2007 North Asian - Telecoms Statistics and Market Overview

This Asia market annual report covers eight economies in the North Asia sub-region. It takes an overall look at the various telecoms markets, together with a particular look at the telecom statistics which describe the market in each of the countries. The markets covered include: China, Hong Kong, Japan, Macau, Mongolia, North Korea, South Korea and Taiwan.

Through 2006 and into 2007, we have continued to see a generally strong run of economic growth throughout the Asian region. In terms of economic power the economies of North Asia are dominating the region. The giant growth engine that is China has continued to provide a sustained lift to the economies of its regional neighbours. However, if China’s economy starts showing signs of stalling, the impact will certainly be felt right across Asia.

The region’s telecom sector was clearly benefiting from the healthy economic environment:

• Asia’s mobile market has continued to grow strongly; having passed the one billion subscriber milestone in late 2006, the market was expanding at an annual rate of almost 30% into 2007.
• By March 2007, the region had amassed 1.1 billion mobile subscribers. Of these, a total of 645 million were to be found in North Asia.
• With strong leadership from Japan, 3G mobile services were being rolled out in most of the major markets in North Asia; China was the notable exception, as it confines itself to ‘trial’ networks and postpones 3G licensing.
• North Asia’s choice of Internet access continues to build a strong and robust broadband presence;
• The big economies of North Asia are leading the way in the drive to build out powerful NGNs.

In looking at the Asian telecom market, it is impossible to avoid the impact of China. With its huge population and strongly developing economy, it is a real presence in the region. Having become the biggest mobile market in the world, China was continuing to expand its mobile subscriber base at a rate of almost 20% per annum. As a consequence, it could claim over 470 million mobile subscribers by April 2007.

In the meantime, while China has been grabbing the headlines, a long-time global and regional telecommunications leader, Japan, has been keenly maintaining its reputation for innovation by regularly adding value to the telecom market. Its industry leadership has embraced the application of wireless Internet access, with over 85 million mobile subscribers using either NTT DoCoMo’s i-mode (with 48 million) or one of the other proprietary products by mid-2007. Its embracing of FttH has also been ground-breaking, with an estimated 10 million FttH subscribers by mid-2007.

Asia claims the world’s largest regional Internet market, with around 437 million Internet users (a user penetration of 12%) by mid-2007. Not surprisingly, the North Asia markets - - Japan, Hong Kong, South Korea and Taiwan - continue to be leaders within the region. This group has been joined by China. With a user penetration of 10.5%, China had a massive 137 million Internet users by the start of 2007.

South Korea was continuing to dominate the area of broadband Internet access, leading the world and the region with its 84% of households having a broadband connection by end-2006. Its launch of WiBro in mid-2006 was also a world first.

In 2007, the Asian telecommunications market was estimated to be worth around US$350 billion. A huge slice of that value was to be found in North Asia. The big new drivers in the market are broadband and IP services, as well as ongoing growth in the mobile sector, particularly as more and more value-added services come into play. NGNs are also being rolled out by the regional heavyweights, with the inevitable strong move into triple play services on the back of the NGNs.

Some key highlights within the telecom sectors of the North Asia markets coming into 2007 include:

• The importance of China’s economic progress and wellbeing to its Asian neighbours – and particularly the developing ones – cannot be overstated. China’s ongoing growth surge has been soaking up huge volumes of exports from its neighbours.
• While overshadowed somewhat of late by China, Japan continues to be a very significant economic player. Japan’s economy is the world’s second largest (behind the US, but still ahead of China). With a GDP of US$4.4 trillion, in 2006 it accounted for 9% of global GDP.
• Into 2007, Asia’s telecommunications sector was looking generally stronger, building on positive growth in 2006.
• The particularly strong demand for 3G services in Japan has continued. By March 2007, around 70 million (or 72%) of Japan’s 96.7 million mobile subscribers had signed up for 3G services.
• By March 2007, NTT DoCoMo claimed 35.5 million 3G services, having maintained its lead over KDDI (27.3 million), with SoftBank (7.1 million) in third place.
• Of the other big markets, all eyes have for some time been on China and its preparations for 3G licensing. However, industry observers may be giving up on predicting a timetable. It seems that when the ministry in China said that 3G services would be in place for the Beijing Olympics in 2008, that did not necessarily mean 3G licences would be issued by or before then.
• Redundancy remained a critical issue for submarine cable systems in North Asia and beyond: the earthquake off the coast of Taiwan in December 2006 and the major outages that followed highlighted the weaknesses in the infrastructure.
• The aggressive push of Chinese equipment manufacturers into the Asia market has continued, with these suppliers having a major impact on the regional markets as they provide generous supplier credit as part of their supply contracts, in order to build market share.
• South Korea was the region’s most penetrated Internet market with 71% user penetration by December 2006. It was closely followed by Japan on 68%; then came Taiwan (63%), with Hong Kong and Singapore both on 60%.
• South Korea was also the most penetrated broadband market in the world, with an estimated 84% of all households in the country accessing the Internet via a high-speed connection coming into 2007.
• Over the 2003-2006 period, Japan and Hong Kong were two of the fastest growing broadband markets in Asia. Almost 50% of Internet households in Japan had broadband access coming into 2007, having jumped from just 15% at end-2001. Hong Kong has had a similar rise and claimed around 69% of Internet households with broadband access by end-2006.
• By mid-2007, there were an estimated 35,000 WiFi hotspots in Asia, according to one source; of these more than 10,000 were located in South Korea.
• Japan has already managed a substantial roll-out of FttH; by mid-2007, it had around 10 million FttH subscribers with broadband Internet access.
• Of the 240 million additional mobile subscribers added to Asia’s total subscriber base in the 12 months to March 2007, around 71 million were added by China.

Data in this report is the latest available at the time of preparation and may not be for the current year.