This report provides an overview of the trends and developments in the mobile, broadband and the digital economy of the major markets of the Asian region. Subjects covered include:
Researcher:- Lisa Hulme-Jones, Peter Evans
Current publication date:- April 2010 (15th Edition)
Next publication date:- April 2011
Mobile markets in Asia have continued experiencing rapid growth during 2009, despite many countries close to or over the 90% penetration mark. A combined total of close to 1.9 billion mobile subscribers and an average annual growth of over 30% (excluding the highly penetrated markets) has resulted in the Asia region having the fastest growing telecommunications markets in the world. Particularly relevant are India and China where monthly net additions are regularly over 10 million subscribers. These two countries combined account for over 57% of overall market share in the Asia-Pacific region.
There is still room for substantial growth and 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. Growth is being driven by various factors, including government investment to drive the economy; infrastructure building or fixing the after-effects of war as well as major foreign investment projects.
In developing economies, quick and easy mobile uptake is the preferred, and often the only, option for subscribers exacerbated by low fixed-line deployments. In order to prevent ARPU slide, operators are developing mobile services such as mobile banking, remittance payments and mobile health services that take advantage of lack of access by the poor to social infrastructure such as banks and hospitals.
Asia makes a strong claim to be leading the world when it comes to the development of broadband Internet. In fact, after the mobile market, broadband has been the fastest growing telecom market segment in Asia. The energetic expansion of broadband, however, has remained more of a phenomenon limited to the developed economies, with narrowband dial-up access continuing to be the norm in most of the poorer developing countries of the region.With DSL dominating the world market, Asia has become the leading region with about 38% of the global DSL subscribers. More recently, we have seen the advent of FttH as an alternative platform for broadband access in Asia. In the leading technology markets of Japan and South Korea, FttH has already started displacing other forms of high speed Internet access. Of these, South Korea is the most remarkable example of the Asian broadband revolution. With a broadband subscriber penetration of over 32%, close to 85% of households in the country have a high speed broadband Internet connection.The growth of wireless Internet in Asia is being driven by competition in the market place and by the advent of 3G and 3.5G services. The roll-out of 3G networks in particular, saw 3G commercial networks operating in 17 countries across the region and by mid-2009 servicing 170 million subscribers.
Market competition has been driving handset prices and airtime tariffs downward, thus opening up mobile services to wider adoption. The rate of adoption of wireless Internet has started to rise with the overall increase in mobile penetration together with networks being progressively upgraded to next generation platforms. While 3G licensing and the ongoing launch of 3G services in Asia has certainly been promoting the growth of wireless data services, 3G has also been providing opportunities for both wireless access and content providers in domestic markets. In South Asia, in particular, more people own a mobile phone than a PC, giving the delivery of mobile data services huge potential there.
Japan’s four main mobile operators, NTT DoCoMo, KDDI (au), Softbank Mobile and eMobile – plan to invest up to ¥1 trillion (US$10 billion) into so-called ‘3.9G’ mobile services, offering end users the prospect of even better and faster options than they have today.
After a somewhat tentative start, wireless broadband access in its various forms is starting to take hold in Asia. This has seen a flurry of activity as operators rush to acquire the necessary frequency licences. The sector had experienced problems earlier on involving unreliable equipment and network design faults. These have become things of the past. The challenge still facing the industry, however, is to establish viable business models that allow wireless to compete with the more established service offerings - DSL and cable modem platforms in the case of fixed wireless broadband and next generation mobile telephony platforms in the case of mobile wireless broadband. Wireless broadband systems are expected to eventually become a key feature of the broadband access landscape across Asia. Apart from WiFi and WiMAX platforms, wireless technologies include LMDS and MMDS.
For some years now, despite high equipment prices and security issues inhibiting adoption, wireless broadband services have been appearing in a piecemeal fashion across the region, notably in airport lounges, transport hubs and hotels, particularly offering mobile travellers immediate broadband connectivity.
While there has been some activity in the providing of WiMAX networks, the real test will be the advent of mobile WiMAX. The initial roll-out of mobile WiMAX in Asia has begun but it has been a cautious start. The technology continues to be strongly supported at this stage of its development. The big question is whether it will become a mass market platform or simply satisfy a niche market need.
Over a number of decades the economies of Asia have progressively built substantial fixed-line national networks followed by national mobile networks. By mid-2009, Asia had infrastructure in place supporting a total of more than 2.4 billion telephone subscribers; of these, around 570 million were fixed-line subscribers, the remainder of course being mobile subscribers.
More recently the focus of infrastructure building has shifted to the upgrading of domestic telecoms networks to Next Generation Networks (NGNs). Basically, this process is seeing large scale investment by Asia’s leading telecoms markets in new-generation IP-based telecommunications networks. Those countries that have government backing for NGN roll-out are the ones that are setting the pace. Even some of the lesser-developed markets are pushing hard on this front.
NGNs are critical for the development of the digital economy. The development across Asia is being strongly promoted. The growth, however, is mostly focused on the developed markets and has been heavily dependent on the local support being provided by the governments in those markets, with Japan, South Korea, Singapore, Hong Kong, Malaysia and Taiwan leading the way.
The most hotly debated topic in the digital media industry is how to make money. The telco industry is still full of complaints on this subject, but the media industry has made some quantum leaps. This has been driven, on the one hand, by role models such as Google, Yahoo, YouTube, eBay, Skype, Amazon and others. We see limited opportunities for IPTV – the reality is that the telcos will find it pretty tough competing with cable and pay TV operators. However, as PCCW has shown, it can be done. China has also developed itself as the largest online gaming market in Asia.
In addition to the national networks, international connectivity remains central to the overall effectiveness of the region’s telecommunications services. Submarine cable routes criss-cross the Asia-Pacific area, providing both intra-regional and inter-regional networks.
More recently it has been recognised that investments need to be more focused on growth and less speculative. Starting in 2007 and continuing on into 2009, a series of new submarine cable projects were being proposed and installed throughout the region, mainly trans-Pacific networks aimed at a particular predicted shortfall in capacity between Asia and the US as Asia’s broadband usage started to rapidly increase. However, it was not certain that all these projects would come to fruition, as their respective business cases underwent close scrutiny. The impact of the global financial crisis also needs to be assessed by prospective investors.
It is estimated that Asia needs to invest at least US$1 trillion in new infrastructure over the next ten years to meet projected demand.
Asia-Pacific’s financial systems experienced a severe shock during the 1997 financial crisis, which originated in Thailand and spread across the region, resulting in slumping economic growth and a withdrawal of foreign direct investment. Following this, the region made strenuous efforts to improve financial oversight and reduce national debt to avoid a recurrence of the fiscal crisis. The region is therefore better placed to withstand the 2007/08 global financial crisis, although it will still experience an economic slowdown in line with the global downturn.
The global financial crisis that began in mid-2007 and worsened in October 2008 resulted in major falls in the US stock market. Asia-Pacific markets are closely tied to those of the USA, particularly those of the more industrialised countries, and therefore suffered similar losses. However, since Asia’s financial systems are relatively resilient, the greater effect will be felt on the real economy, particularly since the negative impact of the crisis will exacerbate existing trends of worsening fiscal deficits and currency weakness. Economic growth will slow across the region, although India and China will retain relatively higher rates of growth.
Of the Asian economies, Japan will be the worst affected, owing to the fact that its export-oriented economy has been badly hit by the global slowdown, as well as historical problems with economic growth and deflation. The export-orientated economies of Hong Kong, Singapore and South Korea will also be badly affected, all expecting growth of only 2.0% in 2009. Some insulation will be provided by ongoing strong economic growth in India and China, which are forecast to grow by 6.3% and 8.5% respectively in 2009, from 7.8% and 9.7% in 2008.
Individual countries are introducing fiscal packages to provide economic stimulus. In December 2008 Japan announced a ¥23 trillion fiscal aid package, including tax breaks and assistance to struggling financial institutions. In November 2008 China announced a fiscal stimulus package, cutting taxes and funding infrastructure programmes to increase employment and income growth.
Asia-Pacific’s strong economic growth slowed in 2009 as the combination of lower export demand, remittances and foreign direct investment weighed on prospects for job creation and wage growth. A recovery is expected in 2010 in line with a gradual global upturn.
Data in this report is the latest available at the time of preparation and may not be for the current year.
Table of Contents
Number of pages 147
Last updated 21 Apr 2010
Analyst: Paul Budde
Paul, Many thanks for your inputs yesterday. You provided a compelling different perspective to our traditional infrastructure focus and this is valuable for our future planning. I also had very favourable feedback from our participants on your involvement.
Stephen Negus, Aurecon
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