Performance

2008 was a challenging year for NeraTel. Compared to 2007, the company posted a slight decrease in revenues by 2 %. This was attributed to the lower turnover from the Telecommunications (“Telecom”) business segment as the Infocommunications (“Infocomm”) business segment registered an increase in its turnover. Gross profit increased by 3 percent, while gross margin increased from 22.1 percent to 23.3 percent.

Telecommunications

The Telecom business segment recorded a decrease in revenue of 16.9 %. The decrease was attributed to the lower sales of microwave radio equipment due to project delays. Revenue  for the satellite business area also decreased due to the lower sales of satellite terminals.

In the Transmission business area, the demand for microwave radio transmission products and services is driven by the mobile operators in developed markets needing increased bandwidth to support introducing voice, data, video, broadband and bundled services to meet various customer needs as well as increasing penetration in less developed markets. Mobile operators need to expand their network coverage, capacity, bandwidth and network capabilities to increase their market share and stay ahead of competition. With the Evolution Series, NeraTel is well positioned to take advantage of these opportunities.

In addition, NeraTel intends to further increase its radio transmission revenues from the Defense, Broadcast and Utilities market sectors so that it will not be overly dependent on the mobile market sector.

In the Satellite business area, the Group will focus on the sales of Inmarsat and Thuraya satellite communication products, solutions and services to the land and marine markets. The Group is currently exploring the business opportunities in providing maritime VSAT products and services to the marine and oil & gas market sector and will continue to promote broadband satellite networks to the satellite operators, ISP, broadcasters and government organizations as well as expanding its satellite product portfolio.

The telecommunication market remains very competitive with mobile operators and service providers having to compete aggressively for market shares. Customers are constantly looking for suppliers to help them lower their operating and capital expenditures. The current global economic slowdown may result in some of our customers re-aligning their capital expenditure, delay or defer projects in line with the potentially lower revenues.

Infocomm

The Infocomm business segment recorded a jump of 16.5% in revenue in 2008.  The increase in turnover was attributed mainly to the higher sales of network equipment to the Service Providers market sector. Profit from operations rose by 30.6%.

The Infocomm industry continues to present many opportunities even in this uncertain economic climate as the Infocomm services remain the fundamental services to both consumers and businesses. Revenues for infocomm services remain intact as most users are reluctant to turn off their broadband connections, internet access, mobile phones or pay TV / entertainment appliances.

Service Providers

In the Service Providers market sector, the demand for networking products and services is driven by the growth in broadband and internet services. Service Providers will continue to seek opportunities for growth but potentially on a more cautious note compared to recent years. We believe that Service Providers will need to develop a stronger competitive advantage, one that will enable them to leverage on the network to match traffic growth with scalability, match service growth with service platform agility and match margin pressure with lower cost of ownership. NeraTel will continue to focus on providing cost effective, high performance Infocomm network infrastructure products and solutions to enable our customers to scale and secure their global network and service infrastructure as well as the rapid deployment of new services.

Enterprise

In the Enterprise market sector, corporate spending is mixed with some enterprises experiencing the decline in business activities resulting in reduced demand for bandwidth, IT products and services while others are taking the opportunity to upgrade or outsource their IT networks to save costs and improve productivity as well as to increase their overall competitiveness. The Group will focus on providing enterprise-class network infrastructure products and solutions such as routers, switches, security equipment or threat management,optimization, aggregation appliances to help enterprises and managed service organizations in cloud computing and service centralization to save costs and improve productivity and competitiveness.

Financial Services & Retail

In the Financial Services & Retail market sector, the demand for point-of-sale (“POS”) terminals, software and services is driven by the banks, financial institutions and retailers, who are gradually migrating POS terminals to those that are PCI PED compliant. However, due to the current poor economic climate, consumer spending is expected to slow down and customers may adopt a careful approach to expanding their POS infrastructure. The Group will continue to focus on developing its POS terminal sales, terminal applications, rental, leasing and maintenance business to the banks, fi nancial institutions and retailers in Southeast Asia. Furthermore, Network infrastructure products and solutions will also be introduced to this market sector.

Media & Broadcasting

In the Media & Broadcasting market sector, we believe that the Broadcasters will gradually migrate their analogue TV systems to digital systems. Although the current poor economic situation may slow down the migration to digital systems, the long term development remains positive as most consumers will not cut back on TV services but instead rather demand higher quality video content. The Group will continue to focus on promoting its turnkey Digital Terrestrial TV (DVB T/H/M) infrastructure network deployment capabilities to the potential broadcasters. In addition, we are introducing more stand-alone broadcast infrastructure products and networking solutions to the customers to this market sector.

Government, Transport & Utilities

In the Government, Transport & Utilities market sector, the Group intends to offer integrated infocomm infrastructure products and solutions to the defence, education, healthcare, utilities and transportation industries. We are working with business partners to gradually add new Infocomm products such as IP surveillance, train and offshore communication systems as well as optical networks to our present product portfolio. Governments are also increasing their IT spending to help improve the economies and the Group will address these potential business opportunities.

Competition in the Infocomm industry is keen and the market is dominated by local and large global industry players. The Group is well positioned as a regional Infocomm infrastructure provider, strengthening its product portfolios and focus on providing competitive products, solutions and services, as well as developing key competence to serve the various customer segments.