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Asean’s Mr. Mobiles
In their own cyber territories

In Southeast Asia, where the average mobile phone market is dominated by young people, all the key players are getting ready to take advantage of the  significant growth in the use of the advanced third generation (3G) mobile telephone network technology.

The 3G technology had taken off in Europe, especially Italy and the United Kingdom, and parts of Asia, especially Japan, and that the momentum is expected to soon begin to increase in Asean.

The 3G mobile telephone is a generic term covering a range of future wireless network technologies, including Wideband Code Division Multiple Access (WCDMA), Code Division Multiple Access 2000 (CDMA 2000), Universal Mobile Telecommunications System (UMTS) and Enhanced Data for Global Evolution (EDGE).

Using 3G technology, mobile phone subscribers will be able to enjoy triple-play services, ranging from video calls, video streaming, video conferencing to video clips through mobile phones, in addition to a much faster data transfer.

Out of an estimated 1,931 million global users of mobile phones, over 28 million have subscribed to 3G, which is dominated by the WCDMA standard -- a technology for wideband digital radio communications of Internet, multimedia, video and other capacity-demanding applications.

The trend for 3G has begun to pick up momentum across the region, including Thailand, Indonesia and the Philippines, which are on the lost potential high growth markets in Asean.

One of the fastest growing markets for mobile technologies, Thailand recorded more than 43 million mobile subscribers with an average annual growth of about 7-8 percent as of July 2007. There are more than 8 mobile operators in Thailand.

The dominant players include AIS Advanced Info Service, DTAC Total Access Communications, and TrueMove.

Thailand’s Information and Communications Technology (ICT) Ministry is speeding up development of third-generation (3G) broadband cellular service. The regulator National Telecommunications Commission (NTC) plans to award 3G licences based on the 2,000-megahertz spectrum bands as early as August.

The ministry meanwhile has already given the go-ahead for a plan by state telecom operators (TOT and CAT) and their private telecom concessionaires for the joint development of 3G on existing 900MHz and 850MHz spectra.

Advanced Info Service (AIS), which holds the TOT concession, will develop 3G on its 900MHz spectrum. Total Access Communication (DTAC), which holds the CAT concession, will develop the service on its existing 850MHz spectrum. True Move, CAT's other private cellular concessionaire, is waiting for CAT to allocate the other 850MHz spectrum bands before it develops 3G.

TOT has already clinched NTC permission for AIS to import 3G equipment, while DTAC is still waiting for CAT to receive similar permission.

While progress has been made on the 3G-licensing side, Suranan said the NTC had to put off plans to grant WiMax licences from mid-year, because 11 of the 13 companies testing WiMax could not complete the tests in April and requested the NTC to extend the trial period for another 90 days.

In Indonesia’s mobile telecoms market, the incumbents’ competitive advantage of having large subscriber and base station networks is slowly but surely being eroded. Interconnection tariffs are set to be revised down, so a pricing war is likely to spread from on-net calls to off-net calls.

The leaders, Telkomsel (in which Telkom Indonesia, majority-owned by the Indonesian government, has a 65 percent holding and Singtel the remaining 35 percent) and Indosat face difficult times ahead, with capital expenditure remaining stubbornly high, market shares declining and profit growth slowing.

Asia Mobile Penetration Rates 2005-2010

  

Mobile Penetration (2005)

BMI Forecast Mobile Penetration (2010)

Forecast Average Annual Growth

Hong Kong

118.5%

111.9%

-0.3%

Singapore

97.7%

100.7%

2.1%

Australia

96.1%

100.6%

2.0%

Taiwan

92.4%

92.6%

1.3%

Korea

79.1%

85.9%

2.1%

Malaysia

74.1%

91.2%

5.8%

Japan

70.3%

85.6%

4.2%

Thailand

46.9%

78.5%

14.4%

Philippines

42.7%

75.2%

16.9%

China

30.2%

58.9%

21.9%

Indonesia

22.3%

41.5%

19.5%

Pakistan

14.1%

37.7%

38.5%

Vietnam

10.3%

35.9%

62.3%

India

7.0%

32.8%

80.1%

The competition has become "multi-pronged", as well – with capitalised contenders emerging from amongst the 11 wireless licence holders, most of which are well funded and backed by foreign telecom companies.

The majority of those licences were handed out only in the last five years. Low network utilisation and a high-tariff regime currently enjoyed by the incumbents have allowed challengers to take market share through an aggressive pricing strategy.

The top two mobile companies, Telkomsel and Indosat, have a more than 70 percent market share, and the top three, which includes Excelcomindo (67 percent owned by Telekom Malaysia), have 90 percent of the market.

Meanwhile, Singapore’s Temasek has been forced by the KPPU to sell its holding in either Telkomsel or Indostat within the next two years, on the basis that its cross-shareholdings in both companies breached Indonesian competition rules. Temasek is appealing against the decision, but it nevertheless highlights the intense scrutiny the incumbent telecom companies are under.

Looking at the Philippines, there has been a focus on and a rapid take-up of mobile services. The market here has witnessed the remarkably high national usage of SMS.

Mobile penetration has grown quickly to have reached 51 percent (46 million subscribers) by early 2007, up from less than three million mobile subscribers in the country at end-1999.

The continued growth has confounded the market; there have been times when the growth looked to have reached a plateau, but then it found a way to continue.

Not surprisingly, mobiles have well and truly overwhelmed fixed-line services. Much of the recent growth in mobiles has also been coming from outside the main city of Manila, with the big operators, Globe and Smart, vying for lower income segments of the population by offering a range of cheap prepaid products.

Observers said further growth in the market will depend on the pricing and marketing strategies of the operators, as well as the growth in the overall economy.

After lagging badly in the roll-out of Internet and broadband services, 2006 saw a significant surge in broadband subscriber numbers. By end-2006, there were an estimated 340,000 broadband subscribers in the country; the numbers had reached about 500,000 by mid-2007.

This presented a much needed boost to a market where more than half the users access Internet at cyber cafes and other such venues. The jump followed the expansion of PLDT’s SmartBro service, a wireless broadband product similar to WiBro in South Korea.

Despite the welcome strong growth, overall broadband penetration remained low coming into 2007; there were only four broadband services for every 1000 people in the country.

Yet, there is considerable ongoing optimism in the Philippine telecom and IT market; apart from generally healthy growth at the moment, the sector has been contributing over 10 percent to the country’s GDP, boosted considerably by the booming mobile segment.

Mr. Mobiles rule their cyber territories
In the mobile industry Asean, there is so far no pan-Asean giant nor is there any one in the making, not at least until the economic integration drive finally dismantles (if ever) the barriers of highly diverse regulations that protect local players.

The competition is largely confined to individual markets or cyber territories where the state-owned carriers often take the upperhand, which however, seems to be changing though at a slow pace.

Mr. Mobiles in Asean

Take a look at the three operators, representing Thailand, Indonesia and the Philippines, chosen at random, and the executives at the helm, who are among Asean’s Mr. Mobiles dominant in their own territories, and who never stop lookingfor more room to grow.

Dtac looks to folks upcountry

Formally known as Total Access Communication Public Company Limited, ‘dtac’ is the second biggest telecom services provides in Thailand. The company’s CEO, Sigve Brekke, is kind of celebrity status after his easygoing character in the local TV commercials.

At dtac, Brekke finds himself more as a coach than a CEO as he would rather work with people than leading them. Lately the CEO, has been talking about discovering how it could grow by meeting the needs of up to 8 million rural consumers.

In one of those interviews he gave he noted that dtac’s penetration rate in the country was coming to 37-38 percent and that most customers lived in the 20 biggest cities in Thailand.

When the CEO of dtac started to go out into the market, and visited small village shops, he found out that brands like Colgate had much smaller toothpaste in these shops than what one would find in Bangkok.

This led him to thinking that well-known consumer product brands had come up with a different type of product, more tailor-made for a lower end market which is very cash driven. He wondered if dtac could come up with a product itself, using similar thinking, that there might be a market the firm currently was not able to serve.

Basically, he found out dtac needed a new, complete concept to reach these new customers - a cheaper network solution, handsets with very, very plain functionality, and low-priced, a new prepaid product, as the rural market being entirely a prepaid segment, and top-up cards for the prepaid product that had a lower value.

Asia 3G Forecasts 2005-2010

 

Estimate No of 3G Subscribers 2005 (mn)

BMI Forecast No of 3G Subscribers 2010 (mn)

Japan

42.93

88.111

Korea

12.868

27.3

Hong Kong

0.6

4.02

Taiwan

1.2

6.806

Australia

0.98

5.2

Singapore

0.16

1.126

Malaysia

0.055

2.51

China

0

136.2

India

0

24

Philippines

0

5.86

Thailand

0

5.535

Indonesia

0

2.775

Vietnam

0

2.1

Pakistan

0

0.9

Gearing up for 3G
In January this year, dtac joined CAT Telecom and Ericsson to demonstrate mobile broadband using HSDPA (High –Speed Downlink Packet Access) technology on the 850 MHz spectrum band.

The company chose Ban Paeng School and Mahasarakham University in the Northeast region as locations for testing the efficiency of high-speed mobile broadband.

Sigve Brekke, the CEO of dtac, believes the cooperation could pave way for his company to offer a new alternative for users to have access to mobile broadband, which is a basic infrastructure to enhance Thailand’s social, economical and educational development, and push for the increase of the broadband Internet penetration rate.

He said dtac is carrying out a feasibility study on both technology and investment for the upgrade of the 850 MHz band for providing broadband Internet access because the company wants to utilize the band to its most capacity.

 

 

 

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