We talk to Charles Moon, Ovum’s principal analyst for Asia Pacific, about the outlook and trends for the Asian telecoms market in coming year.
BBWF: What sort of shape is the Asian telecoms market in as we look ahead to 2015?
Charles Moon: At first glance, Asia’s mobile and fixed broadband markets look quite flat. We are forecasting between 6% and 8% subscription growth over the next year. What the top-line numbers don’t reveal is that large segments of the population will be upgrading to 4G in developed markets, nor does it show how many first-time smartphone buyers will be coming online. In terms of broadband, fiber is the main story, as China continues to see widespread rollouts across its major cities.
This implies a huge opportunity for telcos to boost revenues on the back of increased demand for data. The main issue that continues to plague not just Asian operators but most others around the world is the impact of competition. As competition for upgrading these consumers intensifies, pricing is likely the first thing that will suffer.
Do you anticipate much consolidation, particularly between fixed and mobile operators?
Many operators in Asia already enjoy having both fixed and mobile assets – Singtel, KT, KDDI, Telstra, and Indosat for example. The question in this region is whether operators will start offering quad-play or, failing that, more significant bundle discounts on their higher-margin mobile packages. Beyond the regulatory aspects, the main determinant of this is the competitive position of quad-players, and at the moment I don’t see a big incentive for operators to undermine their mobile margins.
Which operators are having the most success in terms of service innovation?
I see more service innovation coming from the fixed-line side, particularly from fiber operators looking to leverage their ultra-broadband networks. A good example is the retail service provider My Republic in Singapore, which offers super-cheap 1Gbps broadband at less than US$40/month, then provides add-ons such as low latency (for gamers) and the Teleport streaming service, which accesses content from Netflix and Pandora – OTT players whose content is not available to Internet users in the country. This was exactly the type of operator the Singapore government had in mind during the development of the Next Gen NBN, and you can see the impact My Republic has had, with retail fiber prices dropping almost 90% since launch.
Is LTE having much of an impact in terms of data usage and ARPU levels?
Certainly LTE is having an impact in terms of usage as the demand for video remains, and providing faster pipes will allow people to consume more data. Are operators able to charge more for the additional usage? I don’t think this is the case. Yes we have seen ARPU increase for various operators (LGU+ in Korea is probably the most prominent example) as they move to LTE, but the Q&A: Asia 2015 Outlook
ARPU is coming from consumers upgrading to more expensive plans in order to get a free device rather than an appetite to pay more for data.
Which markets are seeing the most aggressive fiber deployment?
Definitely China. Obviously in terms of scale it eclipses every other market in the region, but what is interesting is how aggressive the Chinese government has been with its targets around the Broadband China initiative. The government is looking to double the number of fixed broadband connections to 400 million by 2020 and offer secure speeds of at least 50Mbps and 12Mbps in urban and rural homes respectively. This will be the main driver of fiber in the region over both the short and long term.
Download Ovum’s free Asia Market Outlook 2015 here