Although Asia has certainly felt the impact of the global economic downturn and the worldwide telecommunications recession, the region has continued to record strong overall growth right across its telecommunications sector. Admittedly the growth has been somewhat inconsistent around the region and over the various market segments. Nevertheless, a general dynamism pervades the market. Among the highlights: the mobiles growth engine continues to find new ways to move forward; Internet continues to be a particularly strong growth area; and in broadband Internet access Asia leads the world.
At Our Asia Roundtable next week (15 September – Sydney) we take a look at the Asian telecoms, mobile and broadband market, presenting a summary of developments and other points of interest.
The significance of China’s contribution to the Asian market cannot be underestimated. With its huge population and strongly developing economy, it is a powerful presence in the region. Having rapidly moved to become the biggest mobile market in the world, China’s mobile sector continued to expand. In 2003, it grew by another 30%, on top of 40% growth in 2002, and was continuing to grow at a similarly strong rate into 2004.
Japan, a global and regional telecommunications leader of a different kind, has been maintaining its reputation for finding new ways to add value to the mobile market. It has led the world in the application of mobile Internet access, with over 70 million mobile subscribers using either I-mode or one of the other proprietary products by January 2004. In the area of broadband Internet access, South Korea has continued to be a world and regional leader with 85% of households having a broadband connection by early 2004. Japan has been mounting a major challenge, however, with its broadband sector growing by 30% in 2003. Asia was again the fastest growing region in the world for Internet users. By end-2003, there were an estimated 243 million Internet users in Asia, up from 211 million at end-2002 (representing an annual growth rate of 15%). Also leading in the total number of subscribers, ahead of North America with 198 million and Europe 189 million, Asia was expected to hit 300 million Internet users by end-2004.
As the difficult economic environment seemed to improve, operators were faced with an increasingly competitive market. Price cutting has been widespread, as has innovative product promotion and packaging. Working in such highly competitive markets, the Average Revenue Per User (ARPU) has been dropping on most services. This, in turn, has seen dramatically falling profit margins. Those operators that had not completed the restructuring of debt hanging over from the Asian Economic Crisis of the late 1990s have had to face a fresh round of problems. In 2003, there was further rationalisation within the industry, as some operators had no choice but to merge or be acquired. Markets that addressed the corporate restructuring with greatest vigour have rebounded and returned quickly to strong growth.
The late 1990s saw a period of heavy investment in telecommunications infrastructure in anticipation of regional and global demand levels that did not eventuate. The Asian Economic Crisis aside, these demand forecasts were probably always unrealistic. Since that time, both suppliers and operators in the telecom industry have been approaching the preparation of their investment strategies with considerable caution. Investment in infrastructure in Asia has generally slowed. The oversupply of undersea cable capacity, in particular, has seen investment plans put on hold. Those companies currently holding substantial assets in undersea cables are still reviewing business plans and attempting to find a new and viable business model. It was something of a surprise, therefore when FLAG Telecom announced in early 2004 that it was putting in place a new undersea cable system called FALCON, which will link the Asia and the Middle East. Whilst certainly not a booming market, satellite launches have been continuing at a steady rate over the 2003/2004 period.
The Asian region is characterised by a wide spread in the level of telecommunications and IT development. Countries can be found at both extremes of this development spectrum. Whilst some of the world’s leading developers and implementers of technology are to be found in Asia, many countries in the region are still in the early stages of their information technology and telecommunications adoption. There is certainly a consistently strong awareness of the importance of telecommunications and information being demonstrated right across the region. The commercial significance of telecommunications is well recognised and, at the same time, the potential contribution to the social and cultural wellbeing of nations is also well appreciated. As a consequence, the growth potential in the Asian market remains extremely high.
By 2005, the Asian telecommunications market was expected to be worth around US$270 billion. The big drivers behind this were predicted to be broadband and IP services, as well as growth in mobile services, particularly as the next-generation services come into the market. A remarkable statistic for South Korea’s IT sector is that, by May 2004, about one-third of the country’s exports were from its IT sector.
Exclusive Asia Briefing – Roundtable with the BuddeComm Asia Team
Roundtable 15th September 2004, Observatory Hotel Sydney, Costs $395 pp excl GST
The presentations will be led by Peter Evans our senior analyst for this region. He is in charge of our network of researchers of local researchers throughout the region.
He will be joined in this presentation by Christine Lewis, in charge of the Middle East and Clive Salzer in charge of company research in this region. I will do a brief global introduction, placing the Asian developments into the larger international context.
I would appreciate it if you could pass on this information to interested colleagues in your international networks, and within our industry generally.
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