efficiencies in network equipment procurement. Together with Japan and Malaysia, we will focus on developing strong foundations for the Group's future growth in these markets.
Considering its high concentration of overseas workers in various sectors of the economy, Australia has become a key growth market for the Group. Leveraging CarrierNet's vast network links in the Australian market, the Group has nurtured a direct sales force that covers more than 5,000 retail outlets in Melbourne and Adelaide alone. In addition, it has also enhanced its distribution networks to target better sales and thus market share across various Australian cities. The Group's suite of products has also been expanded to include new pre-paid cards from Australia to countries such as Cambodia, Africa, the Middle East and Lebanon.
A similar expansion strategy has also been deployed in Singapore and Hong Kong, where the booming tourist industry has attracted a sharp inflow of overseas visitors and workers. The Group has launched new pre-paid cards to target different ethnic groups in Singapore and racial communities in Hong Kong.
The Group also set up new wholesale routes to Nepal, Bangladesh and the Middle East and it continues to cultivate new wholesale suppliers and regions within these markets as well as new territories in Myanmar and Africa. Beyond the Asia Pacific, the Group is looking to build regional trader teams in the USA and Europe to recruit more first-tier customers for the Group's wholesale business.
The electronics division contributed S$2.1 million or 12.1% of the group's total revenue. The decrease in revenue from the Electronics division was due to keen competition and rising cost of production in the LCD industry.
In recent years, the Electronics division was able to carve out a niche market in the LCD industry to manufacture and assemble specialty projects. The Electronics division will increase its efforts to further establish itself in the niche LCD market.
As the Group continued to scale up its telecommunications business in China, it had to search for suitable partners to provide the last mile and light up the fiber network.
There had been discussions with relevant parties to assist the Group in identifying suitable partners for possible strategic alliances for the utilization of the fiber network. Although the discussions have not met success so far, the Group will continue its search for suitable strategic partners and also explore other viable options to maximize value for the Company.
Overall, the Group has made significant progress in consolidating its business in FY2007. The telecommunications industry is expected to remain competitive in the year ahead but the Group has invested in a strong foundation that it believes will see it build on its success well into the future. It plans to stay on course and remains focused on becoming a premium niche voice and data player in the Asia Pacific.