Telecom sector in transition in 2013-

These are interesting times for telecom markets across Southeast Asia. While the countries in the region exhibit significant levels of disparity in terms of maturity, sophistication, and growth in telecom service delivery and uptake, Southeast Asia continues to be one of the fastest growing telecom markets in the world.

The past year, in particular, has turned out to be an exceptional one for the telecom industry in Southeast Asia due to several major developments:

  • Launch of 4G – long-term evolution (LTE) services in Singapore, Malaysia, and the Philippines;
  • Introduction of 3G services in Thailand;
  • Establishment of a telecom regulator in Cambodia; and
  • Opening up of Myanmar’s telecom market to foreign players.

As the year draws to an end, Southeast Asia Infrastructure takes stock of key trends and developments in the region’s telecom space and outlook for the industry…

Myanmar: Creating a buzz

The country gained several international brownie points during 2013 with the government’s introduction of major reforms. First and foremost, the telecom market was liberalised with the issuance of two unified service licences to foreign players – Norway-based Telenor and Qatar-based Ooredoo. Furthermore, the state-owned incumbent, Myanmar Posts and Telecommunications (MPT), is also likely to disassociate itself from government support. It is set to forge partnerships with experienced international operators to achieve a competitive edge in the market.

With the introduction of a new telecom law in October 2013, followed by the release of a by-law in November 2013, international operators now have a broad framework in which to do business in the country. These reforms are likely to help Myanmar to meet its target of achieving a teledensity rate of 80 per cent by 2015–16. The endeavour to achieve this objective will be daunting: the country’s wireless teledensity stands at a mere 11 per cent, way behind the figures of its peers in the region.

Singapore:  A mature market

Singapore continues to be the most mature and sophisticated market in the region. Aided by its geographical location and outstanding infrastructure, the country boasts of a wireless penetration rate of 157.1 per cent as of September 2013. 3G customers account for 66 per cent of the total mobile subscriber base of 8.34 million. Currently, the city-state is the only country in the region that provides island-wide LTE coverage with a 4G subscriber base of 1.6 million.

Cambodia: Consolidation of the industry

Considered one of the most overcrowded telecom markets in Southeast Asia, the telecom industry in Cambodia underwent a certain amount of consolidation during 2013. The number of mobile operators declined from nine to five in 2011. The closure of the financially struggling Mfone in early 2013 and the merger of Hello Axiata with Smart/Latelz in March 2013 have returned some of the pricing power to operators.

Furthermore, the Ministry of Posts and Telecommunications (MPTC) officially constituted the Telecommunications Regulator of Cambodia (TRC) in September 2012 – a momentous move for the Cambodian telecom sector. With this change, the TRC has assumed the regulatory role that formerly belonged to the MPTC. Thus, it is responsible for the key areas of spectrum allocation and the regulation of pricing, among others.

Finally, the MPTC prepared a draft National Broadband Policy in early 2013, to expand the availability of broadband internet access and ICT across the country. It is still awaiting government approval.

Indonesia: Large market, slow growth

With about 280 million mobile users, Indonesia continues to be the largest telecom market, in terms of subscriber base, in the region. However, the growth in the country’s telecom sector has been sluggish, due to excessive competition in the mobile segment and the slow rate of the implementation of regulatory decisions. Its broadband penetration rate currently stands at over 20 per cent.

In end-2012, the government allocated the final two blocks of 3G spectrum to operators and consumers have started to show their preference for 3G services. Furthermore, in November 2013, a local Internet service provider, Internux, has come up with a mobile device called “Bolt” that can be used by Indonesians to access data at 4G speeds.

Malaysia: Solid shift to data

The country continues to be a highly saturated market – with wireless penetration of over 146 per cent. The government is increasing its focus on high speed data services. Early in 2013, the government’s RM 11.2 billion high speed broadband (HSBB) project received global recognition for being the fastest in the world in its implementation and the largest in scope. With this project that was first conceived in 2010, Telekom Malaysia rolled out services to 1.3 million premises by end-2012.

In addition, the Malaysian Communications and Multimedia Commission awarded eight 4G licences in the 2.6 MHz band at the end of 2012. Since then, all major operators including Maxis, Celcom, and DiGi have launched LTE services in the country.

The Philippines: Rapid move to maturity

The telecom market in the Philippines witnessed a major milestone in early 2013 when  wireless penetration in the country surpassed the 100 per cent level. The success of the market can be largely attributed to the two key operators – Philippines Long Distance Company and Globe Telecom.

These two operators have embarked on massive network revamps to ensure the widespread coverage of 3G/4G services in the country. Philippines Long Distance Company completed its $1.6 billion network overhauling programme in September 2012, with Globe completing the first phase of its $700 million transformation Program in mid-2013. Making their networks ready for the future has been central to both the operators’ modernisation projects.

Dominant government presence in other markets

Brunei, with a mobile penetration rate of about 120 per cent in 2013, ranks high among its Asian peers in terms of telecom advancements. The country that already has 3G services ushered in 4G technology in 2013 – a feat that most of its neighbours such as Thailand, Cambodia, and Vietnam have yet to achieve.

However, there remains much to be done, in terms of improving the competitive landscape of the country’s telecom market. Currently, there are only two operators in the wireless space – DST Communications and B-Mobile (a unit of state-owned TelBru). However, in the recent past, B-Mobile has been grappling with some serious issues regarding service outages and/or degraded service quality. As a result, DST has assumed significant control over the mobile market in the country.

Vietnam’s telecom market also functions as an oligopoly: local players such as Viettel and Vietnam Posts and Telecommunications Group (VNPT) hold controlling shares of the two key telecom market segments. In 2012, VNPT dominated the fixed line segment with a market share of 75.4 per cent; Viettel trailed behind with 22.96 per cent. As for the wireless market, Viettel held 40.05 per cent of Vietnam’s mobile subscriptions, followed by the subsidiaries of VNPT – MobiFone (21.4 per cent) and Vinaphone (19.88 per cent). This oligopolistic environment not only violates the competition law, but also affects the quality of services for customers.

The allocation of 3G services in Thailand in 2012 has ushered in a new wave of enthusiasm in the country. By mid-2012, all three key Thai operators – AIS, DTAC, and TrueMove – have launched 3G services. True has even conducted 4G LTE trials using the spectrum allocated for 3G services.

One of the major developments in Lao PDR’s telecom space in 2013 was the LTE trials conducted by Lao Telecom. However, with a wireless teledensity of almost 90 per cent, the country still has a lot of catching up to do before it is on par with its regional peers. The construction of the country’s telecom infrastructure continues to be a priority for the government.

Search for new differentiators dominate emerging trends

Despite regional disparities, there exist some key trends whose impact is being felt across all the markets in Southeast Asia:

  • Saturation of the voice markets;
  • Declining average revenue per user (ARPU) for operators;
  • Growing network congestion;
  • Surge in uptake of smartphones; and
  • Emergence of data services as new growth avenues for operators.

As voice markets reach saturation, Southeast Asian operators are increasingly turning to data services to drive revenue growth. Consumers’ appetite for high speed data services is on the rise. Recent instances of 3G/4G spectrum allocation followed by speedy launches of these services as well as their growing uptake indicate that both governments and operators in the region are keen about pushing next-generation services in a big way.

However, as the data momentum builds up, operators will find it extremely difficult to support high bandwidth 3G/4G services on their existing networks that were primarily built for voice services. Consequently, several operators are undertaking major network revamps and exploring data offloading solutions such as femtocells and picocells to reduce network congestion. Needless to mention, the implementation of such strategies have taken a toll on operators’ capex/ opex plans. Hence, operators in the region have seen margins erode due to high network costs and increased competition.

Riding on the data wave, Southeast Asia has become a key growth market for smartphones as well. As consumers move beyond simple voice and SMS services towards high speed, bandwidth-intensive social networking, business and video applications, smartphones are proving to be an ideal platform.

Nonetheless, ARPUs have also followed a downward trajectory in 2013. The region is now characterised by a burgeoning base of prepaid mobile subscriptions; they account for over 90 per cent of the user bases of most of the ASEAN operators. The revenue from prepaid subscriptions is much lower than from post-paid connections on an average and this translates into low turnover and low profits for operators.

2014 outlook: Surge in data service demand

The outlook for Southeast Asia is positive in the near term. The allocation of 3G/4G spectrum, as well as the deployment of these services, will continue to be the focal point of most countries and operators in 2014. As data slowly becomes the new voice, Southeast Asian operators are likely to undertake significant attempts at enhancing the reach of these services by ramping up their existing infrastructure. However, given the regional disparities and the non-uniformity of the telecom markets within the region, surprises could still be in store in the coming year.