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Rakon outlines 5G challenges 'just around the corner'

Rakon outlines 5G challenges 'just around the corner'

By Victoria Young

Aug. 9 (BusinessDesk) - Rakon told shareholders it is in the best position possible to make money from the roll-out of 5G mobile services, but any impact won’t be seen until the fourth quarter of the next financial year at the earliest.

The communications component maker noted that while the big five telco equipment providers were designing their gear with Rakon in mind, it is still at the mercy of those customers as to when they would roll it out.

“We are in a great position," chief executive Brent Robinson said at the company's annual meeting in Auckland today. "I believe it is near, but it is not there yet," he said. "It is a frustrating situation but I do believe it is just around the corner.”

Speaking to BusinessDesk after his address, Robinson estimated the change could provide a 20-30 percent uplift in revenue in the fourth quarter of 2020. Financial year 2019 saw revenue nudge up to $114 million from $101 million.

“It should start with more ferocity but with all this macro stuff going on there is a lot of regulatory hurdles to put cell sites in and things can get delayed. I certainly hope it starts. We’ve been told by our customers these are the schedules but we’ve seen it changed before.”

“We are in a fantastic position but then the utilities might delay the roll-out and the issue with delays is it gives others opportunities to compete with us. For example, Huawei is 12 months ahead of the competition and we supply Huawei but if these delays happen there will be a price battle,” chairman Bruce Irvine said.

Robinson said the company just signed a big contract with Huawei and was not concerned with political events surrounding the company.

“I’ve found them honest and good to work with, whether they get tripped up by the Americans, it's hard to say,” he said. The Chinese company is just “one of many” and not its major customer among the top five providers. He would not elaborate on who Rakon’s major customer is.

Robinson indicated China would be the first market to roll out 5G, and told shareholders that some of what network providers were calling 5G was really 4G and therefore would not require the hardware updates that would provide Rakon with business.

While Rakon is a supplier to Nokia, which is partnering with Vodafone NZ for its roll-out, Robinson said he was not close to their plans to start offering the service in major New Zealand centres at the end of this year.

Rakon got exposure to the internet-of-things firm Thinxtra in 2015, and last year sold down its holding to help repay debt.

The valuation of Thinxtra was a “volatile ride,” Irvine told shareholders, explaining it was a “very very complex” area. The company had booked an unaudited $7.2 million gain on the investment within net profit after tax, but then reversed this.

Irvine said this had to be done following Thinxtra’s capital raising, which it did not participate in.

“The most important message we can give you is that we don’t see Thinxtra as core to the business and we are holding our investment with the intention of selling it down over time.”

One shareholder, who identified himself only as Gerard, said each year at the AGM the company provided “carbon copy” excuses for its performance, and it couldn't even get it together when exchange rates were favourable.

“We are slowly, slowly improving this business," Irvine responded. "Hopefully you will soon see numbers that achieve that.”

(BusinessDesk)

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