Coming of Asia
Underdeveloped, progressive, booming and mature – Asia has it all. Kavit Majithia reports on the markets in the world’s largest continent.
As the world’s largest and most populated continent, Asia has over 4 billion inhabitants spanning 48 countries, each with its own challenging but potentially lucrative telecoms market. More so than any other continent, Asia is totally diverse in terms of affluence, development and technological advances. While some areas within an Asian country can be completely oblivious to broadband, smartphones and latency, other parts are rich with tech-savvy consumers disregarding ‘dumbphones’ and fixed-line services in preference of better 3G connectivity and faster download speeds.
“This is the Asian decade,” claims Adrian Ho, principal, managed and telecom services at IDC Asia/Pacific. “From a growth perspective, there is a great deal of international and intra-Asia connectivity, particularly from Asian enterprises growing out of domestic markets. We have never seen such a frantic pace of expansion.”
There is no place in the Asian market for collective and generalised assessments, according to Ho. In his opinion, the region is split in to four distinct categories – booming, mature, developing and emerging. “Despite operating with different initiatives and business models, China and India are booming like nobody can believe. Developing markets include the Philippines, Malaysia, Thailand and Vietnam, and there is huge interest in these regions for increased foreign investment. Mature but perhaps not necessarily progressive markets are found in Australia, New Zealand and Singapore: these are countries that are traditionally the first adopters of new technology and culturally always seem willing to try something new.”
Intra-Asia connectivity is particularly important to developing regions, and operators in the country are always looking for opportunities to mesh networks together and ensure resilient cable roll-outs, particularly given the region’s greater vulnerability to natural disasters. Considering the amount of data that flows through the Pacific, just a few cuts in a cable could cause a major setback for a developing nation. “We have invested over $400 million in Asia in the past two years – that size of investment is unparalleled in any other company,” says James Walker, vice president, managed network services at Tata Communications. “We invested $150 million in a data centre in Singapore and we are also building a cable between Singapore and Japan, which will be one of the lowest latency routes between the two major financial hubs.”
Given its Indian roots, Tata Communications has a strong affinity to the Asian market and notes the size of its investment in Asia is comparable to its investments globally. Laurie Bowen, president, sales and strategy at the company, says: “Asia is a collection of markets that are all uniquely different, much the same way that Europe is. While it can be convenient to assume the continent is just one market, this really is not the case.”
In the Philippines, mobile subscriber rates have grown by 85 million people in the last decade; and in 2010, Filipino operators recorded the highest non-voice revenues worldwide, according to consultancy firm BuddeComm. In Malaysia, Pyramid Research predicts the telecoms market will grow at a CAGR of 9.7%, from $9.8 billion in 2010 to $15.5 billion in 2015.
“In Singapore and Hong Kong there has been high bandwidth requirement due to high PC penetration – this, however, is not the case in developing markets,” says Diarmid Massey, vice president of international carrier services at Cable & Wireless Worldwide. “Spectacular growth and demand is coming out of the Philippines, Thailand and Malaysia, where there has been a pent-up requirement and consumers are now getting access to devices that can easily access the internet. As competition is so rife, operators are offering good data plans to add to a highly competitive pricing market.”
Massey questions the credibility of dividing the region into developed and underdeveloped, noting that nothing is yet certain in Asia’s telecoms market. “I do not buy in to this ‘old world, new world argument’,” says Massey. “As technology develops, the best way to understand the region is to identify which countries have access to 3G and which do not. Bandwidth growth is accountable to videos, music, social networking and, in Asia, portable devices that have high-speed roaming ability and high-speed data ability. This is what attracts people – in the past, a $2000 desktop PC did not.”
Areas of growth
On the surface, the coming year will prove crucial for the continent’s two booming and ‘developed’ nations, and the world’s two most populous countries. India’s 3G auctions in May 2010 raised approximately $15 billion for the government, with nine operators competing for spectrum in 180 rounds of bidding over 34 days. “India is still driven by organic growth,” says Daniel Yu, senior analyst for Asia-Pacific at Pyramid Research. “The full commercial launch of 3G services, scheduled late to early next year, will give them the opportunity to grow on the data front through rural penetration of voice-centric users, which is still central to business growth.” In China, 3G has been in the market for two years, “but adoption still lags behind expectation,” adds Yu.
“India aside, Asia has learnt from the mistakes in Europe and the advent of expensive 3G licence auctions – 3G, for example, was only licensed to approved carriers,” says Massey. “We are not seeing a ridiculous build-out of parallel infrastructure like we did in Europe, which is another reason why Asia is leading Europe in a number of ways.”
The Asian market is also experiencing a great shift towards a range of new services with enterprise companies and telecoms operators building up branch offices across the region to offer basic virtual private networks (VPN), telephony and managed services. Ho notes that progressive, developing countries, including Singapore and Korea, are strong adopters of unified communications and collaboration, but cloud services are still to take off, particularly in China and India. According to research firm Ovum, voice revenues in Asia-Pacific will continue to decline, falling from $182 billion in 2010 to $176 billion by 2015 – although comparatively, data revenue will increase in the same period from $84 billion to $133 billion.
Patrick Meijer, vice president for Asia-Pacific at iBasis, says: “There has been enormous price erosion in voice with revenue declining in every market in Asia. We are now focussing on maintaining the demand for minutes from the network, considering the growing need for minutes as prices get cheaper.”
The Indian subcontinent and emerging markets are of importance when it comes to voice, according to Meijer: “Bangladesh, Sri Lanka and Nepal are growth markets in this space, and I am a great proponent of IPX-based solutions. Incumbents and operators are making huge investments in new services and IPX should be one of them. There are no developments in international voice, other than IPX being able to reach a full collection of services, improve quality and improve routing.”
As the market continues to evolve, analysts and experts point to Japan and Korea as regions to monitor during 2011, considering their advancements in both LTE and 4G. Japan was the first country to launch 3G services, and Yu believes “early adopters of 3G can evolve to 4G quickly, which will be critical in meeting the goal of offering better wireless broadband to the consumer.” There is also the potential for any top-tier Indian operator “to sling shot itself as one of the largest operators in the world in terms of subscribers if the market consolidates or there is a large scale, foreign merger or acquisition,” says Yu.
Paul Budde, managing director at BuddeComm believes the focus in Asia remains on mobile and backbone, with governments and the private sector eager to continue investing in the region. “It is not just the money, but political, religious and cultural factors that can also have an impact. If there is a co-operative government and a transparent system, even bottom cases can turn into success stories – as we can see in Africa.”