2010 Taiwan - Telecoms, Mobile, Broadband and Forecasts

Taiwan has undoubtedly one of the most advanced telecommunications networks in Asia. Increasing land and labour costs have forced Taiwan to concentrate on technology, and it is now a leading high-tech centre in Asia Pacific. With excellent telecommunications infrastructure in place and the innovative use of breakthrough information technologies, the country continues to be well placed to drive both mobile and data communications services. Annual telecommunications service revenues are around NT$400 billion (US$12 billion) and investment in telecoms infrastructure remains substantial. 

Headed by what had been a runaway mobile sector which passed 100% penetration in early 2002, and a strong but declining fixed-line telephone sector with a penetration of over 55%, the market continues to find new ways to grow. Taiwan has been very progressive in its efforts to liberalise the telecommunications industry and to create a positive regulatory regime. First there was the strong push for competition to Chunghwa Telecom. The focus then moved to privatising the incumbent. Taiwan’s telecommunication infrastructure has been upgraded significantly, undergoing a series of network modernisation projects over the last decade. 

Taiwan has rapidly become a significant player in broadband Internet access. The government has been especially busy promoting the benefits of broadband and has committed the country to being on a par with the US by 2010. Going into 2010, the total broadband penetration had been lifted to over 35% when considering both fixed-line and wireless. The proportion of the population who are Internet users has exceeded 65%. Some 80% of all homes in Taiwan own PCs and around 75% of homes have Internet connections. The market has also been rapidly moving away from dial-up access to broadband and over 80% of all Internet connections are broadband. 

Taiwan has a competitive mobile environment. Although high broadband take-up was expected during 2009 with new WiMAX rollouts, numerous delays resulted in commercialisation being deferred into 2010 for many operators. Taiwan has high expectations for WiMAX and there is significant investment in this area underpinned by the government and companies among which is Intel. In addition there is a growing proportion of data services as a percentage of revenues, as the take-up for 3G increases. 3G subscribers now account for over 50% of the total mobile subscriber base. 

However, many telecoms sub-sectors are at or near saturation which constrain the scope for growth. While the market has been liberalised, there is still limited competition in the local access market which is dominated by Chunghwa Telecom. Overall, there are still low levels of foreign direct investment. Competition has meant more focus on leading edge, often bundled services to subscribers, who have considerably more choice in operator and service selection. 

The 2008 financial crisis and subsequent economic slowdown in 2009 had an impact on many of the operators’ strategies. Faced with diminishing opportunities in the home market, Chunghwa Telecom continues to look for acquisitions overseas, despite the weaker economic conditions, concentrating its efforts in China and emerging markets as a part of its mid-term strategy. 

Market highlights:

• Total mobile sector revenues again reached over US$7 billion in 2009 as the highly penetrated market saw operators introducing more value-added, higher-margin products. The blended Average Revenue per User for mobile services was still dropping per operator at an average of 5%. Revenue from mobile data increased but not at a rapid enough rate to offset the declines in 2G ARPU.
• Taiwan’s mobile operators had signed up close to 15 million 3G handset users going into 2010. 3G handset users account for more than 50% of all mobile subscribers in Taiwan, though many customers with 3G-capable phones are still connected via 2G tariffs, meaning the actual 3G user base is lower than the total given by the operators.
• Chunghwa Telecom’s Optical Era Project involves an investment of approximately US$1.8 billion to construct an island-wide fibre-optic network over five years. By end 2010 it aims to provide fibre access to 2.4 million residential and business subscribers. Chunghwa forecasts that its number of fibre-to-the-home/building/kerb (FTTx) subscribers will increase to over 3 million by 2013 and that FTTx will overtake its ADSL platform in terms of service capacity and number of subscribers in 2011.
• Taiwan expects the total investment in WiMAX networks on the island to reach US$644 million by end 2010. The country’s government aims to make Taiwan a ‘role model’ for wireless broadband development in Asia. By 2009 the global economic downturn forced a number of players to hold off launching WiMAX until the second half of the year and into 2010. The NCC postponed its tender process for nationwide WiMAX licences, due to the marked lack of progress by existing regional operators in deploying their networks and launching services.
• Over the five years to 2011, the government is to appropriate NT$55.6 billion in funds, with NT$11.3 billion for the promotion of new applications that will play a role in the everyday lives of people, such as food, residence, travelling, education and entertainment. Another NT$26.5 billion will be used to promote new e-government related services. The remaining funds will be used to create equal digital opportunities and technology service industries.
• In early 2010, the NCC announcing plans to issue two mobile TV concessions by year-end. A nationwide network of mobile TV services would require the deployment of ten high-power base stations, 20-30 mid-power base stations and 500-600 low-power base stations, an outlay of around NT$1 billion (US$31 million). The two licensees will be allowed to adopt either the Qualcomm-developed MediaFLO or DVB-H as their mobile TV standard.  

Taiwan – key performance indicators – 2008 - 2009

(Source: BuddeComm based on industry data)

For those needing high level objective analysis on Taiwan, this report is essential reading and gives further information on:

• Chunghwa Telecom’s ambitious CAPEX program, which includes increasing the penetration rate of its fibre-optic network to at least 25% of Taiwan’s households over a five year period. The company expects to maintain capital expenditure at 15% of revenue over the next five years and for 20% of the revenue to come from overseas by 2013.
• A warming of relations between China and Taiwan in recent years, raising the prospect of significant investment flows. In 2009 Chunghwa Telecom and China Telecom announced plans to lay a submarine cable across the Taiwan Strait.
• FarEasTone’s plans to form a joint venture in China with China Mobile in the first quarter of 2010. China Mobile previously announced that it would pay US$529 million for a 12% stake in FarEasTone. The deal was the first direct investment in the island by a mainland-based company in over 60 years.
• Chunghwa Telecom and SingTel setting up a joint venture in 2008 to build the ST-2 satellite that is scheduled to be launched in the fourth quarter of 2010.
• Analogue switch off beginning in the remote islands during 2008 and then in the eastern area of Taiwan in December 2009, with the completion of analogue switchover during December 2010.
• The viability of PHS operations being in doubt as many users opt out and defect to 2G or 3G services. Simultaneously, 2G subscribers continue to decline as more users shift to 3G. The licenses granted by the ROC government authorities for operating 2G mobile services on the GSM 900MHz and 1800MHz spectrum will expire in 2012 and 2013 respectively. All 2G mobile operators have asked the government regulators to extend the licenses.
• No official policy shift to switch current focus from WiMAX to Long-term evolution despite a number of the leading telecom equipment providers urging the Taiwan government to look at the development of LTE technology. The government had previously earmarked a total of NT$7 billion (US$199.4 million) to push the Mobile Taiwan (M-Taiwan) program aiming at greater WiMAX coverage on the island.
• Chunghwa Telecom planning to upgrade its mobile infrastructure to HSPA+ technology and launch the service over its networks by 2010, and then build an LTE network in 2011. The company is already experimenting with 4G technology and collaborating with a number of other companies to develop LTE products and solutions suited to Taiwan’s market.
• Chunghwa Telecom entering a partnership with Microsoft in late 2009 to collaborate on cloud services and applications for end users. Chunghwa Telecom is to establish a NT$13 billion data centre using new Microsoft technology named Microsoft Global Foundation Services.
• Aggressive deployments of 3.5G infrastructure by VIBO in 2009 and expecting its capital expenditure to top NT$2 billion (US$62.9 million) in 2010, potentially reaching NT$3 billion as the company upgrades its networks. 

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