2008 Asian - Mobile Voice Market

This Asia market report covers 35 countries in North, South and Central Asia. The topic is mobile deployments and developments particularly focussing on voice application for mobile use.

Mobile markets in Asia continued experiencing rapid growth during 2007, despite many countries close to or over the 90% penetration mark. This has resulted in the Asia region being home to the fastest growing telecoms markets in the world. Excluding the highly penetrated markets, growth has been in excess of 20% in all countries, with average annual growth being well over 30%. This is particularly relevant in India and China where monthly net additions are regularly in excess of 10 million subscribers. These two countries alone account for over 20% and 40% overall market share in the Asia-Pacific region respectively.

There is still room for substantial growth. Markets with large populations and relatively low penetration rates, such as India, China, Philippines, Pakistan, Vietnam and Indonesia, will continue to grow at a rapid rate. In the more mature markets like Japan, Taiwan and South Korea, mobile numbers will rise less than 5%. Growth is being driven by various factors, including government investment to drive the economy; infrastructure building after years of neglect or fixing the after-effects in war torn countries, and also major foreign investment.

South Korea has become a leading global mobile phone player as a result of a number of key factors coming together. First, tariffs and terminal costs have been constantly forced downwards, creating a huge surge in public demand. Second, the introduction of competition in 1996 provided a major impetus to growth. Third, the government’s very active role in helping to build the mobile market has been instrumental in making South Korea one of the mobile phone powerhouses on the global scene. Fourth, the nationwide roll out of CDMA technology has been a real boost to the market. Unlike most other countries where GSM is the norm, the South Korean Government mandated the use of CDMA. Fifth, camera-equipped mobile phones should not to be overlooked as simply a fad; these phones played an important role in increasing mobile service subscriptions and sales of mobile handsets. And finally, 3G phones and advanced mobile services such as mobile gaming, m-banking and m-commerce have kept the mobile sector invigorated.

In the developing economies quick and easy mobile uptake is the preferred, and often only, option for subscribers, exacerbated by low fixed-line deployments. These countries also offer investors the promise of continued growth of the mobile infrastructure and subscribers. While subscriber growth and market share is important in the developing economies, there comes a point where the venture must result in profits.

Operators still face the huge challenge of trying to prevent ARPU slide as mobile services spread to poorer parts of the population. To an extent, a large customer base will help to offset low spend but it is also hoped that new non-voice services will help to drive revenue. Operators are developing new mobile services such as mobile banking, remittance payments, and mobile health services that take advantage of a lack of access by the poor to social infrastructure such as banks and hospitals.

China

In the past five years, as one of its ‘pillar’ industries, China’s telecom service industry has grown at a faster rate than the country’s GDP. Revenue from basic telecom service contributes approximately 2.1% of GDP, while value-added telecom services contribute a further 3.2% to total GDP. China continues to extend its lead as the single largest mobile market in the world. The vast majority of services are GSM – China is the largest GSM market in the world – though China Unicom’s CDMA service is the second largest in the world. By February 2008, China had 565 million mobile phone users, exceeding the fixed-line subscription base of 362 million.

At the end of 2007, mobile penetration in China stood at 41%, following a record level of subscriber additions during the year. The robust growth was due to an expanding rural market and the increasing number of people who have acquired more than one mobile phone. Despite this growth, both China Mobile and China Unicom have been grappling with a steady decline in the average revenue earned from new users. As in other markets around the world, this trend has been fuelled by the growing popularity of prepaid cards instead of the more lucrative postpaid subscriber contracts.

China Mobile chief Wang Jianzhou predicted that, based on the current population of 1.3 billion, China’s mobile market should reach saturation at about 800 million subscribers. Foreign experience suggests that once the 50% mark is reached, growth slows down.

Hong Kong

Hong Kong’s mobile market has some of the cheapest tariffs in the world. This is one of the reasons why it is has such a high penetration rate. An ongoing price war has cut mobile phone air-time rates to levels where operators have become increasingly reliant on provision of non-voice value-added services to maintain margins. This, in turn, has made 2.5G and 3G services of considerable importance to the operators.

India

Driven by cheap call rates, low handset prices and rising incomes among the estimated 300 million of the population that are described as the country’s middle class, the boom in India’s mobile market has continued into 2008. Also the operators are increasingly eyeing the poorer rural areas as potential markets for their services.

India’s mobile market finished the 2007 year strongly with over 233 million subscribers in the sector – according to the telecom regulator’s figures which cover GSM, CDMA and WLL. The mobile operators have been attracting new customers with call rates as low as US$0.01 a minute and by offering cheap handsets. While offering some of the lowest mobile tariffs in the world, the market also has the highest usage in the world with an average customer using 500 minutes per month. In the meantime, the fixed-line market has experienced falling customer numbers, with the overall base dropping to 39.3 million by year-end.

The government continues to be very positive about the future of India’s telecoms market. In February 2007, ahead of its national budget, the government predicted that the number of phone connections, including fixed-line, GSM and CDMA subscribers, would rise to 650 million by 2012, from 200 million at the time.

Indonesia

At the end of 2007 almost 90 million of Indonesia’s 245 million population had a mobile phone, providing plenty of room for growth over the next three years. Coming into 2008 the market continued to expand, with annual growth still running at about 30% on the back of cheaper tariffs and handset prices. But the market is also getting crowded and operators have been slashing prices in a bid to entice customers in a country where mobile take-up is set to surge to 120 million by the end of 2008. ARPU is also falling but with this being offset by the increasing subscriber base, companies are planning to target the lower income groups.

Pakistan

Pakistan’s mobile market continued to run hot in 2007 and into 2008. By any measure, 2007 was another remarkable year for the mobile sector; subscribers totalled 77 million by year-end, representing annual growth of 60%, coming on top of 120% growth in 2006. Mobile penetration was almost 50% by end-2007. Strong marketing by the operators continues to be central to Pakistan’s mobile growth phenomenon. As well as marketing, cheap call rates and falling handset prices have also been key factors in driving demand for mobiles.

Philippines

By March 2008 55 million of the Philippine’s 90 million population were subscribing to mobile services; with the annual growth rate continuing at around 15%. The subscriber base can be expected to reach around 75 million by 2010. On the back of the huge popularity of prepaid services, mobile penetration had reached 59% by end-2007.

Thailand

Thailand’s mobile market experienced yet another strong year of growth in 2007 and this has continued into 2008. Although growth slowed somewhat from a few years earlier, the market has continued its long run of robust expansion, a run that started in 2000. Despite expectations of a cooling market, by end-2008 the 65 million mobile subscriber mark is expected to be reached.

Vietnam

Vietnam’s mobile market started off slowly but has subsequently developed rapidly – growing at an annual rate of between 50% and 100% per year. Judging by the interest shown by foreign operators in investing in the Vietnam market, there is still plenty of room for further growth.

Mobile subscribers and annual change in Asian markets ranked by penetration – 2007

(Source: BuddeComm based on Global Mobile and industry data)

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