Right in tune Group has wide-ranging businesses

07 November 2009

THE Tune group of companies, with its panoply of businesses (and growing, no doubt) has literally painted the town red.

But while the trials, tribulations and triumphs of AirAsia group has been widely documented, those of his other businesses take a back seat in the limelight sphere, although their complementary features to the flagship airline business and low cost ethos is hard to ignore.

“They are all making money,” says co-founder of the group Datuk Seri Tony Fernandes. “The AirAsia and Tune groups have really become a lifestyle.”

“You travel, you require a hotel. You spend a lot of time in financial transactions – buying insurance and using credit cards, and you spend a lot of time talking on your mobile phone,” he explains.

The Tune group is Fernandes’ brainchild as he turns to crafting a niche in serving the underserved mass market. The businesses under the Tune banner encompass hotels, financial services, mobile phone service, sports, property, retail and entertainment. The more significant entities in the stable are Tune Hotels.com Ltd, Tune Money Sdn Bhd and Tune Talk Sdn Bhd.

Value stay

According to Fernandes, a large percentage of the guests that lodge at Tune Hotels are passengers from AirAsia. And that is only understandable, considering that they are sister companies, and that AirAsia has already done most of the branding ground work for the Tune group.

The budget hotel chain currently has seven operational hotels, five of which are in Malaysia and two of which were recently opened in Bali, Indonesia.

Business has been brisk, with the five hotels in Malaysia reportedly registering occupancy rates above 90% and having an average of 60,000 guests monthly. The corporate sector reportedly contributes around 30% to 40% to its business.

Tune Hotels is now focused on expanding its brand to other countries in Southeast Asia such as Thailand and the Philippines, and to South Asian countries such as India and Bangladesh. It is also in the process of seeking to form the right partnership to expand to China.

In India, Tune Hotels has a strategic tie-up with Apodis Hospitality Group to develop and operate up to 70 Tune Hotels in India over a seven-year period.

Money talks

Tune Hotels over the week announced that it planned to open its first hotel in Melbourne by October next year. This is part of its target to have 64 operational hotels by the end of 2013.

Fernandes holds a 13.93% stake in Tune Hotels, and some indirect interests via Tune Ventures Sdn Bhd that holds a 29.35% in the budget hotel chain. Other shareholders include prominent individuals Datuk Seri Kalimullah Masheerul Hassan (10.7%), Lim Kian Onn (10.7%) and Datuk Kamarudin Meranun (10.45%), as well as Japan-based financial services conglomerate Orix Corp (10.62%) and Singapore-based private venture capitalist East Pacific Capital Pte Ltd (8.7%).

Getting itself back on the growth track, Tune Money, which is currently consolidating its business operations, is set to expand its product offering and establish its presence overseas next year.

Among the new products in the pipeline, as Fernandes reveals, could be an AirAsia/Tune card, whose benefits include the enablement of passengers to do touch-and-go transactions on AirAsia flights.

According to Fernandes, the no-frills online financial service provider is targeting to generate revenues of RM25mil next year.

“Business is good – the insurance and card businesses are growing very rapidly,” he says, adding that he believes Tune Money could generate about RM10mil this year.

It has been reported that Tune Money is in talks with several companies for corporate and branding strategies to grow its customer base. It is also in talks with several possible partners to realise its aspirations of venturing into Indonesia and Thailand next year.

Fernandes owns direct interests of 9.95% in Tune Money, and indirect interests via Tune Ventures, which holds a 34.16% stake in Tune Money. Other shareholders include CIMB SI II Sdn Bhd (25.69%), Kalimullah (8.44%), Lim Kian Onn (8.44%) and former Tune Money CEO Tengku Zafrul Tengku Abdul Aziz (7.48%).

Talk is cheap

A new kid on the block in the mobile telephony industry of Malaysia, Tune Talk, which was launched in August this year, is already talking about taking its services to the Singapore space next year.

The company is currently in preliminary, but encouragingly progressive, negotiations with two mobile operators in the island republic for the possible venture to realise its aspiration of becoming a pan-Asean mobile virtual network operator.

“Tune Talk is a massive success,” Fernandes says, based on the fact that the company had managed to secure 100,000 subscribers in the local market in just 1½ months of its launch.

Rolled out as a prepaid service with the prefix “010”, Tune Talk offers a no-frills voice and short messaging service (SMS) package that targets the underserved segment.

Fernandes is confident that Tune Talk could see its business turn around next month. “We have just started … but we’re ahead of schedule,” he says of the performance of the company.

It is estimated that Tune Talk is adding an average of 3,000 new subscribers a day. The company’s target is to hit one million subscribers within one year of its launch.

Celcom Bhd controls the largest equity stake in Tune Talk with over 38%, while Tune Ventures holds a 35.7% stake. The remaining shares are held by Tune Strategic Investments Ltd, and various individuals, including Tune Talk CEO Jason Lo, Kalimullah, Lim and Lankester.

Fernandes says the Tune group, as well as AirAsia X Sdn Bhd, are all handled by “very competent CEOs”.

“I don’t get directly involved in those businesses. I am just a sounding board member,” he explains, adding that his mainstay is still the short-haul business of AirAsia Bhd.

Sounding board member he is, and Fernandes, who has already become a legend of sorts in the aviation industry (he was recently conferred the Capa Legend Award for 2009), is set to establish a new benchmark in the no-frills playing field.

AirAsia, the Tune business is already dominating the no-frills space of Malaysia, and it looks set to take the Asean market by storm, and then that of Asia and the Pacific. With these achievements - whether by direct or indirect involvement – the award-winning entrepreneur is a living testimony that it is by dreaming big that could lead one to great