IMPORTANT NOTICE:

The information in this PDF file is subject to Business Monitor International’s full copyright
and entitlements as defined and protected by international law. The contents of the file are for the
sole use of the addressee. All content in this file is owned and operated by Business Monitor
International, and the copying or distribution of this file, internally or externally, is strictly prohibited
without the prior written permission and consent of Business Monitor International Ltd.
If you wish to distribute the file, please email the Subscriptions Department at
subs@businessmonitor.com, providing details of your subscription and the number of recipients
you wish to forward or distribute this information to.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to
be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or
mechanical error, either at source or during production, Business Monitor International accepts no liability
whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of
the publication. All information is provided without warranty, and Business Monitor International makes no
representation of warranty of any kind as to the accuracy or completeness of any information hereto
contained.
 INSIGHT
March 2011 Issue 58

Asia Pacific
Telecommunications
BMI’s monthly market intelligence, trend analysis and forecasts for the telecommunications industry across Asia Pacific

Regional Contents

Infrastructure Delays To Cool Regional

Infrastructure Delays To Cool Telecoms Rural Expansions......................................... 1

Telecoms Rural Expansions Asia Telecoms And IT Get Close ............................................................................ 2

Intense competition between mobile operators across Asia has pushed
headline mobile penetration rates in many countries such as Vietnam,
Thailand and India to an all-time high in 2010. However, BMI believes
that this does not necessarily mean that opportunities are few and far
between in the telecoms sector. Besides introducing advance technolo-
gies like 3G and WiMAX in order to satisfy consumers’ growing de-
mand for sophisticated services, operators have identified rural areas as
a large untapped segment in the market that presents significant growth
Australia
Queensland Floods Increase Short-Term Risks ........................................................ 3
Philippines
Telemedicine An Opportunity For Telecoms Operators.............................................. 4
Malaysia
Celcom And DiGi Prepare For LTE With Network Sharing Deal................................... 4
TM Facing Pressure From Mobile Broadband Players ............................................... 5
Singapore
NFC Mobile Payment Takes The First Step With StarHub........................................... 6

opportunities. Although the current expansion plans by telecoms opera- Thailand

MNP To Have Little Impact On Mobile Market.......................................................... 6
tor to reach out to rural regions are sluggish, we note that government
True Takes Over Hutchison To Boost 3G Prospects................................................... 7
intervention is playing a vital role
Vietnam
Vietnam Is Not Ready For Mobile Number Portability................................................ 7
Greater Focus On Rural Subscribers Needed Cambodia
India Average Mobile Penetration Rates By Regions (%)
Smart And Star-Cell Begin Consolidation In Cambodia.............................................. 8
140 China
Rural Regions
120 TD-LTE Vital In Maintaining China Mobile’s Dominance............................................. 8
Urban Regions Room For Further Growth In China’s Internet Sector................................................ 9
100 Taiwan
80 Asus Bets On Tablets in 2011................................................................................. 9
South Korea
60 Mobile Operators Feel The Data Crunch.................................................................10

40 IPTV’s Future Looking Bright.................................................................................10

Mobile Operators Not On Same Wavelength With The KCC......................................11
20 Japan
0 NTT DoCoMo Starts A New Chapter In E-Book Industry..........................................11
Lenovo-NEC PC Unlikely To Significantly Boost Performance....................................11
Jun-08

Jun-09

Jun-10
Sep-08

Dec-08

Mar-09

Sep-09

Dec-09

Mar-10

India
Government’s Support To Boost Long-Term Rural 3G Coverage................................12
Source: TRAI
Drawn-out Investigation For 2G Licence Process Expected.......................................12
Vodafone Essar-Wipro Partnership Mutually Beneficial.............................................13
Sri Lanka
Governments have every interest to ensure that the rural population
Change In Direction Needed For Lanka Bell To Ring................................................14
has access to basic telecoms services. While this theme is largely not
Pakistan
applicable to developed countries in Asia, such as Japan, South Korea,
Cheap Tariffs Takes Shine Off SMS Growth.............................................................14
Singapore and Hong Kong, there is a growing urgency to narrow the
digital divide between the urban and rural population in emerging mar-
kets in order to boost the country’s overall standard of living and GDP.
The Telecom Regulatory Authority of India (TRAI) provides a
quarterly update on the urban and rural mobile penetration rates in the
country. This gives us an insight into other emerging markets in the
region as most telecoms regulators do not provide data broken down
into these categories. As BMI has suspected, penetration rates in urban
India have exceeded 100% (except in Madhya Pradesh) as of June 2010,
while the average rural penetration rate came in at 26.43%. Although the
low penetration rate suggests there are growth opportunities for mobile

Editorial Office:
Mermaid House, 2 Puddle Dock,
London EC4V 3DS, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
www.businessmonitor.com
www.telecomsinsight.com
Regional Asia Pacific Telecommunications

operators, companies are hesitant as benefits have yet to outweigh
the high costs involved in rolling out network infrastructure to pursue
low-value rural consumers. Furthermore, continued uncertainty in
the global economy means operators might find it hard to justify
hefty capital outlay to their shareholders.
As such, we believe that government initiatives are essential
to accelerating rural expansion plans. In the high-profile National
Broadband Network project in Australia, rural roll-outs in the coun-
try will be given the highest priority as part of an agreement between
the Australian Labor Party and rural independents, whose support
was needed to approval the project. Similarly, President Mahinda
Rajapaksa of Sri Lanka also acknowledged the importance of the
telecoms and IT industries and the country’s National Backbone
Network will help engender job-creating ventures to rebuild the
war-torn island. Meanwhile, India’s Department of Telecommuni-
cations was reportedly planning to initiate a bidding process across
the country’s 22 telecoms circles to encourage mobile operators to
expand 3G coverage in rural regions.
ture in rural regions. BMI thinks that a significant portion of rural
consumers in emerging countries have limited access to a stable
source of electricity and depend on alternative energy sources such
as diesel-powered generators, which are expensive to operate and
relatively unreliable. While large-scale ambitious utility projects
such as a US$362mn coal-fired power plant in Cambodia and a
US$86mn 20 megawatt geothermal plant in Indonesia are underway,
we would not be surprised if corruption, bureaucratic red tape and
land acquisition delays – some of the problems prevalent in many
emerging markets – result in constant infrastructure project delays.
Furthermore, we think that these energy projects are mainly being
developed to attract foreign direct investment and for industrial
use instead of channelling the electricity for residential purposes.
Unless there are concrete developments in the energy infrastruc-
ture in rural regions and an overall improvement in rural consumers’
purchasing power, we believe that telecoms operators’ rural expan-
sion plans will remain muted in the medium term.

Asia Telecoms And IT Get Close

However, the effectiveness of telecoms rural expansion plans is
directly correlated to the development of basic energy infrastruc-
It has been our long-held core view that significant growth opportuni-
Progress In Energy Infrastructure Needed To
Complement Telecoms Development ties would arise out of collaborations between the telecoms industry
Asia Population Access To Power (%) and sectors traditionally thought to be largely unrelated – such as
120 agriculture, autos and aviation. That being said, we believe the
greatest opportunities will still stem from cooperation between the
100
increasingly competitive telecoms industry and the business-oriented
80 information technology sector. Major Asian telecoms companies
have taken the initial step with a potential uptick in this crossover
60
from 2011, and we expect Asia to play a pivotal role in fuelling this
40 growing trend in the medium term.
20
The Asia-Pacific region predominantly comprises emerging
economies, but its huge population base and strong growing con-
0 sumer demand for sophisticated mobile and high-speed broadband
India
Indonesia

Thailand
Taiwan
Japan
Cambodia

Pakistan

China
Australia
Bangladesh

Sri Lanka
Hong Kong

Malaysia

Singapore
South Korea
Vietnam
Laos

Philippines

services are strong indications of increasing maturity. BMI forecasts

Asia to account for 44.1% of the 1.30bn mobile phones shipped
worldwide in 2010, and we predict this proportion to increase to
Asia refers to the 18 countries covered by BMI. Data for Laos is not available. Source:
55.2% in 2014, representing 1.05bn handsets. Meanwhile, we
BMI expect short- to medium-term large-scale commercial rollouts of

ASIA CLOUD COMPUTING DEVELOPMENTS

Date Company Countries Notes
Dec-09 SK Telecom South Korea SK Telecom and IBM announced the completion of a cloud computing environment for
platform-as-a-service, catering specially to small medium enterprises
May-10 PCCW Hong Kong and China Cloud computing solution comprising infrastructure-as-a-service, platform-as-a-service,
software-as-a-service, content-as-a-service and process-as-a-service.
Aug-10 Taiwan Mobile Taiwan Construction of its first internet data centre will begin by end-2010, part of Taiwan Mo-
bile’s five-year cloud computing investment
Aug-10 Bharti Airtel Malaysia and Thailand Expansion of its Global Data portfolio, which offers IPL, Managed MPLS and Ethernet
services.
Sep-10 China Unicom Singapore, Malaysia and Indo- First subsidiary in South East Asia offering global data services, voice wholesale and
nesia information communications and technology solutions.
Sep-10 SingTel Singapore SingTel introduced enterprise cloud-based virtual data centre services using Virtual
Computing Environment (VCE) created by Cisco, EMC and VMware.
Oct-10 Tata Communica- India Introduction of cloud computing solutions that delivers self-service, pay-as-you-use IT
tions application and data centre infrastructure services.
Oct-10 NTT Communica- Hong Kong Launch of a 30,000 square metre data centre, its largest outside of Japan. Investment is
tions valued at HK3bn.
Oct-10 Verizon Business Hong Kong US-based operator opened a data centre offering consumers cloud computing solutions.
Oct-10 Chunghwa Taiwan Intel partnered with Chunghwa to develop cloud computing architecture and usage
Telecom models.
Source: Operators, BMI

2 www.telecomsinsight.com
Australia
next-generation technologies LTE, WiMAX and TD-LTE and
next-generation national broadband networks in the region to further
fuel growth momentum by providing the platform for businesses to
incorporate telecoms services into their business models.
Asia Leading Global Handsets Sales
Global Total Handset Shipments Forecast (‘000), 2006-2014
2010f
2011f
2012f
2013f
2006
2007
2008
2009
North America Latin America Caribbean
Eastern Europe Asia Middle East
f = forecast. Source: BMI
In light of the intensifying competition in the telecoms industry,
with an increasing number of operators offering a complete suite of
services such as mobile, broadband and IPTV, BMI believes that the
shift of focus on businesses interested in IT services – which provide
a more sustainable and profitable revenue-generating model – opens
a new competitive landscape for telecoms operators. Furthermore,
an early foray into the new market would create a first-mover ad-
vantage and enable telecoms operators – which have largely focused
on traditional telecoms services to consumers and corporations – to
gain valuable experience.
Opportunities Galore In Asia
Japanese telecoms company Nippon Telegraph and Telephone
(NTT) – which can be considered the regional frontrunner – has been
the most aggressive in establishing its footprint in the IT sector, ventur-
ing beyond its domestic market and Asia and into North America (for
example, Keane and MISI) and Africa (Dimension Data). Through its
dedicated IT subsidiary NTT Data, NTT uses mergers and acquisitions
to acquire the necessary knowledge and expertise to ease its entry into
the IT industry in new markets. That said, Asia remains key to the com-
pany’s expansion plans, and this is clearly reflected by the opening of
its subsidiary NTT Communications (Thailand) in September 2010
which offers information communication technology (ICT) solutions
to multinational companies in the country, as well as the launch of a
data centre in Hong Kong, the largest outside of Japan, in October.
Although developed countries such as Japan and South Korea
present a ready market due to existing IT infrastructures and high
broadband penetration rates, the presence of established IT solutions
providers increases barriers to entry and limits growth potential.
BMI therefore believes that emerging markets are equally – if not
more – attractive because they remain largely untapped and have
significant growth potential and support from the government to
promote the IT industry. Philippine President Benigno Aquino III has
urged Singapore Telecommunications (SingTel) and its local as-
sociate Globe Telecom to support the country’s IT sector and boost
the business outsourcing industry. Similarly, Sri Lanka President
Mahinda Rajapaksa believes that the island’s National Backbone
Network and its IT industry will create job-creating ventures and
complement efforts to rebuild the war-torn country.
www.telecomsinsight.com
Asia Pacific Telecommunications
Players From Emerging Countries Are Not
Far Behind
In our opinion, this combination of factors – increasing demand due
to technological advancements, intense competition in the telecoms
industry and growth opportunities in emerging markets – which has
1,200,000
driven companies from emerging markets to offer their IT portfolios in
South East Asia. This includes major operators in the world’s two larg-
1,000,000
est countries: China Unicom and India’s Bharti Airtel. China Unicom
800,000 set up a regional subsidiary in Singapore to offer global data services,
voice wholesale and ICT solutions to consumers in Singapore, Malaysia
600,000
and Indonesia in September. Going forward, the operator announced in
400,000 November that it would be looking to cloud computing and machine to
200,000 machine (M2M) technologies such as environmental monitoring and
smart houses as the next growth drivers for the company.  
0
It is BMI’s core view that rural expansion will gain traction
2014f
because urban penetration rates in emerging markets are rapidly
Western Europe
approaching saturation. However, we think this will be a long-term
Africa process as the benefits have yet to outweigh the high costs involved
in pursuing low-value rural subscribers. We therefore foresee more
operators in emerging market looking beyond organic growth in
the telecoms industry in their domestic markets in order to achieve
long-term sustainability and profitability.
Risks To Outlook
Although the increasing convergence of two related industries results
from improvements in the IT industry – especially in cloud comput-
ing interconnectivity that has emerged from its early infancy stage
and starting to show its true potential – there are challenges that
could prevent telecoms operators from achieving short-term revenue
growth in the IT sector. With the exception of NTT Data, which
has gathered plenty of experience and expertise over the years, we
foresee many new entrants facing difficulties positioning and dif-
ferentiating themselves in the increasingly crowded IT industries.
Japanese IT firm NEC mirrored this view in November with its
comment that telecoms operators do not know how to integrate their
networks with IT services and then operate them as IT businesses.
While joint ventures, partnerships and mergers and acquisitions
could expedite the crossover, overseas expansion remains a po-
tentially complicated process for telecoms operators as regulatory
frameworks in emerging markets have not kept pace with technologi-
cal advancements. In the short run, we expect inherent weaknesses
such as security (especially in today’s volatile global market) and
reliability concerns to continue to fuel sceptics and hinder develop-
ment. That said, such issues could be resolved in the medium term
when new solutions and advancements are introduced.
Australia
Queensland Floods Increase
Short-Term Risks
Australian telecoms operators are trying to cope with damages
caused by severe flooding in the Australian state of Queensland at
the turn of 2011 after recording heavy rainfall (the highest levels in
50 years). There were interruptions to normal telecoms services and
operators are struggling to reach affected areas as the flood waters
remain high. While the floods dealt an immediate negative blow
to Australia’s telecoms sector, we think there is unlikely to be a
medium- to long-term impact on Australian operators.
3
Philippines
Operators such as Telstra, Vodafone Australia and Singapore
Telecommunications-owned Optus experienced service outages and
network congestions as a direct result of the floods. The situation could
further escalate if battery backups for mobile equipment run out, which
would add more stress to existing functioning networks. The actual
scale of damage is still uncertain as companies are unable to access
the affected regions. Besides the loss of telecoms revenues during this
period, we expect significant capital outflow from telecoms operators
to repair and replace damaged equipment and infrastructure (although
insurance could defray some of the costs). While we see upside potential
for telecoms infrastructure and equipment vendors such as ZTE, Hua-
wei and Alcatel-Lucent, the floods are expected to negatively impact
the financial performance of Australian operators at least for H111.
Our Forecasts Remain Buoyed
Australia Telecoms Forecasts (‘000), 2005-2015
40,000
Number Of Mobile Phone Subscribers
35,000 Number Of 3G Subscribers
Number Of Broadband Subscribers
30,000
25,000
20,000
15,000
10,000
5,000
0
2011f
2012f
2013f
2014f
2015f
2005
2006
2007
2008
2009
2010e
e/f = estimate/forecast. Source: ITU, BMI
In a situation similar to the telecoms industry, the infrastructure
industry has not been able to assess the exact size of the damage but our
BMI infrastructure team thinks that the overall recovery process will be
a drawn-out one. Local news media reported that industrial parks and
railway stations are submerged under water and 127,000 Queensland
residents are cut off from power supplies. Australian energy company
Energex also warned that power blackouts could last for days. The time
period for Australia’s telecoms industry to recover is highly dependent
on the damage to the state’s power lines, but we expect that the restora-
tion of services will be a high priority for the government.
Although Australia’s situation is somewhat reminiscent of Paki-
stan’s recent floods, which were the worst in its history (see ‘Pakistan
Flood Crisis Raises Medium-Term Challenges For Telecoms Industry’,
August 25 2010), we do not think that Australia’s case is as dire. The
Australian government and telecoms companies are better placed and
financially strong enough to facilitate the recovery process and the
Australian floods have not directly impacted the entire country.
Philippines
Telemedicine An Opportunity
For Telecoms Operators
The Philippine Department of Science and Technology (DOST)
announced in January 2010 that telemedicine is now available for
doctors to offer medical and treatment advice to rural patients in
the country. This initiative is government-led and aims to reduce
the cost of medical expenses, particularly for the Philippines’ rural
population. However, BMI thinks that private operators can play a
4 www.telecomsinsight.com
Asia Pacific Telecommunications
part in the emerging telemedicine industry.
BMI’s pharmaceutical team believes that demand for products
to aid non-institutional chronic disease management and improve
independence among elderly patients will increase. Traditional
healthcare channels, such as hospitals and clinics, will not be able to
meet the expected growth of the world’s ageing population over the
next 50 years. As a result, we expect the administration of medical
services to shift to the homes of patients. BMI also recognises that
there is a need to extend the reach of medical services to cover the
underserved rural population and we believe that the growing preva-
lence of telecoms services will facilitate growth in the telemedicine
industry, which is still in its infancy stage.
DOST’s telemedicine platform uses a government broadband
network called the Philippine Research, Education and Government
Information Network. The government’s participation is required
in this early stage to provide an internet connection for doctors to
transfer medical data, images and live audio and video feeds. The
number of Philippine internet users and broadband subscribers still
lags behind the country’s mobile subscriber base largely due to
the affordability of personal computers and internet services. BMI
forecasts 99.3mn mobile subscribers in the country by end-2011,
representing a penetration rate of 104%. By contrast, we only expect
6.7mn internet users and 5.8mn broadband subscribers.
That said, BMI thinks that the Philippines’ fragmented geography
creates a situation conducive for private telecoms operators to partner
with healthcare providers to introduce cost- and time-saving eHealth
services. We think that there is a demand for medical services from
subscribers for whom accessing medical facilities is difficult. While
such ventures are unlikely to reap immediate rewards, an early foray
could help companies establish a foothold in the emerging sector.
In the meantime, basic value-added services (VAS) based on SMS
technology remain an important revenue stream for Philippine mobile
operators. Mobile market leader Smart Communications said it
processed PHP13bn (US$292.5mn) worth of transactions per month
in 2010 for its mobile financial services platform, and the firm expects
this number to increase by 10-15% in 2011. BMI thinks that the Phil-
ippines’ growing VAS market provides a foundation for operators to
offer more sophisticated revenue-generating products and services.
Malaysia
Celcom And DiGi Prepare For
LTE With Network Sharing Deal
The high cost of investing in next-generation technologies has
prompted Malaysian mobile operators Celcom Axiata and DiGi.
com to sign a network sharing agreement in January 2011 after a
six-month technical and financial feasibility study. The existing
working relationship between Telenor and Axiata – the respective
parents of DiGi and Celcom – in the Bangladeshi telecoms market
has played an important role in establishing a similar deal in Ma-
laysia. BMI believes that cost savings will provide the companies
with a competitive edge as Malaysia’s mobile operators prepare for
the launch of next generation services.
BMI notes that operators worldwide have been forming similar
partnerships (for example, PCCW-Hutchison in Hong Kong,
Bharti Airtel-Vodafone Essar-IDEA Cellular in India and
Etisalat-du in the UAE). The deal between Celcom and DiGi ties
in with our long-held view that infrastructure sharing increases data
capacity while reducing resource duplication and accelerating roll-
Malaysia Asia Pacific Telecommunications

out time. The extensive network collaboration will see Celcom and Mobile Broadband Flying High Flying Fast
Malaysia Broadband Subscribers By Technology
DiGi focus on the sharing of telecoms sites, access transmission,
aggregation transmission and trunk fibre transmission, which will Q209 Other
Mobile
translate to cost savings of MYR2.2bn (US$720.5mn) over 10 years. 29.2%
Wireless
Broadband
0.9%
Room For Growth In Mobile Broadband Sector
Malaysia Mobile And Broadband Forecasts, 2005-2010 Other Fixed
40,000 140 Broadband
3.6%
35,000 120
30,000
100
SDSL
25,000
80 0.4%
20,000
60
15,000
40
10,000
20 ADSL
5,000
65.8%
0 0
Q210
2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f

2014f

2015f

Mobile
Number Of Mobile Phone Subscribers ('000) LHS Other
Number Of Broadband Subscribers ('000) LHS 43.4%
Number Of Mobile Phone Subscribers Per 100 Inhabitants RHS Wireless
Number Of Broadband Subscribers Per 100 Inhabitants RHS
Broadband
e/f = estimate/forecast. Source: ITU, MCMC, Operators, BMI 0.8%

Both companies are in the running for 2.6GHz frequencies to be

Other Fixed
awarded by the Malaysia Communications and Multimedia Commis-
Broadband
sion (see ‘Up To Nine Operators To Crowd LTE Market’, September 5.6%
16 2010). DiGi said the spectrum will strengthen its mobile broadband ADSL
49.8%
services and BMI thinks that LTE will feature prominently in its plans SDSL
as next-generation WiMAX services have been rolled out by alter- 0.4%

native operators. We believe that future hefty costs of new network

roll-outs were taken into account when the network sharing agreement
between Celcom and DiGi was established. The companies expect
to see cash savings of about MYR100-200mn (US$32.7-65.5mn) in
2012, and we envisage Celcom and DiGi using that capital to launch
commercial services earlier than their competitors.
The additional capital could enable the companies to expand
operations in overseas markets amid decreasing organic growth
opportunities in Malaysia. While Malaysia’s infant broadband in-
dustry presents growth potential – BMI expects 5.07mn broadband
subscribers by end-2011, representing a penetration rate of 17.9%
– mobile penetration has already crossed the 100% mark. India and
China are the natural candidates for investment but BMI thinks that
Indonesia and the Philippines also look attractive as they lead the
emerging countries pack in our business environment ratings for
the Asia Pacific region.
Source: MCMC
share over the years. According to TM in early-December 2010, the
operator’s market share fell to 63% and its main strategy now is to
delay the decline in light of intensifying competition. With traditional
fixed-line voice revenue dropping due to the increasing popularity
of mobile services (TM separated its mobile business into Axiata in
2008 and currently only focuses on fixed-line, data and broadband
services), we expect TM to invest heavily in upgrading its broad-
band network and coverage in order to capitalise on the increasing
demand for high-speed data services in Malaysia. BMI forecasts
9.3mn broadband subscribers in Malaysia by 2015, representing a
penetration rate of 30.8%.
Although TM is also the wholesaler of High-Speed Broadband
(HSBB), Malaysia’s national broadband network, the operator con-
tinues to experience pressure due to the launch of next-generation
WiMAX services by competitors. YTL Communications joined

TM Facing Pressure From

existing WiMAX players P1, Asiaspace DotCom and REDtone
Telecommunications in offering commercial WiMAX broadband

Mobile Broadband Players

Telekom Malaysia (TM) said it plans to boost its wireless solu-
tion portfolio by increasing the number of Wi-Fi hotspots in order
to improve the operator’s competitiveness in Malaysia’s mobile
broadband industry. Although BMI welcomes the operator’s deci-
sion to improve network coverage for its broadband services, we
think that providers of next-generation technologies WiMAX and
LTE are well-placed to challenge TM’s dominance in the industry.
TM was looking to add 1,200 Wi-Fi hotspots to the existing
8,800 in end-2010, and BMI believes that this would increase the
attractiveness of TM’s Streamyx broadband service. The fixed-line
incumbent initially dominated Malaysia’s internet industry but the
entry of other mobile and internet providers has eroded TM’s market
services in November. Pre-launch responses from the public for
YTL’s services were largely promising and judging by P1’s rapidly
increasing WiMAX subscriber base (see ‘YTL Provides Boost For
WiMAX And Mobile Broadband Industry’, November 18 2010), we
believe that TM’s market leader position in Malaysia’s broadband
industry is under significant threat.
TM was not one of the nine telecoms operators that reportedly
will receive a LTE licence in 2011. With an increasing number of
consumers opting to use mobile devices such as netbooks and tab-
lets, we believe that demand for mobile broadband services could
outpace the growth of fixed broadband services. That said, we expect
TM to continue to drive subscriber growth for its next generation
nationwide fixed-broadband service (UniFi) and bundle value-added
services such as IPTV to boost its attractiveness to consumers.

www.telecomsinsight.com 5
Singapore Asia Pacific Telecommunications

will feature NFC) suggest that NFC technology plays an important

Singapore
NFC Mobile Payment Takes The
First Step With StarHub
Singapore-based mobile operator StarHub commenced an eight-
month mobile payment trial based on near field communications
(NFC) technology for 1,000 of its subscribers in December 2010.
This trial came shortly after the Singapore telecoms regulator In-
focomm Development Authority invited companies to establish an
open NFC mobile payment platform by February 2012, and BMI
believes that NFC technology is rapidly-gaining traction globally,
which will enhance revenue-generating abilities of mobile operators
and other companies associated with NFC.
The project – jointly organised by DBS Bank, contactless
transport card issuer EZ-Link, MasterCard and digital security
company Gemalto – features a Gemalto-made SIM+antenna NFC
solution called N-Flex that enables StarHub subscribers to turn any
mobile handset into a NFC device that is capable of contactless
mobile payments. Participants in the trial are able to use the new
technology in places where MasterCard, PayPass or EZ-Link cards
are accepted and the companies hope to introduce the new service
to the public in H211.
Leveraging Off The Increasing Mobile Subscriber
Bases
Singapore Mobile Operator Subscriber Bases And Penetration Rate,
2008-2010
3,500
3,000
2,500
2,000
1,500
1,000
500
0 122%
Dec-08
role in their operations, and BMI believes that there is significant
growth potential for the nascent mobile payment industry. Unlike
the growing mobile applications industry, which has the ability to
bypass mobile operators, mobile payment requires the cooperation
of telecoms operators, banks and payment service providers in or-
der to create a secure payment platform, and this ensures that each
stakeholders will get a share of the profits generated.
Thailand
MNP To Have Little Impact On
Mobile Market
The long-awaited mobile number portability (MNP) in Thailand
looks set to take place on schedule after the first phase of the number
transferral process was successfully implemented in Bangkok on
December 5 2010. Although the introduction of MNP will heighten
competition in Thailand’s telecoms industry, BMI does not expect
a significant impact on the operators’ subscriber figures due to the
dominance of prepaid consumers. That said, we foresee companies
competing aggressively in order to retain or increase the number of
high-value postpaid subscribers.
The repeated delays of MNP forced the National Telecommuni-
cations Commission to impose a fine of THB166,667 (US$5,542)
per day on the country’s five operators – Advanced Info Service
(AIS), Total Access Communications, True Move, TOT and
CAT Telecom – after they missed the August deadline. Judging
144%
from the initial consumer response – MNP changes are limited to
142%
140% 500 numbers per day at 25 service locations in Bangkok and were
138% fully subscribed for the first three days – BMI believes that Thai
136%
134%
subscribers welcome the transferral system that will enable them to
132% switch providers but retain their mobile numbers.
130% However, BMI expects limited impact on the Thai telecoms
128%
126%
industry as 90% of the country’s 68.5mn mobile subscribers (as of
124% June 2010) are on prepaid plans. For one thing, it is commonplace
for consumers to have several SIM cards from different mobile

Mar-09

Jun-09

Dec-09

Mar-10

Jun-10
Sep-08

Sep-09

Sep-10

operators in order to take advantage of the cheapest calling rate.

Furthermore, measures put in place by the clearing house (estab-
Number Of SingTel Mobile Subscribers ('000) LHS
Number
Number
Of
Of
StarHub Mobile Subscribers ('000) LHS
M1 Mobile Subscribers ('000) LHS
lished by the five operators) such as a THB99 (US$3.29) fee and
Number Of Mobile Subscribers Per 100 Inhabitants RHS a rule to prevent consumers from switching from a new provider
Source: IDA, Operators, BMI within the first three months could deter subscribers from opting
for MNP. It would be of less hassle for subscribers to simply pur-
Although we believe that Gemalto’s method will accelerate the
MNP Expected To Cause Some Changes in 2011
adoption NFC technology in mobile devices as handset manufac- Thailand Prepaid And Postpaid Mobile Net Additions (‘000), 2008-2010
turers have yet to hop onto the NFC bandwagon, the process to
2,500 400
introduce NFC technology to a handset via an additional device
Prepaid Net Additions LHS
could become redundant in the future when handset manufacturers Postpaid Net Additions RHS
350
2,000
hop onto the NFC bandwagon. We believe it is likely for mobile 300
phone companies to turn NFC technology into a standard function
250
1,500
on handsets – similar to features such as Bluetooth connectivity and
200
cameras – once the technology matures and there is enough market
demand for the new technology. That said, we think technological 1,000
150

advancements could also result in NFC-embedded SIM cards that 100

would allow consumers to retain their mobile payment information 500
50
when switching between devices.
Developments from major players such as US-based mobile op- 0 0
Jun-08

Dec-08

Mar-09

Jun-09

Dec-09

Mar-10

Jun-10
Sep-08

Sep-09

erators AT&T, Verizon Wireless, T-Mobile USA (the three firms

jointly launched a NFC mobile payment platform in November) and
Source: Operators
Google (with its Gingerbread Android mobile operating system that

6 www.telecomsinsight.com
Vietnam
chase a prepaid SIM card from an alternative operator.
That said, operators are to see this development as an opportunity
to increase their share of the highly-competitive market. We expect
competition for postpaid subscribers to intensify due to constant
delays in introducing more profitable 3G services in Thailand. Data
provided by mobile market leader AIS (the only Thai operator to
release this data) showed that its postpaid quarterly churn rate has
been steadily increasing amid competition. Going forward, we could
see a spike in Q111 when nationwide MNP is fully implemented.
A similar impact could be expected for the fixed-line market as the
second phase of the MNP will allow subscribers to port their fixed-
line numbers to alternative providers.
True Takes Over Hutchison To
Boost 3G Prospects
Thai telecoms operator True Corporation has announced the
successful acquisition of Hutchison Telecommunications
International (HTI)’s operations in Thailand for THB4.35bn
(US$144.8mn). BMI thinks that this deal will help True expand its
wireless network in Thailand and potentially pave the way for the
company to become a nationwide 3G service provider.
In a report submitted to the Stock Exchange of Thailand in De-
cember 2010, True said its subsidiary Real Move (its 3G investment
unit) will acquire a 92.5% stake in Hutchison Wireless Multime-
dia Holdings for THB4.35bn. Another subsidiary, Real Future,
will take over three CDMA-related companies, including 100% of
Hutchison affiliate network provider BFKT. True emerged as the
favourite to acquire Hutchison’s assets in Thailand after state-owned
CAT Telecom and Hong Kong-based Hutchison Whampoa (parent
company of HTI) failed to agree on the takeover price (see ‘CAT
Telecom Stands To Lose More From Stalled Takeover’, November
3 2010).
Hutchison previously said that CAT Telecom’s offer of THB4bn
(US$133.2mn) in November to takeover Hutchison’s 74% stake in
Getting Out Before It Is Too Late
Thailand Mobile Subscriber Figures (‘000), 2008-2010
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0 0
Dec-08
Mar-09
Jun-09
Dec-09
Mar-10
Sep-08
Sep-09
AIS LHS DTAC LHS True LHS
Hutchison’s subscriber figures after Q109 are estimates. Source: Operators, BMI
the joint venture Hutchison CAT Wireless Multimedia was too
low. However, BMI thinks that Hutchison’s steadily-declining mo-
bile subscriber base played a significant role in prompting the Hong
Kong-based company to withdraw from the highly-competitive
market. We believe that Hutchison only generated modest profits
from its joint venture in recent years, but could start incurring losses
due to its shrinking subscriber base and the presence of three well-
www.telecomsinsight.com
Asia Pacific Telecommunications
established Thai mobile operators that dominate the industry.
Although Hutchison had only about 600,000 CDMA mobile
subscribers (according to local media reports in December 2010)
in Thailand’s total mobile subscriber base of 69.7mn, True’s real
intention is to replace Hutchison as the owner of a telecoms net-
work covering 25 Thai provinces and gain access to the 800MHz
frequency band. This deal will enable True to collaborate with
CAT Telecom and jointly launch 3G wireless broadband services
in the country. While the formation of a new super regulator, the
National Broadcasting and Telecommunications Commission, is
making headway, BMI believes that Thailand’s constant political
wrangles and complicated legislations will continue to hinder further
progress in the 3G licence auction. We therefore believe that Thai-
land’s private mobile operators – Advanced Info Service (AIS),
Total Access Communications (DTAC) and True – are pressured
to seek alternative means to roll out the lucrative service. AIS has
resumed talks with state enterprise TOT to launch 3G services as
a mobile virtual network operator, while CAT approved DTAC’s
plans to expand its 3G trial services.
Vietnam
Vietnam Is Not Ready For
Mobile Number Portability
Vietnam’s Ministry of Information and Communications (MIC) said
it was studying the possibility of implementing mobile number port-
ability (MNP) in the country and could release a set of guidelines in
2011. Although BMI broadly welcomes the introduction of MNP,
we think that the Vietnamese market is not yet ready for a further
increase in the level of competition, which could affect the sustain-
ability of mobile operators.
It was reported that Vietnam’s three leading operators Viettel,
MobiFone and VinaPhone – which accounted for about 88% mar-
ket share (as of December 2009) in the country’s mobile industry
– have been resisting the introduction of MNP. BMI understands
their concerns as MNP could apply undue downward pressure on
1,200
a growing mobile market. Vietnam’s mobile industry is engulfed
in a detrimental price war partly due to the number of telecoms
1,000 companies operating in the market. At last count, Vietnam had nine
800 mobile operators, and MNP would force companies to compete more
aggressively to gain or protect their subscriber bases. However,
600
given the dominance of Viettel, MobiFone and VinaPhone, we think
400 that smaller operators are at a greater disadvantage due to the larger
players’ wider network coverage and economies of scale. That said,
200
MNP could also hasten the much-needed consolidation in Vietnam’s
mobile market and ensure operators’ long-term sustainability.
Jun-10
Sep-10
The benefits of MNP are best reaped in countries where the
industry has matured and is experiencing stagnant growth as a
Hutchison (e) RHS result. This could not be said for the Vietnamese market, even
though the mobile penetration rate for the country is among the
highest in the Asia-Pacific region. According to the General Sta-
tistics Office of Vietnam, there were 147.3mn mobile subscribers
in the country as of November 2010, representing a mobile pen-
etration of about 170%. However, we believe that the prevalence
of inactive mobile subscribers and multiple prepaid SIM cards
heavily distorts the actual size of Vietnam’s subscriber base.
MNP enables mobile subscribers to switch service providers with-
out the hassle of changing their phone numbers. However, the latest
figures from the MNP exercise in Thailand showed that the impact of
7
Cambodia
MNP Not Required For Industry That Is Growing
Vietnam Mobile And 3G Subscribers Forecasts, 2005-2015
300,000
250,000
200,000
150,000
100,000
50,000
0 0
2005
2006
2007
2008
2009
2010f
2011f
2012f
2013f
2014f
2015f
Number Of Mobile Phone Subscribers ('000) LHS
Number Of 3G Subscribers ('000) LHS
Mobile Phone Subscribers Per 100 Inhabitants RHS
f = forecast. Source: ITU, BMI
MNP faded after a few days. There were only 2,400 MNP requests
in the first 10 days of the MNP launch in Thailand on December
5 2010, way below the 500 requests per day limit that the clearing
house had set. This development chimes with our previous view
(see ‘Mobile Number Portability To Have Little Impact On Mobile
Market’, December 9 2010), and we believe that a similar scenario
will play out in the Vietnamese market if MNP is launched in the
short term.
Meanwhile, Viettel has given some support for MNP but urged
the MIC to apply the policy on newly issued numbers as opposed
to all outstanding numbers. While this would impact the country’s
small postpaid subscriber base, BMI believes that it would have little
effect on the dominant prepaid subscriber base as one could easily
obtain a new number instead of going through MNP.
Cambodia
Smart And Star-Cell Begin
Consolidation In Cambodia
Cambodia’s mobile industry got off to a positive start in 2011 after
Smart Mobile and TeliaSonera-owned Star-Cell were given the
go-ahead by the local authorities in January to merge. The newly-
formed entity will operate under the Smart Mobile brand and claimed
to be the country’s third largest mobile operator (with 850,000 sub-
scribers) competing in Cambodia’s now-eight-player mobile market.
BMI believes that the merger deal enables TeliaSonera to remain in
Cambodia and profit if the country fulfils its potential, but it also
significantly reduces the company’s exposure to the industry’s
competitive landscape.
Cyprus-based Timeturns Holdings, owners of Smart Mobile,
will hold a 75% stake in the new mobile company, while Telia-
Sonera will control the remaining 25%. BMI previously reported
that even Cambodia’s Ministry of Post and Telecommunications
was uncertain of the exact size of the country’s mobile sector as it
estimated in December 2010 that the mobile penetration rate was
in the range of 50-59% for Cambodia’s population of 14.8mn. A
lack of concrete data has not deterred investor confidence as foreign
companies continue to believe that Cambodia presents significant
growth potential. PT Telekomunikasi Indonesia and France Tel-
ecom have announced that they were in talks to acquire CamGSM
(MobiTel), Cambodia’s largest mobile operator.
TeliaSonera commitment to Cambodia’s emerging but highly-
8 www.telecomsinsight.com
Asia Pacific Telecommunications
competitive mobile market was not diminished by a US$100mn
write-down in Star-Cell’s value in October 2010. The company said
300
there was a lack of goodwill in the industry amid fierce competition
and high churn rates. Indeed, BMI believes that it is difficult to fos-
250 ter brand loyalty and shift consumers to the higher-value postpaid
200 contracts in an industry where companies compete purely on price.
We also believe that operators heavily inflate their subscriber figures
150
by counting the number of SIM cards sold to consumers, which ap-
100 plies further downward pressure on the Cambodia’s overall ARPU.
On the flip side, the situation may not be as dire as the headline
50
figures suggest. BMI believes that consolidation, which we have
been calling for, will provide stability and sustainability for the
industry in the long run, and the merger between Smart Mobile and
Star-Cell could be the first of many to reduce the number of compa-
nies competing in the market. Meanwhile, operators’ actual ARPUs
are almost certain to be higher because companies over-inflate their
subscriber bases to boost their market shares. Lastly, we think that
financially-strong foreign companies could inject much-needed
capital and experience to promote long-term industry development
in order to recoup their investment in the emerging market.
China
TD-LTE Vital In Maintaining
China Mobile’s Dominance
China Mobile is preparing itself for stronger competition in the
Chinese mobile market in 2011 partly due to a six-month long mobile
number portability (MNP) trial launched in November 2010. While a
nationwide MNP implementation is unlikely to cause a mass exodus
of mobile subscribers – particularly 3G subscribers – China Mobile
is not taking any chances and BMI expects the mobile market leader
to push for the launch of next-generation TD-LTE in China in order
to stay ahead of its competitors in the long run.
China Mobile and South Korean mobile operator SK Telecom
have announced a successful TD-LTE trial that began in August
2010. The last phase of the trial will take place in Seoul in July 2011,
and SK Telecom expects a nationwide launch in South Korea by
2013. Indeed, this is a major boost for the LTE camp because SK
Telecom said it will be capping investments for its WiBro (a South
Korean variant of alternative standard WiMAX) network and chan-
nelling capital to its LTE and Wi-Fi networks as well as femtocell
technology. The commercialisation of TD-LTE is equally important
for China Mobile as we believe that the next-generation technology
will play a pivotal role in maintaining the operator’s dominance in
the Chinese mobile market.
Local rival China Unicom poses a large threat to China Mobile’s
dominance in the Chinese market with its offering of the highly-
popular iPhone manufactured by Apple. However, the iPhone is
only one part of the equation as Bloomberg reported that Chinese
consumers preferred China Unicom’s WCDMA network to China
Mobile’s proprietary TD-SCDMA because of better connection
speeds. China Mobile recognises its deficiency and has been expand-
ing the number of Wi-Fi hotspots in the country since 2010 in order
to meet consumer data and speed demands. China Mobile expects
the Wi-Fi network expansion to accelerate in 2011 and BMI sees
this as an interim solution to keep China Mobile’s subscribers on
its network when nationwide MNP kicks in. Faster speeds delivered
by TD-LTE and China Mobile’s broad network coverage would
help contain challenges from China Unicom and China Telecom.
Taiwan Asia Pacific Telecommunications

Meanwhile, handset manufacturers are pushing out LTE smart-

phones to capitalise on the increasing number of LTE networks
deployed globally. The support of SK Telecom and other overseas
operators (Indian nationwide broadband wireless access licence
owner Reliance Industries has selected TD-LTE and expects serv-
ice roll-out by end-2011) as well as China Mobile’s 580mn mobile
subscriber base (as of November 2010) are incentives to convince
makers to ensure that LTE devices will be compatible with TD-LTE.
However, we expect these developments to play out in the next few
years, which would explain China Mobile’s current Wi-Fi solution
to please its subscribers.
Taiwan
Asus Bets On Tablets in 2011
Taiwan-based computer product manufacturer AsusTeK unveiled
four tablet computers during the annual Consumer Electronics Show
(CES) in Las Vegas, which the company hopes will compete with
current market leaders Apple (iPad) and Samsung Electronics
(Galaxy Tab). Tablet computers barely existed a year ago but the
current heavy focus on the nascent market is a clear indication of
innovation in the dynamic industry. BMI expects the demand for
smartphones and tablets to hit new highs in 2011 as manufacturers

Room For Further Growth In

continue to roll out new devices.
Unlike the ‘one-size-fits-all’ strategy adopted by Apple with its

China’s Internet Sector

iPhone and iPad, Asus has selected a quantity approach (as have
Apple’s other rivals), but the company was the most aggressive
The China Internet Network Information Centre (CNNIC) has with its four tablets showcased at the CES. BMI thinks that Asus is
provided a comprehensive insight into the country’s internet sec- embracing a trial-and-error tactic by using Microsoft’s Windows 7
tor with its ‘27th Statistical Report on the Internet Development operating system (OS) on one tablet and Google’s Android OS on
in China’ published in January 2011. The total number of internet the remaining three. However, this strategy is by no means inferior
users in China reached 457mn in December 2010, while the annual to a focused approach as a diverse range of products could appeal to
growth rate slowed to 19.1% from 28.9% in 2009. However, the a wide spectrum of consumers. The company further differentiated
internet penetration rate came in at a mere 34.3%, which is compel- itself from its competitors from incorporating physical keyboards
ling evidence that there is significant room for growth in this sector. on some of its tablets (either detachable or slide-out), which should
Unsurprisingly, internet penetration rates in urban areas such attract consumers who find that touchscreens are unable to meet
as Shanghai and Beijing were among the highest in China, but their usage demands.
the number of rural internet users continues to increase due to the
government’s efforts to promote internet awareness and use. BMI Tablets To Stabilise Shaky Performance?
Asus Financial Results (TWDmn), 2007-2010
believes that mobile broadband plays a vital role and will be the main
180 10
internet user growth driver in China over the next few years, which is 9
160 8
in line with the global trend. This is largely due to Chinese telecoms 7
140
operators’ push to increase the take-up rate for 3G services, which 6
120 5
has been below expectations. China Unicom lowered the monthly 4
100 3
cost of its entry-level 3G mobile package for consumers in December 2
80
2010 as part of a strategy to increase its mobile data subscriber base. 60
1
0
This sort of aggressive pricing strategy increases the attractiveness 40
-1
-2
of mobile broadband – particularly in rural regions – and suggests 20 -3
-4
that the weak sign-up rate is a temporary phenomenon. 0 -5
The report also showed that the number of internet banking and
Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

payment service users grew by an average of 47% in 2010, which

exceeded the growth rates of other services such as blogging and Revenue LHS Net Profit RHS
online gaming. We believe that this presents an opportunity for
Chinese telecoms operators and financial institutions to cooperate Source: AsusTeK

and capitalise on the future growing mobile internet user base. It is

BMI’s long-held view that mobile banking and payment services
greatly appeal to countries with large populations. Two of India’s
largest mobile operators, Bharti Airtel and Vodafone Essar, have
partnered with the State Bank of India and ICICI Bank respec-
tively to deliver financial services to underserved rural consumers.
However, China’s regulatory framework could prevent Chinese
mobile operators from adopting a similar path. Local media reported
that Chinese regulations prohibit telecoms operators from engaging
in financial transactions, which would severely dent China Mobile’s
plan to introduce mobile banking services through its partner, the
Shanghai Pudong Development Bank. Despite this potential setback,
BMI thinks that the state-run telecoms firm would obtain the necessary
permission to offer mobile banking services to rural subscribers, which
could become a lucrative revenue source. Meanwhile, second-ranked
China Unicom also signed an agreement with Industrial Bank in
December 2010. We therefore foresee the number of mobile banking
and payment users maintaining its growth momentum in 2011.
Asus said it will be focusing on the tablet market in 2011, and
BMI believes that the increasingly-competitive smartphone industry
drove Asus to diversify and seek opportunities in the alternative
fledgling industry. This followed a largely-unsuccessful smartphone
joint venture with personal navigation device vendor Garmin due
to the free map and navigation service provided by the Android
operating system. Although smartphones and tablets are unlikely to
replace personal computers and laptops in the near future, netbooks
(a market that Asus is a market leader in) look increasingly under
the threat of being cannibalised. That said, BMI is encouraged by
Asus’ quick shift in direction to produce tablets and we think the
company could leverage on its computer expertise and knowledge
to establish itself as a serious challenger in the industry.
Asus forecasts the size of the non-iPad tablet computer market
to reach 10-15mn in 2011 and the company aims to achieve a
double-digit market share. However, BMI cautions that overstretch-
ing resources in order to produce a wide variety of devices could

www.telecomsinsight.com 9
South Korea
start to have negative impact on Asus’ financial performance once
industry players begin employing cut-throat competitive tactics, as
the competition in the global tablet sector is intensifying much more
rapidly compared to the smartphone industry in 2010.
South Korea
Mobile Operators Feel The Data
Crunch
South Korean mobile operators are feeling the pressure from the
ever-increasing number of data devices that are applying immense
stress on companies’ data networks. BMI previously flagged up that
South Korean mobile operators’ strategy of bundling data devices
with unlimited data plans is a quick way to boost subscriber growth
but is largely unsustainable in the long term. While network up-
grades and expansions can alleviate data stress, the solution requires
substantial capital investment and does not resolve the issue in the
short term. BMI reaffirms that a change in business plan is necessary
to ensure companies can efficiently monetise their data networks.
Mobile market leader SK Telecom is in talks with the Korea Com-
munications Commission for a potential overhaul of its unlimited data
plans due to network congestion. Second ranked KT (which introduced
unlimited data services in September 2010 to compete with SK Tel-
ecom) said it was considering charging its tethering services to manage
subscribers’ data consumption. KT previously downplayed the effects of
unlimited services overloading its networks and said the concerns were
exaggerated. Although operators are now reaping the negative results
of their earlier marketing campaigns to promote unlimited data plans,
BMI welcomes operators’ initiatives to rectify the situation.
BMI believes that operators need to put an end to ‘all-you-
can-eat’ data plans even if the decision could provoke protests
from some subscribers. Tiered pricing is not necessarily a
worse option for the majority of consumers as it mainly targets
‘heavy’ data users who engage in activities such as video-streaming.
That said, unless the situation becomes dire, BMI foresees that
operators will be reluctant to switch from a business model that has
become the main subscriber growth driver. Firstly, we think that
operators fear that rivals might gain a competitive edge by main-
taining their unlimited data offerings but network quality is also a
vital deciding factor for consumers. Secondly, we think that mobile
operators see next-generation technologies LTE and WiMAX as
silver bullets to resolve the data crunch (SK Telecom and KT aim to
Surging Demand For 3G Services
KT Mobile Subscriber Growth (‘000), 2007-2010
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0 400
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Number Of 3G Subscribers Number Of 2G Subscribers
Source: KT
10
Asia Pacific Telecommunications
launch LTE services in 2011, while third ranked LG Uplus targets a
LTE roll-out in 2012). However, there is no guarantee that LTE and
WiMAX will not face a similar network congestion issue: though
there is a current lack of compatible devices, the subscriber base is
expected to grow significantly in the future.
IPTV’s Future Looking Bright
The Korea Communications Commission (KCC) estimated that
there were 2.93mn IPTV subscribers (as of December 5 2010) in the
country, and the telecoms regulator expects this figure to exceed 3mn
by end-2010. South Korea’s IPTV industry has grown significantly
since it was launched two years ago amid the global economic crisis.
Going forward, BMI expects the country’s high broadband penetration
rate and the support of the KCC to fuel IPTV’s growth momentum.
Media Industry Association, South Korea is the fourth largest
IPTV service provider in the world behind France, the US and China.
IPTV delivers media content via high-speed broadband connections
that are increasingly prevalent in South Korea – BMI forecasts
20.2mn broadband subscribers in South Korea by 2015, represent-
ing a penetration rate of 40.1% – and we expect IPTV to leverage
on the country’s growing broadband subscriber base to expand its
market share in South Korea’s pay-TV sector.
Besides increasing the number of channels to 300 in December
2010 – up from 251 in the previous year – South Korea’s major IPTV
providers KT, SK Broadband and LG Dacom collaborated to secure
broadcasting rights to major sporting events in order to reduce costs
and deliver sports programmes to consumers at affordable prices.
Furthermore, BMI believes that the introduction of smart TV in the
near future will further increase the attractiveness of IPTV services.
Smart TV aims to deliver an integrated interactive platform that offers
consumers a broad range of entertainment services on their internet-
enabled TV sets. Samsung Electronics forecasts that smart TVs will
account for 50% of the South Korean TV industry by 2013.
However, BMI notes that the KCC has used regulatory barriers
to prevent the entry of foreign players in order to protect its domestic
companies. The KCC only allowed Apple’s iPhone to be sold in the
South Korean market in late-2009 after months of consumer pres-
sure. The KCC has now pledged to provide financial support for
IPTV providers and cable TV operators and has urged them to cooper-
ate in order to prepare for future challenges from Google TV and Ap-
ple TV. While BMI is encouraged by the KCC’s foresight, we caution
that an overly-protective stance could deter foreign companies and
investors and leave South Korean consumers worse off in the long run.
2009/2010 Was A Very Good Year
South Korea IPTV Subscribers (‘000), 2008-2010
2000
KT 1800
SK Broadband 1600
LG Dacom
1400
1200
1000
800
600
200
0
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Source: Operators
www.telecomsinsight.com
Japan
Mobile Operators Not On Same
Wavelength With The KCC
The Korea Communications Commission (KCC) has announced
further investment plans in order to simulate growth in South Korea’s
telecoms and information communication technology industries in
2011. Amongst the telecoms regulator’s plans are the deregulation
of South Korea’s advertising and media industries and the launch
of mobile virtual network operators that would inject much-needed
competition in the stagnating telecoms industry, which is dominated
by well-established players. Another key focus of the KCC will be
to increase the take-up rate for its local variant of pre-4G WiMAX
technology called WiBro but BMI thinks that WiBro faces a gloomy
future despite the continued governmental support.
The government originally had high hopes for its homegrown
technology and intended to export WiBro globally – South Korea’s
incumbent fixed-line operator KT launched WiBro services in Rwanda
in end-2009 – but demand from South Korean consumers are luke-
warm at best. According to the Korea Times, SK Telecom and KT
have currently less than 600,000 WiBro subscribers, far less than the
1mn mark that the government had hoped to achieve by 2008. The
KCC aims to press SK Telecom and KT to expand WiBro’s network
coverage but BMI foresees resistance from the telecoms operators due
to the weak consumer demand for the technology and the possibility
that WiBro could cannibalise their costly 3G services.
That said, stricter measures such as KCC’s threats to revoke Wi-
Bro licences if operators held back investments could help to drive
adoption of the technology in the short run. Indeed, SK Telecom and
KT pledged to increase their budget and WiBro network coverage in
the next two years. Marketing campaigns and attractive price plans
will be implemented to drive consumer interest for WiBro. Although
we welcome the government’s efforts to promote its local WiMAX
standard, we think that WiBro could be further marginalised when
operators eventually introduce alternative LTE technology in South
Korea if inherent weaknesses – such as connection issues when
multiple devices are located in the same vicinity – are not resolved.
BMI sees the introduction of Wi-Fi-generating modems that con-
nect to South Korea’s WiBro networks as a short-term solution to
tackle the lack of compatible devices and WiBro’s reliability issue.
Meanwhile, South Korean mobile operators seem to be more ag-
gressive in their push for alternative LTE technology in the country.
SK Telecom aims to establish a nationwide LTE network by 2013
after launching commercial services by H211 while KT plans to
roll out services in 2012 and invest KRW1.67trn (US$1.43bn) in its
network from 2011 through 2014. Lastly, LG Uplus, third-ranked
in terms of subscribers has selected Samsung Electronics, LG-
Ericsson and Nokia Siemens Networks to deploy its LTE network
that will start operations in July 2011. These developments mirror
BMI’s view that LTE is gaining traction in Asia and could deal
another blow to the country’s WiBro industry.
Japan
NTT DoCoMo Starts A New
Chapter In E-Book Industry
Japanese mobile operator NTT DoCoMo has announced an agree-
ment to establish a fully integrated digital and physical hybrid book-
store that will begin selling printed and electronic books (e-book)
www.telecomsinsight.com
Asia Pacific Telecommunications
in 2011. The joint venture (JV), called 2Dfacto, is the result of an
earlier agreement in August 2010 with Dai Nippon Printing Group
(DNP), one of Japan’s largest comprehensive printing companies,
and BMI thinks the multi-pronged approach adopted will enable the
companies to leverage on their individual expertise.
NTT DoCoMo started an e-book distribution service trial from
late October in order to gather feedback from consumers prior to its
commercial launch, early 2011. The companies also aim to integrate
an existing online bookstore for printed books that is managed by
CHI (a DNP Group company) and other physical bookstore chains
in the DNP Group.
Although the global e-book industry is rapidly growing due to the
increasing number of e-book stores – Google launched its eBooks store
in the US in early December – and mobile devices such as Amazon’s
Kindle and Apple’s iPad, BMI believes that there is still significant
demand for printed Japanese books in the ageing population. The
decision to combine the three distribution channels could give NTT
DoCoMo and DNP a competitive edge over its rivals that are competing
or looking to compete in the e-book industry. For example, Japanese
multinational conglomerate Sony Corporation has announced its re-
entry into the Japanese e-book market after the company pulled out
of the industry along with Panasonic in 2007 due to a lack of content.
While Sony increased its number of titles to 20,000, up from 10,000
when it exited the market, it will pale in size compared to the 100,000
titles that NTT DoCoMo and DNP plan to offer through 2Dfacto.
We expect NTT DoCoMo and DNP to increase their focus on the
booming e-book market in Japan. According to research firm Impress
R&D, Japan’s e-book sales reached JPY57.4bn (US$684.4mn) in
2009, an increase of 23.7% from JPY46.4bn (US$553.3mn) in 2008.
Furthermore, sales through mobile handsets accounted for 89% of total
sales in 2009, which highlights the importance of NTT DoCoMo’s
role in the JV. NTT DoCoMo dominates the Japanese mobile sector
with 47.6% market share (as of September 2010), an equivalent of
56.9mn subscribers. Although 2Dfacto’s e-books are only available on
seven Android-based devices, we expect NTT DoCoMo to increase its
mobile device support and leverage on its widespread i-mode service
in order to capitalise on its market leader position.
Lenovo-NEC PC Unlikely To
Significantly Boost Performance
China-based computer manufacturer Lenovo Group formed a
joint venture with Japan’s NEC on January 27 2011 to form Ja-
pan’s largest personal computer (PC) group. The companies were
reportedly in talks about a potential tie-up earlier and BMI thinks
that collaboration between Lenovo and NEC, both market leaders
in their domestic markets, can help expand their product reach
and increase their competitiveness in the domestic and global PC
markets. However, BMI thinks that the strategic partnership could
struggle to create a significant impact on their rivals as the global
PC business becomes increasingly commoditised.
Under the agreement, Lenovo will control 51% of the new entity,
called NEC Lenovo Japan Group, while NEC will have the re-
maining 49% stake. The companies will leverage off each other’s
distribution channels, market positions and product portfolios to
reinforce their PC businesses and expand their presence in the informa-
tion technology (IT) sector. The mature Japanese and rapidly growing
Chinese markets present significant potential, particularly in the enter-
prise sector that generates a longer-term sustainable revenue stream.
However, BMI has yet to see a game-changing strategy that
11
India
Lenovo Could Have Given NEC Five More Years
NEC Financial Results (JPYbn), 2006-2010
Source: NEC
would boost the long-term outlook of Lenovo and NEC in the PC in-
dustry. Innovations in the smartphone and tablet computer industries
have dominated headlines in the past two years, and the booming
mobile device market is posing a serious threat to the PC industry.
Furthermore, unlike software makers such as Microsoft, which are
able to customise their products meet the changing consumer needs,
PC manufacturers are struggling to differentiate their products as
computer hardware progressively becomes a commodity.
Perhaps more interestingly, a filing with the Hong Kong Stock
Exchange showed that Lenovo has a right to buy out NEC’s stake
as early as 2016, which is subject to approval from NEC and various
government entities. Although NEC said ‘both sides have no intention
of exercising this right,’ the insertion of this clause has undoubtedly fuel
speculations that NEC could pull out of the Japanese PC industry in
five years. NEC was the Japanese market leader (19.6% market share)
in Q210, but the company’s most recent financial results showed a net
loss of JPY26.5bn (US$323.6mn) for the quarter ended December
2010. NEC withdrew from the global PC industry in 2009 amid sub-
stantial losses due to competition and decreasing demand, and BMI
thinks that the joint venture’s performance in the next five years will
be crucial to determine whether NEC will remain in the Japanese PC
business or restructure itself to focus on its core IT solutions business.
India
Government’s Support To Boost
Long-Term Rural 3G Coverage
India’s Department of Telecommunications (DoT) will initiate a
bidding process across the country’s 22 telecoms circles that aims
to encourage mobile operators to expand their 3G coverage in rural
regions, according to the Economic Times. This development chimes
with BMI’s core view that rural expansion represents significant
opportunities for the industry and that telecoms services play a vital
role to driving economic growth in rural areas.
The bidding process will involve the seven telecoms operators
– Bharti Airtel, Reliance Communications, Vodafone Essar,
Aircel, Idea Cellular, Tata Teleservices and S Tel – that have 3G
licences. However, state-owned Bharat Sanchar Nigam (BSNL)
will also be roped in to ensure that a minimum of two operators
provide 3G services in rural regions, which will reduce capital ex-
penditure and introduce competition, thereby making tariffs more
affordable to rural subscribers. In the event that no bids are received,
12
Asia Pacific Telecommunications
BSNL will be the default winner of the telecoms circle and will be
awarded the contract at the benchmark rate.
BMI previously reported that BSNL had a run-in with the Indian
government over its social obligation to India’s rural areas as a
state-owned operator ( see ‘BSNL’s WiMAX Halt Reflects Deeper
Troubles’, October 8 2010 ). BSNL claimed that government was not
providing proper support for the company to fulfil this mandate, and
the government subsequently agreed in November to grant BSNL an
additional INR23.95bn (US$530.8mn) in order to complete BSNL’s
WiMAX rural rollouts. BMI therefore thinks that the government
will ensure BSNL is given enough support to achieve profitability
with the 3G rural contracts that the operator is awarded. That said,
we believe that this incentive scheme, if structured properly, would
also appeal to private sector mobile operators that have been slow
to expand their rural coverage.
3G Has To Wait While 2G Has Yet To
Make An Impact
India Mobile Penetration Rates By Regions
140 18
120 16
14
100
12
80 10
60 8
6
40
4
20 2
0 0
Jun-08
Jun-09
Jun-10
Sep-08
Dec-08
Mar-09
Sep-09
Dec-09
Mar-10
Average Urban Penetration Rate (%) LHS
Average Rural Penetration Rate (%) LHS
Urban Q-o-Q Growth (%) RHS
Rural Q-o-Q Growth (%) RHS
Source: TRAI
The project will be funded by the India’s Universal Service Ob-
ligation Fund (USOF), which came into effect in 2002 and requires
all Indian telecoms companies (pure value-added services providers
are excluded) to contribute 5% of their annual revenues towards this
fund. Although further details such as the amount and uses of the
incentive were not available, BMI believes that the monetary support
will subsidise the hefty cost involved in the expansion of network
infrastructure, which has deterred mobile operators from providing
3G coverage to rural areas. This project is part of the DoT’s promise
in July 2010 to connect over 250,000 villages in India to wireless
broadband and 3G services by 2012 in order to enable access to
value-added services such as weather forecasts and mobile banking
that could enhance their standards of living.
However, BMI affirms that even if the scheme is successfully
implemented, we foresee initial take-up rates to be suppressed
because cost of 3G and wireless broadband services, as well as the
devices used to access these networks will remain unaffordable
for majority of India’s rural population. We expect this scheme to
form only part of the government’s larger plan to improve economic
conditions in India’s rural regions.
Drawn-out Investigation For 2G
Licence Process Expected
India’s Department of Telecommunications (DoT) said it will
conduct an exercise to determine the actual revenue loss from the
www.telecomsinsight.com
India
allocation of 2G licences in 2008 instead of relying on the ‘presump-
tive’ INR1.76trn (US$39.26bn) figure calculated by the Comptrol-
ler and Auditor General. Although the ongoing investigation will
impact India’s foreign investment outlook in the short term due to
the number of high-profile foreign companies involved (the Indian
government is also in a dispute with Vodafone over a US$2.5bn
tax bill), BMI believes the scandal provides a platform for the
government to carry out a much-needed reform for the country’s
telecoms industry.
The DoT will attempt to calculate the net present value of the
licences as it is unable to determine the market value due to a lack
of an auction in 2008. Furthermore, the DoT will issue notices to
companies holding 85 disputed licenses, giving them 60 days to
address the government’s concerns. Meanwhile, the DoT is likely
to impose fines on all telecoms operators that have failed to meet
telecoms infrastructure and service roll-out deadlines as part of
an industry-wide crackdown. Given India’s existing competitive
landscape and regulatory framework, BMI welcomes the govern-
ment’s attempt to clean up the telecoms industry that has been
plagued with issues such as an ongoing price war and constant
delays in network roll-outs.
India’s telecoms industry is dominated by seven companies
– Bharti Airtel, Reliance Communications, Vodafone Essar,
Bharat Sanchar Nigam (BSNL), Tata Teleservices, IDEA Cel-
lular and Aircel – that accounted for 90% market share as of June
2010. Incidentally, companies such as Etisalat DB, S-Tel, Unitech
and Sistema Shyam that accounted for less than 3% market share
were reportedly under investigation by the DoT. According to
India’s Economic Times, the Directorate of Enforcement, the
country’s investigating agency, has written to foreign governments
such as the UAE, Norway, Singapore and Cyprus seeking informa-
tion on telecoms companies embroiled in the disputed allocation
process. The agency is trying to find out if these companies were
involved in a series of interlinked financial transactions in order to
‘camouflage the real beneficiaries of the spectrum scam.’
If the DoT decides to revoke and reallocate the disputed licences,
the development will mirror BMI’s core view that consolidation in
India’s overcrowded telecoms market will enable operators to pool
valuable resources such as spectrum and deliver better services
to subscribers. Although competition (in terms of lower prices)
is largely beneficial to consumers, the ongoing price war has sig-
nificantly negatively affected the profit margins of even the market
leaders. Moreover, the Indian government is running out of valuable
Small Operators Holding On To Valuable
Spectrum Licences
India Mobile Operator Market Share (%), June 2010
MTNL S Tel Etisalat
0.2% 0.0%
Reliance 0.8%
17.4% Bharti Airtel
21.5%
Sistema
0.8%
Videocon
BSNL 0.3%
11.4%
Loop Vodafone
0.5% 17.2%
Idea/Spice
10.8%
Aircel/Dish Unitech
net HFCL Tata 0.9%
0.1% 11.4%
6.6%
Source: TRAI
www.telecomsinsight.com
Asia Pacific Telecommunications
spectrum to allocate to operators, which are struggling to meet the
demand of an increasing number of consumers.
Besides a comprehensive and drawn-out investigation that could
run deep into 2011, legal challenges and potential complications in
reallocating licences (the government will be keen to avoid another
undervaluation of spectrum lots) could mean a conclusion to the
investigation may be reached only in the medium term. Although the
scandal will continue to shadow the industry, BMI believes that it
could also pave the way for a long-term industry development, as-
suming that the government manages the dispute properly.
Vodafone Essar-Wipro
Partnership Mutually Beneficial
India-based mobile operator Vodafone Essar and informa-
tion technology (IT) service firm Wipro Technologies have
announced a partnership that will see Wipro manage support
services to Vodafone Essar’s fixed-line enterprise business cus-
tomers. Vodafone Essar is looking to improve its cost efficiencies
by outsourcing non-core operations in order to compete in India’s
highly-competitive telecoms market. Going forward, BMI expects
more collaboration that will provide a growth driver for companies
operating in the telecoms and IT industries.
Vodafone reported that operating expenses accounted for 32.2%
of its total revenue of GBP3.11bn (US$4.89bn) in India for the
FY2009/10 (Apr-Mar). BMI thinks that outsourcing IT services will
enable Vodafone to reduce its expenditures and improve its profit-
ability, which came in at a loss of GBP37mn (US$58.2mn). Voda-
fone also has an agreement to outsource its billing, data centres and
financial systems to IBM in a five-year contract signed in late-2007.
Under the agreement, Wipro will build an Enterprise Network
Operation Centre that provides services such as network design and
build and integration with existing IT operations support system
applications for three years. Despite the presence of well-estab-
lished international IT companies such as IBM and Accenture,
Wipro is proving to be a strong competitor in the Indian telecoms
outsourcing sector. The Vodafone contract was reported to be
worth US$50mn and is the third deal Wipro has signed with Indian
telecoms operators – the firm has also bagged agreements with
Uninor and Aircel.
Vodafone’s fixed-line enterprise business is valued at INR80bn
(US$1.79bn) and is growing at 23% compounded annually, accord-
ing to CNBC. BMI believes that Wipro’s deals with Indian operators
will be a significant boost to its profit margin and reputation. The firm
reported total revenue growth of 6.3% to INR271.4bn (US$6.04bn)
for the financial year ended March 2010, a significant decrease from
its average annual growth rate of 34.1% in the previous three years.
Wipro attributed the slowdown due to weak global economy but
going forward, we believe that its strategy of focusing on small and
medium enterprises (SMEs) across a wide range of industries – such
as autos ancillary, gems and jewellery and hospitality – could help
close the gap between the firm and India’s current market leader
IBM in terms of revenues. As potential contract deals with large
companies start to dry up due to increasing competition, SMEs will
provide the growth driver for IT companies.
Meanwhile, Indian mobile market leader Bharti Airtel has
awarded IBM a US$80mn contract to manage the operator’s
telecoms business in Bangladesh. This is an extension of a long-
lasting relationship between the two companies that started with a
US$750mn partnership in India in 2004, which has since increased to
13
Sri Lanka
Wipro-fessional Help Needed To
Arrest Escalating Cost
Vodafone India Financial Results, 2007-2010
45%
Revenue (GBPmn) LHS
2,000 Operating Expenses (GBPmn) LHS 40%
% Of Operating Expenses RHS
35%
1,500 30%
25%
1,000 20%
15%
500
10%
5%
0 0%
H1 07/08
H2 07/08
H1 08/09
H2 08/09
H1 09/10
H2 09/10
H1 10/11
Source: Vodafone
US$2bn. Subsequently, IBM clinched a 10-year deal reported to be
worth US$1bn to manage Bharti’s newly acquired 16 operations
in Africa. This development chimes with Bharti’s lean strategy
and could help company mount an aggressive price competition to
increase its market share of 5% as of June 2010.
Sri Lanka
Change In Direction Needed
For Lanka Bell To Ring
Sri Lankan fixed-line operator Lanka Bell was put up for sale by
its parent Distilleries Company of Sri Lanka (DCSL) in end-
November 2010. It was also reported in October that Indian telecoms
company Tata Communications was in talks to acquire 100% of
Sri Lanka’s alternative fixed-line wireless in the local loop (WLL)
operator Suntel. Although both Sri Lankan companies operate in a
fixed-line industry dominated by Sri Lanka Telecom, BMI thinks
buyers of these companies will be attracted to the operators’ assets
because they allow for the pursuit of profitability in alternative
revenue streams and take advantage of the government’s efforts to
promote the telecoms and information technology (IT) industries.
Lanka Bell posted revenue and net profit of LKR2.4bn
(US$21.5mn) and LKR92.3mn (US$828,397) respectively for the
six months ended September 2010, providing much-needed posi-
tive news for the company’s profit margins, which have been under
pressure since the telecoms price war started in Sri Lanka in 2008.
DCSL’s telecoms arm reported that profit before tax plunged to
LKR76mn (US$682,104) in the FY2008/09, down from LKR907mn
(US$8.7mn) in the previous reporting period. However, BMI thinks
that the reversal is unlikely to be sustained as the outlook for the
country’s fixed-line industry remains bleak due to decreasing de-
mand for fixed-line services in light of the increasing popularity
of mobile services. BMI forecasts the number of fixed-lines in Sri
Lanka will plateau in the medium term – growing at an average of
0.8% annually from 2010-2014 – to reach 3.6mn in 2014, up from
3.5mn in June 2010.
Although it seems that the turnaround is insufficient to persuade
DCSL owner Harry Jayawardene from divesting its telecoms busi-
ness, we believe that Lanka Bell has valuable assets that will attract
the attention of domestic and overseas telecoms operators. Besides
being the country’s leading CDMA operator, Lanka Bell also of-
14
Asia Pacific Telecommunications
fers WiMAX services on its 3.5G spectrum and operates the sole
landing site of the undersea fibre-optic cable FLAG (Fibre-Optic
Link Around the Globe) – a 65,000km long cable that is capable
of offering services at high speeds and with large capacity for both
voice and data services.
Constant Ringing In the Head
DCSL Telecoms Segment Financial Performance (LKRmn), 2009-2010
7,000 200
Cumulative Revenue LHS
Cumulative Net Profit/Loss RHS 100
6,000
0
5,000
-100
4,000
-200
3,000
-300
2,000
-400
1,000 -500
0 -600
Jun-09
Jun-10
Mar-09
Sep-09
Dec-09
Mar-10
Sep-10
Source: DCSL
Furthermore, the Sri Lankan government is proactively trying
to promote the country’s telecoms and information technology
industries in order to create employment and restore economic
stability, and President Mahinda Rajapaksa’s ongoing bid to con-
solidate political power in the hands of the presidency should ensure
near-term political stability after years of domestic turbulence (see
‘Greater Centralisation To Bolster Growth In The Short Term’
November 2 2010). BMI therefore thinks that telecoms companies
could be interested in acquiring Lanka Bell to leverage on the
government’s support and capitalise on the growth potential of the
nascent broadband industry in Sri Lanka. BMI forecasts 598,000
broadband subscribers by end-2010 and we expect this number to
increase to 4.8mn in 2015, representing a penetration rate of 23.1%.
Pakistan
Cheap Tariffs Takes Shine Off
SMS Growth
The Pakistan Telecommunication Authority (PTA) reported that
151.64bn SMS text messages were exchanged in 2009, which placed
the country fourth in the world behind the Philippines, US and UK.
Although newer and more sophisticated data services – 3G and 4G
– are rapidly being rolled out globally, BMI believes that the basic
and humble SMS remains an important revenue stream for operators
in developed and emerging markets in the long term.
Although Pakistan was some distance off the Philippines – which
remained as the ‘text capital of the world’ with about 720bn SMS sent
in 2009, representing an average of 834 SMS per subscriber per month
– the PTA said Pakistan had the highest SMS growth rate (149%) in the
Asia-Pacific region in FY2008/09. As a whole, the PTA estimated that
the total SMS traffic in the country generated revenues of PKR40.76bn
(US$475.9mn) in 2009. Undoubtedly, SMS’ revenue-generating abil-
ity goes beyond the actual service as it is also an affordable and simple
tool for many basic value-added services such as mobile banking.
Operators’ heavy emphasis on non-voice revenues is often a positive
sign as data services are seen as a more sustainable revenue stream
www.telecomsinsight.com
Pakistan Asia Pacific Telecommunications

between operators and flat-rate promotions. According to the PTA’s

Pakistan Sending A Clear Message data, the average cost of an SMS in Pakistan amounted to PKR0.27
Pakistan, UK And The Philippines SMS Figures (bn), 2006-2009
(US$0.0032), which is significantly lower than the world average of
800 180%
US$0.07 per SMS. Pakistan did not fare better when compared to its
700 160%
regional emerging peers such as the Philippines, India and China.
600 140%
120%
These countries reported that their average SMS cost was about
500
100%
3-9 times higher than Pakistan’s. While the low SMS cost played
400
80% a pivotal role in promoting SMS growth in Pakistan, operators are
300
60% experiencing diminishing returns on their data services. We expect
200 40% operators to invest further in their data networks in order to cope with
100 20% the increasing number of SMS that could eventually cripple services.
0 0% Perhaps more worrying is that Pakistani con-
2006 2007 2008 2009
sumers are getting used to paying rock-bottom prices for telecoms
Pakistan LHS
UK LHS services. The PTA announced that a proposal for a 3G auction would
The Philippines LHS
Pakistan y-o-y % Grow th RHS
UK y-o-y % Grow th RHS
be submitted to the government and the Economic Coordination
The Philippines y-o-y % Grow th RHS
Committee for discussion and approval, with the hope that com-
SMS figures for the Philippines in 2006 and 2007 are estimates. Source: PTA, NTC, mercial 3G services could be launched by end-2011. BMI foresees
OFCOM, BMI
challenges for operators in recouping their capital investments if
compared to traditional voice services. they continue their aggressive pricing strategies once premium 3G
Indeed, the figures paint a rosy picture for the Pakistani data services are available. However, take-up rates are likely to be weak
sector and its future growth potential but BMI is concerned about if operators are unable to justify charging substantially higher prices
the low tariff rates for SMS services due to intense competition for 3G plans.

Analyst: Andrew Kitson © 2011 Business Monitor International. All rights reserved.
Sub-Editor: Savika Voratanitkitkul All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organi-
sations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International, and as such
Subscriptions Manager: Dan Xue
no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd.
Production: Duane Rogers
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of
Publishers: Richard Londesborough/Jonathan Feroze publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any informa-
www.telecomsinsight.com 15
tion provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part
of the content.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.