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The Parallel Development Paths of the Mobile Industry in Asia Pacific
1. Executive Summary 2. 3. 4. 5. The world’s largest and most diverse mobile market 2.1 Asia Pacific: The Growth Driver for the Global Mobile Industry 2.2 There is no ‘One’ Asia Pacific 2.3 Market Dynamics in AP17 2.4 Competitive Intensity in the Mobile Industry 2.5 Resilience of the Asia Pacific Mobile Industry amidst a Global Recession The Parallel Paths of Development 3.1 Distinctive Characteristics of the Asia Pacific Market 3.2 Driving Access for the World’s Next 1 Billion Subscribers 3.3 Taking Mobile to the Next Frontier The Economic Contribution of the Mobile Industry 4.1 The Direct Contribution of Mobile Operators to GDP 4.2 The Value-Add of the Mobile Ecosystem 4.3 The Mobile Ecosystem’s Contribution to Employment 4.4 Contribution to Public Funding The Forefront of Innovation: Delivering on Unique Customer Needs 5.1 Innovation Along Two Paths 5.2 Developed market innovations 5.3 Emerging Market Innovations 5 10 10 12 14 16 20 22 23 25 28 32 33 34 36 37 38 39 39 44 50 51 54 56 57 59 60 62 66 68
6. Corporate Sustainability: The Environmental and Social Impact 6.1 The Environmental Impact of the Mobile Industry 6.2 The Social Impact of the Mobile Industry 7. Regulatory Enablers to Spur Further Growth 7.1 The Need for Transparent, Predictable and Consultative Regulatory Regimes 7.2 Reducing Ineffective Taxation to Drive Penetration 7.3 Incentives to Drive Universal Access, Not USFs 7.4 Driving Improvements in Spectrum Allocation
8. Appendix: Country-Level Economic Contribution Estimates in AP17 9. About the Authors
Table of figures
Figure 1: Global Mobile Connections Figure 2: Asia Pacific Connections and Penetration Rate Figure 3: AP47 and AP17 Connections Breakdown Figure 4: AP 17 Market Size and Growth Rates by Subscribers Figure 5: Penetration Rate in AP17 Figure 6: Pre-paid and Post-paid Connections in AP17 Figure 7: Number of Wireless Operators in the Market Figure 8: Average Revenue per Minute for Selected Markets Figure 9: CAPEX/Sales Ratios for Selected Countries Figure 10: EBITDA Margins in AP17 Figure 11: Resilience from the Economic Crisis Figure 12: Growth Effects of the ICT Industry Figure 13: Market Characteristics – Developed and Emerging Markets in AP17 Figure 14: Mobile vs. Fixed Lines Penetration Figure 15: Fixed and Mobile Broadband Penetration in AP17 Figure 16: AP17 Unconnected Population Breakdown Figure 17: Challenges and Drivers for Growth at the BOP Figure 18: Decreasing Average Sales Prices of handsets Figure 19: Data Revenues as a Percentage of Total Service Revenues Figure 20: Telecom Patents Filed in Major National Patent Offices Figure 21: NTT DOCOMO’s “Brain for Society” Figure 22: AP17: The Direct Contribution of Mobile Operators to GDP Figure 23: Description and Size of Mobile Ecosystem Value Chain in AP17 Figure 24: Framework for Calculating the Mobile Ecosystem’s Economic Contribution Figure 25: Mobile Ecosystem Value Add (V A) in AP17 Figure 26: Mobile Ecosystem Contribution to Employment in AP17 Figure 27: Mobile Ecosystem Contribution to Public Funding in AP17 Figure 28: Market Share in the Global Handset Market Figure 29: Innovative Advanced Handsets Figure 30: Examples of Service Innovation in Emerging Markets Figure 31: Examples of “Cost of Information” Faced Figure 32: Savings Survey in the Philippines Figure 33: Perceptions of Mobile Money in the Philippines Figure 34: Low Cost Handset Innovations Figure 35: China Mobile’s Alternative Energy BTS Deployment Figure 36: WEF Ranking of the Political and Regulatory Environment Related to the ICT Industry Figure 37: Examples of Telecom-specific Taxes in Asia Pacific Figure 38: USF Operator Levies in Asia Pacific Figure 39: Performance of Universal Service Funds Figure 40: Mobile Ecosystem Value Add in AP17 (by Country) Figure 41: Mobile Ecosystem Contribution to Employment (by Country) Figure 42: Mobile Ecosystem Contribution to Public Funding in AP17 (by Country) 11 12 13 14 15 16 17 17 19 19 20 21 23 24 25 26 26 27 29 29 30 33 34 35 36 37 37 41 42 44 45 46 46 49 52 58 59 60 61 66 66 67
hundreds of cultures as well as thousands of languages and dialects. Referring to Asia Pacific in singular form without considering the intricacies and complexities among and within its countries ignores the wholeness and richness of this diversity. Therefore. 3. . However.7 billion people. These 17 markets (hereafter referred to as AP17) are extremely diverse economically. Asia Pacific is the most diverse region in the world. the focus of this report is on the 99% of subscribers in Asia Pacific who live in 17 countries as shown here. culturally.Geographic Scope of this Study With 47 countries. geographically and politically and therefore are a good representation of Asia Pacific as a whole. it would be impossible to profile each of the 47 countries in this report in the thoroughness they deserve.
400 Nauru 1.562 Macau 848.346.276 Indonesia INA 139.607 Papua New Guinea 1.000 .351.825.338.808 Thailand Maldives THA 394.136.984 Pacific Islands American Samoa 37.071 IND 346.000 New Zealand NZL 4.721 Pakistan PAK 89.828 Samoa 53.474 Myanmar 295.404 Solomon Islands 30.702.925 Philippines PHI 68.000 Australia AUS 23.525.290.878 Micronesia 36.696.449 Fiji 764.557 Vanuatu 40.670 Bhutan 259.319 French Polynesia 192.364 Brunei Darussalam 407.604 Kiribati 850 Marshall Islands 1.286 Cambodia 3.507 New Caledonia 123.509.300 Korea.000 Singapore SIN 6.911 Vietnam VIE 58.863 Malaysia MAS 25.510.679 62.156 Nepal 4.878.630 Laos 1.727 Réunion 957.354.082.817 Hong Kong HKG 11.606.188 Sri Lanka SRI India 11.2008 Connections AP17 Countries Countries outside AP17 China CHN 618.610 Japan JPN 105.000 Mongolia 1.029.224.727.893.000 Taiwan TPE 23.864 Tonga 37.194 Cocos (Keeling) Islands 180 Cook Islands 10. South KOR 45.007 Bangladesh BAN 47.030.894 Niue 919 Northern Mariana Islands 31.524 Guam 146.300 Timor-Leste 125.907.826 Palau 7.508.
Executive Summary .6 Asia Pacific Mobile Observatory 1.
336 6.006 376 454 448 504 227 293 462 506 481 519 263 309 543 552 512 533 298 328 614 6.058 (39%) 379 393 475 178 274 1.367 (41%) 1.151 4. an additional 1 billion connections are expected to be added with the Asia Pacific market projected to exceed 3 billion connections in 2013.672 (47%) 2. increasing citizen prosperity and hence affordability of communications services The opening of markets to the forces of globalisation and foreign direct investment The ambitious rollout of network infrastructure.721 2. low-cost services The introduction of low-cost handsets and the reduction in mobile usage prices driving down the minimum cost of mobile ownership Innovative business models including infrastructure sharing and unique distribution channels making network expansion to rural areas economically viable to operators and consumers ■ ■ 1 Compounded Annual Growth Rate . driving population coverage to nearly 80% ■ ■ ■ The success of cost-effective pre-paid services (74% of Asia Pacific connections versus 68% in Europe and 16% in USA) enabling consumers to manage their spending and access flexible.7 billion connections in 2008 (see below).744 135 240 261 405 103 225 819 (37%) 52 127 113 339 56 173 530 (38%) 1.7 Asia Pacific is the world’s largest mobile market.345 279 +10% 5. Over the next five years.604 4. 2009 is expected to be a landmark year for Asia Pacific as it crosses the 2 billion connections mark for the first time.385 (46%) 2.063 (45%) 2.705 (43%) 2.189 1. Global Mobile Connections CAGR 03-08 CAGR 08-13 Africa Americas Europe: Eastern Europe: Western Middle East USA/Canada Asia Pacific +24% 3.020 676 643 622 591 553 536 551 543 326 344 364 348 357 367 556 567 730 48% 29% 32% 8% 32% 11% 14% 7% 5% 2% 10% 5% 2. adding over a billion connections and growing at 26% CAGR1 to reach 1.913 (48%) 3. As the global mobile market grows beyond 4 billion connections.108 (49%) 26% 13% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Wireless Intelligence This impressive growth achieved in Asia Pacific has been driven by several key factors: ■ Rapid economic development in the region. the Asia Pacific market has more than tripled in size.390 82 174 179 370 72 198 669 (38%) 200 307 333 437 133 253 1.625 5. Since 2003.
11% 2. nearly six times greater than the direct contribution of operators when the demand-side productivity improvement is accounted for. universal service funds and through the provision of basic infrastructure.2% 13.23% 0. infrastructure sharing policy. In total. These countries (listed in the ‘Geographic Scope’ section) will be referred to herein as AP17. Frost & Sullivan.82% Source: Wireless Intelligence.8 368. China and India alone account for nearly 81% of these unconnected individuals. With the continued investment in mobile broadband networks. and regulatory fees.8% 48. in 2008. The mobile industry will continue to find ways of achieving coverage in remote areas.2 30. Ovum. the mobile ecosystem contributed 2. lower cost handsets and further innovation on mobile services can help but policy makers also need to carefully consider the impact they have on the total cost of ownership.8 Asia Pacific Mobile Observatory Figure 27 The mobile ecosystem is a major contributor to the Asia Pacific economy. India.T. Policy makers again have a significant influence through spectrum policy. 3 The World Resources Institute and the International Finance Corporation define the base of the economic pyramid as the population segment in which individuals had annual incomes of up to and including $3000 per capita measured in 2002 international dollars (purchasing power parity or PPP). A.71% Total Value Add 8.3 66. in developed markets. (2) Network coverage needs to be extended into ever more marginal areas. 2008) 223. which contribute over 99% of total connections in Asia Pacific. the mobile ecosystem also makes a major contribution to public funding through contributions to VAT/indirect tax. while the other development path. the focus of this report is on the 17 largest countries (in terms of connections) in Asia Pacific. 2 Though Asia Pacific consists of 47 countries. This presents an opportunity for mobile operators to serve a significant untapped market. Ecosystem Value Add (VA) in AP17 (US$bn. The answer for bridging the digital divide lies in mobile technologies. often lacking in basic infrastructure.1% 39. industry and policy makers need to focus on a number of areas: (1) The cost of mobile ownership and usage still needs to be reduced further. In 2008. Telenor. corporate tax. Furthermore.2% 144. Mobile Ecosystem Value Add (VA) in AP17 (US$bn. In total. on . The Asia Pacific mobile market is developing along two parallel paths. over 10 million people were employed directly and indirectly in the mobile ecosystem. Of these. the direct and indirect economic contributions from the mobile ecosystem in AP172 amounted to approximately US$368 billion MobileThe ripple effect from the direct contribution of mobile operators (US$66 billion) is significant. However. it is likely that mobile will also be the primary form of data communications and rich internet access for the majority of people in Asia Pacific. The main constraint is that the majority of un-served individuals living in the AP17 emerging markets are considered to be at the base of the economic pyramid3.1 17.5 100% % of GDP 0. 96% can be attributed to five emerging countries: China. roughly 2 billion consumers in Asia Pacific still do not have a mobile connection. Today. TIA. Mobile voice communication is currently the only form of voice communication for many people in Asia Pacific and this likely to continue to be the case in the future. IDC. One development path is bringing mobile access to the next billion consumers at the bottom of the pyramid. The mobile ecosystem’s total contribution to public funding amounted to approximately US$100 billion in the region.82% of the aggregate GDP (see below). however.37% 1. Informa. providing services to these consumers is not without challenges. Kearney Analysis The mobile ecosystem is also a major contributor to employment in the markets it operates in. Merrill Lynch. 2008) resulting in a US$144billion supply-side impact when the contribution of the entire ecosystem is considered.9% Mobile Operators Related Industries Multiplier Effect Supply-Side Impact Productivity/ Demand-side Impact 1.3 60. social security taxes of direct and indirect employees. To address the unconnected market. The full impact of the mobile industry investment is.51% 0. Pakistan and Bangladesh. PWC. income taxes. Indonesia. is taking mobile services to the next frontier.
implementing infrastructure optimisation and sharing. video. (3) Relevant and practical mobile services and applications that meet the unique needs of individuals at the bottom of the pyramid need to continue to be developed and proliferated to drive uptake among this segment. mobile operators and vendors in Asia Pacific are finding new ways to improve energy efficiency. 3) embedding incentives to drive universal access. Four key regulatory issues are likely to be important in the Asia Pacific region: 1) the need for transparent. and regulators and governments will need to develop and implement sustainable policies to aid this ambitious growth agenda. . Regulators have a critical role to play to ensure that Asia Pacific continues to grow and deliver value for customers. In doing so. developed markets in Asia Pacific are experiencing rapid adoption of services that extend beyond basic voice communication with data revenues contributing over one third of total revenues. mobile phones are more than just a basic communication tool: they are an indispensable part of individuals’ lives. and reducing mobile device life cycle emissions through design and recycling. In parallel. As a result. by: designing low energy base station sites. 2) reducing mobile-specific taxation and fees to drive penetration.effectiveness for industry to bring services to these remote areas. People in developed markets in Asia view mobile devices as: ■ A device from which to organise their busy lives. however. making them more productive and efficient. To manage the different development paths. environmental and social agenda of the 47 countries in Asia Pacific will in many ways surprise even many industry insiders. Mobile operators are also having a profound impact on social development. pictures. and 4) reviewing spectrum management policies and accelerating harmonised spectrum allocation. employees and society. A relentless focus on bridging the digital divide and driving innovation for the mobile industry is the expectation in the years to come. employing innovative corporate social responsibility (CSR) programmes largely focused on education. they are truly propelling the mobile industry to the next frontier. enabling further reductions through the use of Machine-to-Machine (M2M) mobile technologies to deliver ‘smart solutions’. deploying base-stations powered by renewable energy. The mobile industry is increasingly making a positive impact on environmental sustainability and social development in the region. To reduce emissions.9 the ability of and the cost. fuelled by innovations from by mobile operators and the greater ecosystem. predictable and consultative regulatory regimes. with Asia Pacific developed markets leading the way for North America and Western Europe to follow. It is predicted that by 2013. ■ A central platform for entertainment (gaming. new approaches will be needed for this value to be realised. In developed markets across Asia Pacific. Governments and regulators must create an environment that allows the mobile industry to further innovate and create value for consumers. ■ A personal extension that embodies and documents their lifestyle and allows for intense personalisation and self-expression. The industry is also acting as a catalyst for other sectors. a society of highly-advanced mobile users in developed markets is continuously finding new ways to use mobile phones. Players in the mobile ecosystem in Asia Pacific have made great progress in challenging their business models and developing innovative products and services that meet the unique demands of customers in both these developed and emerging markets. music). Operators in Asia Pacific are taking an increasing role in mitigating the effects of climate change. There remains significant opportunity to create social and economic value through mobile. The industry outlook is positive and the massive contribution the industry continues to make on the economic. the mobile ecosystem in Asia Pacific is pioneering innovation. The first Asian Mobile Observatory has touched upon many issues across a diverse footprint of countries and market situations. health and community development. data revenues in developed markets will constitute nearly 50% of revenues. ■ A more convenient means for accessing products and services.
10 Asia Pacific Mobile Observatory 2. The world’s largest and most diverse mobile market .
705 (43%) 2.1 Asia Pacific: The Growth Driver for the Global Mobile Industry In 2002. Future growth in the industry is dependent on AP.108 (49%) 26% 13% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Wireless Intelligence 4 Compounded Annual Growth Rate .7 billion connections in 2008 (see Figure 1). Since then.721 2. 2009 is expected to be another landmark year for Asia Pacific as it crosses the 2 billion connections mark for the first time. As the global mobile market grows beyond 4 billion connections. adding over a billion connections since 2003. Over 99% of the AP market is driven by 17 countries.063 (45%) 2.189 1. they are well positioned to rebound from the recession because of their relatively better liquidity and debt positions.672 (47%) 2. 13% CAGR is expected from 2008 to 2013.913 (48%) 3. Figure 1: Global Mobile Connections CAGR 03-08 CAGR 08-13 Africa Americas Europe: Eastern Europe: Western Middle East USA/Canada Asia Pacific +24% 3. the Asia Pacific (AP) region cemented its place as the world’s largest mobile market. The AP market is highly competitive with 3-15 players in each market. With almost 2 billion connections in 2008 or nearly half of the world’s total connections.006 376 454 448 504 227 293 462 506 481 519 263 309 543 552 512 533 298 328 614 6.744 135 240 261 405 103 225 819 (37%) 52 127 113 339 56 173 530 (38%) 1.151 4.625 5.390 82 174 179 370 72 198 669 (38%) 200 307 333 437 133 253 1. ■ ■ ■ ■ ■ Operators in Asia Pacific are resilient.058 (39%) 379 393 475 178 274 1.345 279 +10% 5.604 4. growing at 26% CAGR4 to reach 1.367 (41%) 1.385 (46%) 2.336 6. creating a competitive environment for consumers and resulting in price declines of up to 80% over the past 4 years. 2. Asia Pacific (AP) is the largest mobile market globally. economic and consumer diversity exists and the mobile markets in AP each have their own unique development paths. the market in Asia Pacific has more than tripled in size.11 Key Messages: ■ Sheer population size and rapid economic development have led to explosive growth in the mobile sector.020 676 643 622 591 553 536 551 543 326 344 364 348 357 367 556 567 730 48% 29% 32% 8% 32% 11% 14% 7% 5% 2% 10% 5% 2. Tremendous cultural. surpassing Europe in total connections for the first time. There is no ‘one’ Asia.
As impressive as this is. By 2013. it is expected to add the same number of connections over the next five years (over 1 billion) as it has over the past five years.063 +22% 1. low-cost voice and SMS services The introduction of low-cost handsets and the reduction in mobile usage prices driving down the minimum cost of mobile ownership ■ ■ Figure 2 Innovative business models including infrastructure-sharing and unique distribution strategies making the expansion of network coverage to rural areas economically viable to operators and consumers Asia Pacific Connections and Penetration Rate Figure 2: Asia Pacific Connections and Penetration Rate Connections (Millions) Penetration Rate These factors have contributed to the growth in penetration of mobile services in Asia Pacific from less than 10% in 2000 to 46% eight years later (see Figure 2). crossing 3 billion subscribers or approximately half of the world’s mobile connections by 2013. the Asia Pacific market is expected to continue its double digit growth (13%) over the next five years.108 2. mobile penetration is projected to extend to 80% of the population. increasing citizen prosperity and hence affordability for communications services The opening of markets to the forces of globalisation and foreign direct investment ■ ■ The ambitious rollout of mobile network infrastructure by operators. Euromonitor . 3. it also highlights the potential and need for substantial growth to connect the other half of the population in Asia Pacific. Though the growth rate in Asia Pacific will be slower over the next five years.058 819 669 530 19% 15% 23% 29% 37% 46% 55% 63% 75% 227 7% 2000 329 10% 2001 428 12% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Wireless Intelligence.385 70% 2.705 1. reflecting the massive scale of the industry in the region.12 Asia Pacific Mobile Observatory Even with the global economic slowdown.367 1. driving mobile coverage to over 75% of the population in 2006 compared to 50% just five years earlier ■ The success of cost-effective pre-paid services (74% of AP connections versus 68% in Europe and 16% in USA) allowing consumers to take control of their spending and gain access to flexible.672 80% 2. This impressive growth achieved in Asia Pacific has been driven by several key factors: ■ Rapid economic development in the region.913 2.
In fact. the Tibeto-Burman language family has 12 variations Referring to Asia Pacific in singular form without considering the intricacies and complexities among and within its countries ignores the wholeness and richness of this diversity. Asia Pacific is home to some of the largest and smallest countries in the world by various measures5: ■ ■ ■ ■ ■ ■ Population: China: 1. South Korea (0.700/km2 [#1/238]. Source: Wireless Intelligence Rest of Asia Asia Pacific Total . Figure 3: AP47 and AP17 Connections Breakdown 2008 Connections (Millions) AP17 countries represent >99% of total Asia Pacific connections in 2008 46 26 24 23 11 11 6 5 16 1. the focus of this report will be AP47 and AP17 Connections Breakdown on the 99% of subscribers in Asia Pacific who live in the 17 countries as shown in Figure 3.100 [#175/194] Literacy Rates: Japan: 99%. Additionally.2 There is no ‘One’ Asia Pacific With 47 countries. Asia Pacific is equally diverse from a telecoms perspective with vast differences in the characteristics of the mobile markets in its 47 countries. it would these countries. Nepal: $1. Some examples include: ■ ■ ■ ■ Penetration: Singapore: 173%. Nauru: 21 km2 [#227/233] Population Density: Macau: 18.7 billion people. Asia Pacific is the most diverse region in the world. Niue: 2. 3.6 million km2 [#3/233].7%) Figure 3to profile each of the 47 countries in this report with the richness and thoroughness they be impossible deserve. culturally.4%). Myanmar: <1% Number of Countries with 3G Network Availability: 22 out of 47 Data Revenues as a Percentage of Total Revenues: Philippines: 45% .000 [#7/194]. the availability and reliability of data varies perhaps as much as the diversity of Given this vast diversity in mobile characteristics as well as the macro-economic environment.13 2. Bangladesh: 47. Mongolia: 1.7/km2 [#235/238] GDP Per Capita: Singapore: $52. hundreds of cultures as well as thousands of languages and dialects.34 billion [#1/223 countries].100 [#220/223] Area: China: 9. Pakistan: 8% Pre-paid Connections as a Percentage of Total Connections: Pakistan (98. Therefore.5% Languages: China alone has seven known variations of the Chinese language. These 17 markets (hereafter referred to as AP17) are extremely diverse economically. geographically and politically and therefore are a good representation of Asia Pacific as a whole.705 90 106 140 347 69 62 59 47 Remaining 30 countries make up <1% of Total AP Connections 619 CHN IND INA JPN PAK PHI THA VIE BAN KOR MAS TPE AUS HKG SRI SIN NZL 5 The total number of countries for each metric varies depending on the various sources quoted.
Four countries (China. Source: Wireless Intelligence. China’s current subscriber base of 619 million is 100 million connections – larger than all of Western Europe combined! In contrast. Euromonitor. 90%. Indonesia. India and Sri Lanka – have grown at astounding compound annual rates of 97%. together contributing to over 70% of AP17 connections. Bangladesh.14 Asia Pacific Mobile Observatory For the purposes of this report. the developed markets in AP have grown at high single-digit growth rates comparable to markets in Western Europe.78 56% 54% HKG 7. 81% and 54% respectively (see Figure 4). This overestimates the penetration rates due to multiple SIM ownerships per citizen. Kearney . A.T.Pakistan. The countries in South Asia -.20 101% 4% AUS 20.2008 MAS 27.17 113% 12% 97% 90% 8% 85% 72% 42% 9% SIN 3. countries outside AP17 will be covered through case studies and anecdotes to highlight their unique characteristics. 2.143 233 173 161 128 17% 40% 54% 70% 48% 71% 64 89 87 3% 23% 33% 48 5% Penetration Rate (1) 97% 83% 60% 46% 30% 52% 29% 77% 95% 67% CHN IND INA PAK BAN JPN PHI VIE THA KOR CAGR 2000 – 2008: 28% Other AP17 Population (m) % Connected CAGR 2000 . the majority of countries have experienced annual double digit growth from 2000 to 2008. Unconnected citizens are actually higher then projected. and Japan) have grown to a scale of above 100 million subscribers.33 155% 11% 58% NZL 4.85 112% 11% 81% SRI 19. reflecting the maturity and high penetration rates of these markets. Figure 4: AP 17 Market Size and Growth Rates by Subscribers Rest of Population Penetration Population 1. India.66 173% 13% (1) Penetration rates are calculated using connections over population.344 1.3 Market Dynamics in AP17 Within AP17.82 92% 23% TPE 23. noteworthy market moves and cutting-edge innovations.
6 Nielsen Media. enabled network in AP17 Figure 5: Penetration Rate in AP17 173% 155% 113% 112% 101% 97% 95% 92% 83% 77% 67% 60% 56% 52% 46% 30% 29% 47% WA SIN HKG NZL AUS TPE THA KOR MAS JPN PHI VIE INA SRI PAK CHN IND BAN Source: Wireless Intelligence. this is no longer a driver for multiple SIMs. showcasing the pervasive use of multiple SIMs by mobile users in Asia Pacific. In many countries in Asia Pacific. pre-paid services offer . and to split voice and data services to different handsets.000 people. product bundles). the tendency to use multiple SIM cards overstates the actual number of individuals with an active connection. In addition to voice communications. the multiple SIM phenomenon had been driven inadvertently by regulatory action. While five of the countries in Asia Pacific have penetrations over 100%. multiple SIM card ownership will decrease though it will likely not disappear as some people may still prefer holding multiple handsets (data vs. when spectrum was licensed at considerably cheaper rates for limited mobility CDMA offerings in order to drive adoption in place of traditional fixed lines. voice or personal vs. own-network rates. located in the Pacific. However.6 billion people who do not have a mobile connection yet. India and China with 29%. In fact. Perhaps more importantly. Euromonitor Interestingly. Penetration rates in Singapore and Hong Kong exceed 150% (173% and 155% respectively). is the world’s smallest independent nation of 21 km2 and a population of 10. the Republic of Nauru. there are other markets which are still in the infancy stage. countries with lower penetration (Bangladesh. according to a survey conducted by Nielsen Media6. 87% of Australians reported owning a mobile phone compared to the total mobile connections penetration of 112%. Korea nearing saturation. This shows the tremendous growth potential in Asia Pacific. Digicel will be launching a GPRS/EDGEPenetration Rateto enable internet access through mobile devices for the first time. development and subscriber usage characteristics among the region’s markets (see Figure 5). Pre-paid pricing options offer mass-market consumers access to mobile services at a far lower entry cost than post-paid contracts. Nielsen survey finds HK. For example. The expectation is that over time. five countries among AP17 have penetration rates greater than 100%. The introduction of pre-paid mobile services has been a vital enabler for the proliferation of mobile connections in Asia Pacific. 30% and 46% penetration respectively) have at least 1. For example.15 The penetration rates of countries across AP17 vary considerably reflecting the differences in maturity. 2006: AsiaPacific is world’s most prolific mobile phone market. work). September 1st 2009 was declared a “national holiday”. Mobile customers use multiple connections for varying reasons including to take advantage of attractive promotions (long-distance rates. Nowadays. this also cannibalized the full mobility offerings and individuals took advantage of the benefits of each type of technology. In countries such as Indonesia and India. as the tariffs between CDMA and GSM have converged. as Nauruans enjoyed mobile communications for the first time with the launch of Digicel’s new network.
India. while the remaining 20% is shared amongst the remaining operators. Twelve countries in the AP17 have at least 5 wireless networks. and trust in the industry and/or businesses generally. offering post-paid services could prove disastrous for operators to determine the individuals capable of paying for mobile services. Ireland 65%) in the world also have a substantial portion of pre-paid connections. Other factors that also contribute to the considerable differences in pre-paid versus post-paid connections include varying consumer needs. Japan and South Korea have amongst the highest percentage of post-paid connections in the world (98% and 99% respectively). with more set to enter the market in coming years. as well as to collect payments in such environments. It would be too simplistic. in seven countries among AP17. to explain this dichotomy in AP17 as an developed market versus developing market or a rich versus poor phenomenon. It is not surprising therefore to note that. In fact.16 Asia Pacific Mobile Observatory consumers that have less financial stability or cannot rely on a regular pay cheque the flexibility to purchase mobile credits only when they can afford to. with the top 3 GSM operators holding over 80% of the market. prepaid connections make up almost the entirety (>90%) of their total connections. has 15 mobile operators present in the market in 2008. Greece: 73%. as an extreme example. historical market developments. with poor credit checking facilities in some developing countries in Asia. Doing so would disregard the fact that some of the more affluent and most developed markets (Italy: 85%.4 Competitive Intensity in the Mobile Industry Competition in wireless markets in Asia Pacific is among the most dynamic in the world. however. business models. as opposed to committing to an often-required 1 to 3-year contract. excluding the multiple service providers and MVNOs (see Figure 7). These seven countries are also amongst the less wealthy nations of the AP17. 74% of total AP17 connections are pre-paid versus 68% in Europe and 16% in the US (see Figure 6). education and awareness. Additionally. In contrast. Indonesia has 11 mobile operators. Figure 6 Figure 6: of Pre-Paid and Post-Paid AP17 PercentagePre-paid and Post-paid Connections inConnections in AP17 Post-Paid Pre-Paid 2% 2% 2% 2% 3% 7% 10% 16% 19% 28% 33% 50% 51% 56% WA: 74% Prepaid 98% 99% 81% 98% 98% 98% 98% 97% 93% 90% 84% 81% 72% 67% 50% 49% 44% 19% 2% PAK PHI VIE INA BAN SRI THA IND MAS CHN NZL HKG SIN AUS TPE JPN 1% KOR Source: Wireless Intelligence 2. on average. .
17 0. for instance. the steepest ARPM declines have been seen in emerging markets where penetration growth has been the strongest.T. Kearney analysis Average Revenue Per Minute (US$) for Selected Emerging Markets Figure 8: Average Revenue per Minute for Selected Markets 2004 2008 % Change in effective price per minute 0.18 0. India. the belief is that prices will stabilise in the near term. Merrill Lynch Wireless Matrix .17 Figure 7 (2004-08) Number of wireless operators in the Market Figure 7: Number of Wireless Operators in the market Operators with CDMA Networks1 Operators with GSM Networks 15 6 12 11 9 7 6 5 4 4 9 8 6 2 6 3 6 1 5 1 5 3 2 KOR 5 1 4 4 1 3 JPN 4 1 3 NZL Ø7 3 1 2 CHN 3 3 SIN 9 IND 5 BAN 5 INA 4 SRI 5 PAK 4 PHI 4 THA 3 VIE 4 HKG 4 TPE 4 MAS 4 AUS (1) Double counts operators who offer both CDMA and GSM products (2) Includes fixed-line wireless operators Source: Wireless Intelligence.21 0.05 0.02 0. However. Likewise. are also the result of increasing take-up of attractive bundled value plans such as free minutes. has seen ARPM plummet by 55% from US$0.40 0.08 0. making it among the world’s cheapest mobile markets today. Average revenue per minute (ARPM) in Asia Pacific has fallen significantly from 2004 to 2008 (see Figure 8). Not unexpectedly.32 0.02 per minute.41 Figure 8 Evidence of intensifying competition can be seen in cellular prices dropping sharply in recent years.04 0.06 0. while partly driven by reduced per-minute pricing as a result of increased competition. as further drastic cuts could threaten to bring prices below economically sustainable thresholds.07 0. Bangladesh has seen its ARPM fall by 80% to just US$0. A.04 per minute to US$0.04 0.01 BAN -80% JPN -4% PHI -33% KOR -4% AUS -21% MAS -29% HKG -15% CHN -34% PAK -71% IND -55% Source: Wireless Intelligence.04 0. These declines.15 0.12 0.01 per minute.02 0.19 0.02 0. 0.
many of these markets do not enjoy a premium price over limited mobility (as many mature markets do vis-a-vis fixed line access). As a large number of limited mobility subscribers do not travel much. as well as the GSM and CDMA segments. As of 2008. there are over 20 brands across both post paid and prepaid segments.18 Asia Pacific Mobile Observatory There is also intense competition in markets that have strong representation across both full mobility and limited mobility services. especially in recent years. In Indonesia for instance. Leading the pack are operators from India: Reliance Communication’s CAPEX/Sales ratio of 102. operators in many countries have maintained tremendous commitments to capital expenditure. falling by no more than 4% annually. as well as customer service. Operators in Asia Pacific are investing in networks in many concurrent ways: they are rolling out new sites. In mature markets however. As a result. Across AP17. 2008 CAPEX/Sales ratio has averaged just over 30% (see Figure 9) though this ratio can vary significantly depending on the stage of development of the mobile market. Competitive differentiation occurs in terms of innovative products (such as new wireless data products). quality. such as Indonesia and India. Each of these brands has attempted a different value proposition targeted at individual customer segments. sophisticated subscribers in Japan or Korea are less price-sensitive. Japan and Korea are examples of Asian countries that have actually seen ARPMs remain reasonably flat from 2004 – 2008. With already among the world’s highest market penetrations. they tend to use limited mobility services just as they would a full mobility GSM service. there were 12 GSM and 11 CDMA brands. and 13 pre-paid and post-paid brands. These markets have seen severe price pressure due to market forces. Idea and Airtel likewise are driving high costs of rollout in various circles. ARPM declines have mostly bottomed out. despite lower revenues per minute. increasing capacity on existing sites and also deploying 3G/HSPA+ sites to drive increased access to data services.3% is driven by aggressive expansion of its GSM network. However. This has led to a further downward impact on full mobility GSM pricing. Within various markets in Asia Pacific. ranging from professionals to factory workers to trendy college students. operators have begun to adopt a more sophisticated customer segmentation approach in an attempt to capture or retain targeted customer segments. there are a tremendous number of brands all competing against each other. investing in network and service quality could be an important differentiator in the near future. as operators aspire to complete their work on rolling out affordable access to the masses. Across many markets. . CAPEX is expected to remain high for the next few years. With prices already among the lowest in the world.
4% 14.7% 46. 56.1 Ø -127.3% 32. Kearney analysis . Indonesia and India have seen EBITDA falling by ~700 basis points.3% 69.0 -680.0% 32.0 -652.0 -756.0 -220.0 HKG SRI 110.0 THA NZL PAK SIN BAN AUS IND KOR 490.8% 36.0 -18.4% 13.T.0 18.0% Ø 40.5% 46.0 -178.19 Figure 10 CAPEX/Sales Ratios for Selected Operators in AP17 Figure 9: CAPEX/Sales Ratios for Selected Countries (2008.5% 16.0 Source: ML Global Wireless Matrix (2009).6% 18.1% PHI INA CHN TPE MAS JPN 314.3% 43.0 23.T.3 -334.6% 23.7% AIS AirTel China Mobile DiGi FarEasTone Globe Idea LG Telecom RCVL SK Telecom Total Access Source: ML Global Wireless Matrix (2009). Currently.1% 12. A.4% 41. Kearney analysis EBITDA Margins and Developments for AP17 (2008) 10: EBITDA Margins in AP17 Figure Average EBITDA EBITDA YoY Change (bps) 62. From 2004 – 2008.5% 44. %) 102. in line with falling margins seen in other parts of the world (see Figure 10).3% 43.0 91.0 64. A.8% 28.0% 32.9% 33.5% 43.7% Taiwan Mobile 14. the EBITDA margin across the AP17 is just above 40%: this is expected to decline Figure 11 even further.0 169.3% Ø 31.4% The joint impact of falling ARPMs and increasing costs has seen operator margins being negatively impacted across most markets.4% 10.0 -478.2% 33.9% 43.3% 38.
the valuation impact due to the decrease in investor confidence and the liquidity levels on the balance sheet of the operator. When plotting the 6-month market capitalisation erosion against the Net Debt/EBITDA of the various operators. The study assessed over 90 operators worldwide against several common measures of asset intensive industries such as telecommunications: 1) Growth is fuelled by constant investment. the scale of the business.T. This analysis showed that significantly more Asia Pacific operators were in the “Attack Zone” than the operators in the other regions of the world (see Figure 11). Figure 11: Resilience to the Economic Crisis 86% Comparison Between Regions Resilience from the Economic Crisis Key Observations Of the sample of 90 operators considered. the “Attack Zone”. Kearney Analysis . Kearney illustrated that operators in Asia Pacific were likely to emerge more strongly from the crisis than their competitors in Europe and North America. followed by Americas. North America) appear to be more adversely impacted by the crisis — 25% of operators from Americas fall into ‘Defend’ — 27% of European operators are in ‘Reinforce’ and 19% in ‘Defend’ Asia Pacific telecom operators are well positioned to capitalise on the growth prospects Asia Pacific (28) Americas (28) MEA (7) Europe (26) Number of Operators Considered in this Study Source: A.5 Resilience of the Asia Pacific Mobile Industry amidst a Global Recession There was much debate at the end of 2008 and in early 2009 about the global economic crisis and the resultant slowdown in the economy. the study focused on the degree of leverage the operator had. specifically for Asia Pacific operators. Comparatively.20 Asia Pacific Mobile Observatory 2. Operators in Zone 1. 2) Margins are linked directly to utilisation levels. and Europe 50% 75% 71% % of Operators in ‘Attack’ Operators in mature markets (Europe. A recent study conducted by A. These operators can pursue M&A and also fund aggressive organic growth in attractive segments to enhance their competitive position. and 4) Telecoms industries enjoy heavy economies of scale. according to this analysis. Many economists and governments in Asia were apprehensive about the financial crisis and its impact on the telecommunications industry.T. Figure 12 European operators appear to be finding the current environment most challenging. are in a strong position as they have high liquidity and low debt. APAC has the highest % of operators in the ‘Attack’ zone. three “zones” emerged. Given that the crisis was sparked by a credit crunch and that the resulting impact was the inability of many companies to raise financing when the credit markets froze. Middle East and Africa. 3) Success of operators is dependent on the breadth and depth of the product offering.
81 0.0 0.21 1.73 0. Clearly there is a 10% case to be made of the benefits of Increase in GDP growth per strongincrease in telecom penetration driving penetration in mobile broadband from these figures as both mobile and broadband independently raise GDP significantly. dial-up.21% in per capita GDP growth.60 0.5 Developed Economies Emerging Economies 1.5 0. broadband and economic development in both developing and developed countries. yet in developing countries the same growth in penetration contributed 1. a new study by the World Bank that analysed 120 countries found a strong correlation between mobile.38 1.0 Fixed. Figure 12: Growth Effects of the ICT Industry Percentage Points 1. studies even point out that emerging economies like Asia Pacific have a steeper benefits case than developed economies.Line Phone Source: World Bank.43 0. For example.38% per capita GDP growth (see Figure 12). a 10% increase in broadband penetration contributes 1.12 1. In developed countries. less so than broadband or 0.21 Figure 13 In fact. Qiang 2009 Mobile Phone Dial-Up Internet Broadband Internet .77 Growth in mobile of ICT Growth Effects penetration was also strongly correlated to GDP – however.
The Parallel Paths of Development .22 Asia Pacific Mobile Observatory 3.
Mobile voice communications is likely to be the only form of voice communication for the majority of people in AP; and mobile broadband will likely be the only form of data communications for the majority of people in AP
While the industry is a complex mix of 47 different markets, broadly speaking it is developing along two fundamentally different paths: In emerging markets in AP17, operators are driving access to basic services for the world’s next 1 billion subscribers, the majority of which are low-income individuals at the bottom of the economic pyramid. Operators are attempting to break down the barriers for adoption: affordability, availability and relevant applications and services In parallel, consumers and operators in developed AP17 countries are finding novel applications and services that are redefining the boundaries of the industry globally
3.1 Distinctive Characteristics of the Asia Pacific Market
The characteristics of Asia Pacific markets are vastly different as can be seen in Figure 13. In many countries in Asia Pacific, the mobile phone was the first form of communication available for the mass market, since access to a fixed line was problematic. This was in stark contrast to developed markets where fixed lines were largely ubiquitous when the first mobile phones came along and many people had already experienced the power of communicating with each other over a telephone line. In these developed countries, mobile usage became complementary to fixed line usage. in Asia Figure 15 Pacific. Firstly, it can be argued that mobile voice communications is likely to be the only form of This distinctive phenomenon has a couple of interesting implications for emerging and developed markets voice communication for the majority of people in Asia Pacific. Secondly, as a result, it can be argued that mobile broadband will likely be the only form of data communications for the majority of people in Asia Pacific. Figure 13: Market Characteristics – Developed and Emerging Markets in AP17
Developed Markets Emerging Markets
Market Characteristics – Developed vs. Emerging Markets in AP17
Countries Included: Mobile Penetration
Australia, Hong Kong, Japan, New Zealand, South Korea, Singapore, Taiwan Average penetration rate at 119%, implying >1 connection per person Average 3G+ penetration rate is 51%
Bangladesh, China, India, Indonesia, Malaysia, Pakistan, Philippines, Sri Lanka, Thailand, Vietnam Average penetration is 61%, almost half
3G+(1) Penetration Broadband Penetration
Average 3G+ penetration rate is 5%
Average fixed broadband penetration is 70% Additions to connections are at 8% of total 2008 connections Average ARPU at US$34, but declining at 4%
Average fixed broadband penetration is 7% Additions are still growing strong at 23% of total connections in 2008 Average ARPU at US$7, (almost 1/5 of developed nations) but declining at 13%
(1) Network speeds at 3G levels and above, including CDMA2000 1xEVDO, CDMA2000 1xEVDO Rev. A, WCDMA, WCDMA–HSPA, TD-SCDMA Source: Wireless Intelligence A.T. Kearney analysis
As can be seen in Figure 14, mobile voice communications will be the primary form of communication for the majority of people in Asia Pacific. The larger markets, with lower fixed line density, are on the left hand side of the graph. This is most apparent in Thailand and the Philippines, where mobile penetration rates are 97% and 77% respectively compared to fixed line density which is 24% and 10%. In contrast, developed markets such as Australia, South Korea and Singapore are near or above 100% penetration for both fixed and mobile, showing they are complementary by nature. Fixed line penetration in most countries is unlikely to grow further, which means that in countries like Thailand and the Philippines the only way the vast majority of people will communicate with each other will be via the mobile phone.
Asia Pacific Mobile Observatory
Mobile vs. Fixed Lines Penetration
Mobile Penetration 200% Emerging Markets Averages Fixed Line: 29% Mobile: 61% 150% HKG Developed Markets Averages Fixed Line: 99% Mobile: 119%
(2008, %) Figure 14: Mobile vs. Fixed Lines Penetration
NZL 100% THA PHI VIE INA 50% IND BAN 0% 0% 10% Population size
(1) Total consumer fixed lines over total households Source: Wireless Intelligence, Euromonitor, Ovum, A.T. Kearney Analysis
AUS KOR TPE
MAS SRI JPN
Fixed Lines Household Penetration (1)
The penetration of broadband follows the same logic as above: countries that have high fixed line penetration typically have high levels of broadband adoption due to the rollout of xDSL services. In fact, developed markets in Asia Pacific have an average household broadband penetration rate of 80%, even greater than the penetration rates in Western Europe (55%) and North America (66%). Furthermore, South Korea and Singapore rank first and second in the world with penetration rates of 83% and 82% respectively. However, since a large proportion of customers in Asia Pacific do not have access to fixed line services, their gateway to broadband access is likely mobile broadband. At present, emerging countries in Asia Pacific have an average household fixed broadband penetration rate which is ten times less (7%) than the developed markets in Asia Pacific (though total population is nine times greater than the developed markets). For example, in India, only 5 million households -- or 2% of total households -- have broadband internet access. Hence, 217 million households do not have adequate internet access. The continent’s weighted average penetration is only 19% due to the sheer population size in the emerging markets. Nearly 700 million households do not have broadband access in Asia Pacific today and thus sit on the wrong side of the digital divide. The answer for narrowing the digital divide in Asia Pacific will lie in mobile broadband technologies7. Mobile broadband connections (114 million) are currently fewer than fixed broadband subscribers (182 million) but are expected to surpass fixed broadband connections by 2011. By 2013, mobile broadband connections will reach 753 million, far exceeding fixed broadband connections (311 million). The additional 636 million connections will connect a sizeable portion of the unconnected Asia Pacific population to the internet. Australia has been a driving force in mobile broadband deployment. Telstra, Australia’s largest operator, has launched the world’s first HSPA+ (or HSPA Evolved) network which promotes the fastest broadband speeds at 21 Mbps (and upgrade to 42Mbps currently being rolled out) and mobile broadband coverage of 99% of the population in Australia.
Fixed and Mobile Broadband Penetration in AP17
Figure 15: Fixed and Mobile Broadband Penetration in AP17
AP17 Mobile(1) vs. Fixed Broadband Subscribers (Millions) CAGR 2007-13 19% 55% 753
Fixed Broadband Penetration in AP17 (2008, % of Households) Developed Markets Avg.: 70% 84% Emerging Markets Avg. : 7%
Fixed Broadband Mobile Broadband 67% 61% USA / W. Europe Average 55% 69%
311 AP17 WA: 19% 10%
HKG KOR SIN TPE JPN AUS NZL MAS CHN THA PHI VIE IND SRI INA PAK BAN
(1) Mobile Broadband Connections include CDMA 2000 1x EVDO, Rev A and WCDMA-HSPA family Source: Ovum, ITU, Wireless Intelligence, Frost & Sullivan, A.T. Kearney analysis
The mobile industry in Asia Pacific can, therefore, be characterised as developing along two fundamentally different paths: 1) A path of “Driving access for the World’s next 1 billion Subscribers” where there still remains a massive opportunity for many industry players to provide very basic voice services to the low-income segments and underpenetrated consumer and business segments at the ‘Bottom of the Pyramid’. 2) A path of “Taking Mobile to the Next Frontier” where a relatively small base of advanced users in developed markets (primarily in North Asia) is pushing the industry’s boundaries; finding novel applications and services that are challenging our perceptions and preconceptions of what owning and using a mobile phone means to us today.
3.2 Driving Access for the World’s Next 1 Billion Subscribers
Today, roughly 2 billion consumers in Asia Pacific still do not have a mobile connection (see Figure 17). Of these, 96% can be attributed to five emerging countries: China, India, Indonesia, Pakistan and Bangladesh. China and India alone account for nearly 81% of these unconnected individuals. This presents a significant growth opportunity for mobile operators to serve a massive untapped market. However, converting these individuals into customers will not be easy. The large majority of individuals living in the AP17 emerging markets are considered to be at the base of the economic pyramid8. The people in this population segment are the lowest-income earners in society and thus have little disposable income to spend on even the basic necessities, let alone telecommunications. Furthermore, since some of this population already has a mobile connection, it can be assumed that those remaining are likely to be the poorest among this already marginalised segment of society.
7 Mobile Broadband is defined in this paper as mobile technologies that enable data download speeds greater than 1Mbps, such as W-CDMA / HSPA (HSDPA, HSUPA, HSPA+), CDMA2000 1x-EVDO (and Rev. A) and TDSCDMA. 8 The World Resources Institute and the International Finance Corporation define the base of the economic pyramid as the population segment in which individuals had annual incomes of up to and including $3000 per capita measured in 2002 international dollars (purchasing power parity or PPP).
indirect distribution models) will boost take-up Thailand 77% Philippines 77% Pakistan 3. Conventional wisdom holds that. Euromonitor. C.579 93 797 Figure 18 726 These 5 countries make up 96% of the total unconnected population 1. Harsha De Silva and Ayesha Zainudeen Telektronnik 2. The massive untapped market at the BOP presents three broad challenges for growth based on the unique needs of individuals at the BOPs that must be catered for with a new approach. Availability With population coverage below 70% in BOP countries. a significant portion of people (particularly in rural areas) could not get access even if they wanted to and could afford it Innovative solutions for network expansion and distribution models that expand coverage economically to rural areas (tower sharing. Relevant Applications & Services Subscribers at the BOP need practical applications that are essential for improving their lives such as agriculture.26 Asia Pacific Mobile Observatory AP17 Unconnected Population Breakdown (Millions) Figure 16: AP17 Unconnected Population Breakdown (Millions) 83 114 77 3. in order to succeed at the BOP. Prahalad and Stuart L.T. Strategy+Business Magazine 2002. Hart. Affordability Decreasing handset and usage prices along with new business models aimed at affordability (pre-paid services. The three challenges and drivers for growth are: Affordability. Low disposable income and unreliable cash-flow make affordability the biggest barrier for take-up 1. The same holds true for the mobile industry.K. health. availability and practical applications (see Figure 17). Kearney Analysis Much has been discussed about the aggregate economic opportunity as well as the development potential from serving the “bottom of the pyramid” (BOP) since Prahalad and Hart first introduced the concept in 20029. companies must fundamentally adapt their business models as well as their products and services. alling-party pays. A.689 AP17 Subscribers CHN IND INA PAK BAN Rest of AP17 Total Population Source: Wireless Intelligence. IT outsourcing) will drive growth India 82% 2. .T. 2008 9 The Fortune at the Bottom of the Pyramid. Kearney Analysis (2) Teleuse at the Bottom of the Pyramid : Beyond Universal Access. connections sharing. and education Practical applications that show tangible benefits to potential consumers will drive take-up and usage Sri Lanka 75% 72% Source: (1) A. Figure 19 Figure 17: Challenges and Drivers for Growth at the BOP1 Affordability: Biggest barrier for take up at the BOP2 % of respondents at the BOP who rated affordability as the reason for no connection.
the introduction of pre-paid services has made mobile services more accessible at the BOP. a significant portion of individuals at the BOP are still unable to access a mobile connection. governments and operators will need to continue to find new ways to make mobile connections more affordable. Furthermore. even if they want to and are able to afford it. A further complication lies in unreliable power sources: operators and handset vendors must find ways to make mobile usage viable (both for powering networks and charging handsets). . as well as ongoing operating costs. Operators and regulators must continue to work together to find new ways to make the further deployment of mobile networks economically viable. an additional innovation that is increasing availability while maintaining economic viability is infrastructure tower sharing. affordability is perhaps the greatest barrier to owning a mobile connection.g. However. The fact that a large portion of the BOP resides in rural areas makes delivering and distributing services to them considerably more challenging. Harsha De Silva and Ayesha Zainudeen. although 90% of sampled individuals in Pakistan. operators in some emerging countries are adopting lean operating models with sizeable outsourcing to reduce their cost base and thus be able to reduce prices to subscribers.9% 10 Source: Teleuse at the Bottom of the Pyramid: Beyond Universal Access. Policy makers have enabled greater affordability at the BOP with policies such as the introduction of calling-party pays policies (otherwise resulting in the ‘missed call phenomenon’) and. in some cases. Figure 20 AverageDecreasingPrice of GlobalofHandset Manufacturers Sales Average Sales Prices Handsets Figure 18: US$/unit 220 210 200 190 180 170 160 150 140 130 120 110 2004 Source: Mirae Asset Research CAGR 04-08 Sony Ericsson -5% LG Nokia Motorola Samsung 2005 2006 2007 2008 -9. Furthermore. Pakistan) to operators and subscribers.1% -6. Sri Lanka. 2008. are beginning to reduce telecom-specific taxes (e. since vastly rural areas will not make traditional retail models viable. Philippines. operators will need alternative distribution models to reach consumers. the average selling prices of handsets have been steadily decreasing (see Figure 18) lowering the total cost of mobile ownership and usage in the region.27 First.4% -6. This can significantly reduce network deployment costs. Telektronnik 2. the majority do not own a phone because they cannot afford it10. India. and Thailand claimed to have used a phone at least once in the past three months. Finally. Operators have already made significant strides in making mobile services more affordable. A study by LIRNEasia researchers found that. A second challenge for serving the BOP is availability of mobile services. Additionally. where operators share ownership and/or access to BTS towers with one another. They have reduced the effective price per minute of use considerably (in some cases over 80%) to as little as one cent in Bangladesh (see Figure 8). In addition. Though mobile networks cover approximately 70% of the population for some of the BOP countries.7% -7. where many cannot count on a steady stream of income.
music). video. . and social networking) are far less relevant for consumers at the BOP. This untapped market will drive subscriber and revenue growth for operators and will enable individuals at the BOP to ‘connect’ to the global economy for the first time. along with policy makers. education or personal finances – will likely deliver the most value and hence drive take-up and usage. until they are connected to it. Whereas for people in most of the world a mobile phone is primarily utilised as a device for voice and text-based communication. 12 Hjroth. In fact. As the World Resources Institute rightly stated. Routledge 2009. instead of the traditional approach taken in developed markets. it has been said that. Content and applications created for the developed world (such as music downloads. A personal extension that embodies and documents their lifestyle and allows for intense personalisation and self-expression. pictures. New handset and service innovations are achieving rapid take-up and are driving further innovation in a powerful consumer-driven innovation cycle. data revenues in developed markets will constitute nearly 50% of revenues. Therefore. gaming. health. The rapid adoption of services that extend beyond basic voice communication can be seen in Figure 19 as data revenues make up an increasing portion (over one third in 2008) of total revenues and the rest of the world is following. but those in the BOP cannot join the global economy. 2007. A more convenient means for accessing products and services. needs to adopt a different approach to serving this market and meeting its unique needs. for people in this region “the mobile phone is not only a symbolic repository for the user’s social capital but also signals to others certain unspoken clues about the user’s identity and social status. It is predicted that by 2013. people in developed markets in Asia view mobile devices as: ■ ■ ■ ■ A device from which to organise their busy lives.”12 Simply put. A perfect example of this is ‘Farmer’s Friend’. 11 The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid. Mobile Media in the Asia-Pacific: Gender and the Art of Being Mobile. 3. in doing so is propelling the mobile industry to the next frontier. mobile phones are beyond just a basic communication tool: they are an indispensible part of individuals’ lives. with AP developed markets paving the way for North America and Western Europe. and have an intimate relationship with their mobile phone and services compared to the rest of the world. A central platform for entertainment (gaming. for this forecast to become reality.3 Taking Mobile to the Next Frontier In developed markets across Asia Pacific. Larissa.28 Asia Pacific Mobile Observatory A third challenge for serving the BOP is the need to offer relevant and practical content and applications that deliver tangible benefits to customers. a society with highly advanced mobile users is constantly searching for new ways to use their mobile phones and. and benefit from it. an application developed by AppLab (a Grameen Foundation initiative) and powered by Google SMS.”11 However. “It may seem obvious. advanced users in some Asian markets place far greater value on. The growth of the mobile industry is expected to be driven by countries with a large population segment at the base of the economic pyramid. making them more productive and efficient. applications that help improve their daily lives – be they related to agriculture. World Resources Institute and the International Finance Corporation. the mobile industry. Instead. that sends farmers agriculture tips in response to SMS-based requests.
being viewed by many as the benchmark for the evolution of the mobile industry in other countries. United States 23% South Korea 14% Source: World Intellectual Property Organization .T. A. New inventions stemming from this part of the world have been plentiful: 50% of all telecommunications patents applications (filed to National Patent Offices between 2002 and 2006) were filed by individuals and/or organisations from Japan and South Korea (see Figure 20).29 Figure 21 Data Revenues as a PercentageTotal Total Revenues Revenues Figure 19: Data Revenues as a Percentage of of Service Service 50% Asia Pacific AP Developed Markets 40% Western Europe North America 30% 20% 10% 0% Figure 22 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Gartner. Kearney Analysis Telecom Patents Filed in Major National Patent Offices Figure 20: Telecom Patents Filed in Major National Patent Offices Listed by Patent Origin Country (2002-06) 100% = 549.147 patents Sweden Netherlands UK Finland France Germany China 6% Japan 36% Others The advanced use of mobile communications in South Korea and Japan has placed them at the forefront of the global industry.
nttdocomo. Practically speaking. Inc. NTT Docomo. assessing and predicting individual behaviour. hypothetically. .) to contribute to the development of society and its economy by memorising. Will such a concept succeed? Will it transcend to other countries around the world? This cutting-edge thinking radically challenges the perceptions of how a mobile phone and a mobile network can be used. 2008. events or other phenomena13.pdf. NTT DOCOMO has introduced the concept of using its mobile assets to create infrastructure that can act as the ‘brain of society’ (see Figure 21). Figure 21: NTT DOCOMO’s “Brain for Society” 13 Docomo’s Change and Challenge to Achieve New Growth. October 31. buying and browsing characteristics. an intelligent ‘system’ such as this could. demographics.jp/english/corporate/ ir/binary/pdf/library/ presentation/081031-2/all_e. http://www. weather. traffic data. co. use the mobile network as social sensors to predict demand and control oversupply of products and services and thus make the economy considerably more efficient. Such infrastructure is able to leverage the tremendous amount of data that the mobile network can collect (location.30 Asia Pacific Mobile Observatory In Japan. etc.
especially as handset replacement cycles become shorter. operators are also exploring what the next trend in their consumers’ usage patterns will be. these users (particularly those in North Asia) are highly advanced in their uses of mobile technologies. SK Telecom was the first to propose this initiative and successfully launched this project in February 2009 in cooperation with KT Telecom to standardise technologies in enabling the realisation of this idea. . one clear frustration that users have is the transfer of all their valuable mobile material assets from one handset to the other. While mobile customers in developed countries may form a relatively small portion of the overall subscriber base in Asia Pacific.31 Besides finding new uses for mobile communications. South Korean operators have been leaders in the GSMA SmartSIM initiative. contacts. multimedia files and run various mobile applications such as personalised portals or multimedia messaging across handsets. Their voracious hunger for new services and applications will continue to drive the development of the mobile industry globally. To manage their mobile assets. to drive development and adoption of the large capacity USIM (Universal Subscriber Identity Module) that allows users to store personal mobile content. so as to pre-empt these needs and respond to demands as they arise. For example. This ‘thumb-drive’ concept will likely prove popular with many users in developed markets across Asia as multiple handset ownership continues to proliferate into the future.
The Economic Contribution of the Mobile Industry .32 Asia Pacific Mobile Observatory 4.
This represents a direct contribution from revenues of approximately 1.4% 5. This means that raising mobile penetration rates in AP17 emerging countries to 100% could add over US$270 billion to the aggregate GDP of these countries in the AP17.8% of GDP.1% 2. this is simply theory that.3% 2.6% 1. ■ The previous chapter highlighted the development paths of the mobile industry in Asia Pacific and the massive impact that the mobile industry is having on the lives of people in both emerging and developed markets. 4.1% 2. the mobile ecosystem plays a major role in national employment as over 10 million people are either directly or indirectly employed through the mobile ecosystem.60% in developed countries). The total value add of the mobile ecosystem in AP17 is nearly US$370 billion or 2. social security. this direct contribution from operator revenues ranges from 3. However.8% 5. In addition. In India.2% 1. the direct contribution from operator revenues is considerably higher among emerging countries (2.9% to aggregated GDP in AP17.1% 5. IDC. we focus on quantifying the direct and indirect economic contribution that the mobile industry has made to countries in Asia Pacific.8% 2.3% 1. income taxes.1 The Direct Contribution of Mobile Operators to GDP The phenomenal take-up of mobile communication in Asia Pacific has driven revenues for mobile operators in AP17 from US$150 billion in 2004 to over US$230 billion in 2008. A. The mobile ecosystem is a major contributor to public funding with over US$100 billion generated through corporate taxes.2% in Vietnam to 1. indirect taxes and regulatory fees.3% 2. it is indicative of the powerful impact that could be achieved if governments and operators work together to enable all individuals to have access to mobile communications.8% Potential Increase to GDP1 3.5% 1. there is an increase of 0. Frost & Sullivan.5%).2% in Hong Kong.3% (1) Potential increase in GDP (at 2008 levels) from raising mobile penetration rates in emerging countries in AP17 to 100% based on a 2008 World Bank econometric study that showed that a 10% increase in penetration has a 0.6% 1.33 Key Messages: ■ ■ ■ Mobile operators’ revenues in AP17 contribute 1.3% 0. Kearney Analysis .2% Philippines Bangladesh China South Korea Thailand Pakistan Indonesia Singapore Japan Taiwan Sri Lanka New Zealand Australia Hong Kong 4. Merrill Lynch.6% Figure 22: AP17: The Direct Contribution of Mobile Operators to GDP MNO Revenues As % of GDP Vietnam Malaysia India 2.81% increase to GDP Source: Wireless Intelligence.6% 1. In this chapter.T.5% 1.9% of aggregated GDP.8% 0.2% 2.6% of cumulative GDP. an increase of 4. Bangladesh and China.2% on average) than developed countries (1.8% 4.8% 1. This finding is consistent with studies previously undertaken including the World Bank study mentioned earlier(see Figure 13) which showed that for every 10% increase in mobile penetration.1% 3. potential GDP growth could be over 5% (see Figure 22). Interestingly. in reality. World Bank.0% 2.81% in GDP in emerging countries (compared to 0. AP17: The Direct Contribution of Mobile Operators to GDP Figure 24 (2008) (2008) 3. Obviously.0% 1. would take years to accomplish. At a country level.
182 Network Operators 241. and content & services providers (see Figure 23).686 Distribution Distributors and retailers of wireless handset devices 23. Telecommunications Industry Association. Value Chain in AP17 Figure 25 Figure 23: Description and Size of Mobile Ecosystem Value Chain in AP17 Value Chain Infrastructure & Support Services Description 2008 Revenues (US$m) Suppliers of infrastructure and support services. handset devices. including public and enterprise network equipment and support services for this infrastructure Predominantly mobile network operators (MNOs). A. the mobile ecosystem value chain consists of five components: infrastructure vendors & support services. Broadly speaking. Mobile operators make up roughly 62% of the of Mobile Ecosystem Description and Size entire ecosystem’s revenues.603 Handset Devices Wireless handset device manufacturers 69. network operators. PWC.34 Asia Pacific Mobile Observatory 4.586 Content & Services Providers of mobile content and service applications 7. Kearney Analysis To estimate the direct and indirect economic contribution of the mobile ecosystem. a structured framework was used (see Figure 24) that considered the following factors: Supply-side Effects ■ ■ ■ The direct contribution from MNOs The direct contribution from the adjacent industries in the ecosystem’s value chain (see above) The indirect impact on the greater economy (the ‘multiplier effect’) Demand-side Impact ■ Productivity gain from workers using mobile technologies for work (mobile workers) .2 The Value-Add of the Mobile Ecosystem Mobile operators work within a larger ecosystem to deliver mobile communications to society. Informa. therefore the entire ecosystem’s economic contribution to society needs to be considered. with some revenues flowing to fixed line network operators (FNOs) for interconnection1 49.T. distributors.688 (1) Interconnection revenues flows have not been included in this analysis Source: Gartner.
and to the technician who is able to receive notification from his employer of other appointments in the day while on the road and thus reduces wasteful travel back to the office. The productivity gain factor used was approximately 4% for developed countries and 7. contributing over US$220 billion across AP17. Subsequently. we do not believe that they are fully dependent upon each other. While it can be argued that GDP per Capita and mobile workers % may be partially interrelated. For such individuals.To determine the % of mobile workforce across AP17 countries.T. The productivity gain was proven to be very significant.1% of the mobile ecosystem. allocate resources more effectively and reduce wasted travel and time. However.1 to 2. 14 Value add was used rather than revenues in order to avoid double counting of revenue flows within the value chain. in emerging countries. to the plumber who is able to respond to customers while on the job. The results showed that the supply-side impact from the mobile ecosystem on the greater economy contributed approximately US$145 billion in AP17 or 1. To evaluate the economic impact resulting from the productivity gains enjoyed from mobile workers (or workers who use mobile technologies for work). the direct and indirect economic contributions from the mobile ecosystem amounted to approximately US$368 billion or 2. A lower productivity gain percentage was used for developed countries based on the fact that. equivalent to 1. the overall contribution of the mobile ecosystem is nearly six times greater than the direct contribution of mobile operators.5 as a multiplier based on an average of multipliers used in previous studies ranging from 1. we leveraged various studies including studies conducted for Telenor ASA and IDC . The ripple effect from the direct contribution of mobile operators on to the rest of the mobile ecosystem and the economy at large has a much larger contribution than originally thought. without mobile phones workers in the developing world would be significantly worse off than their counterparts in developed countries who typically have access to fixed line access in the office.82% of the aggregate GDP in AP17 (see Figure 26). . 16 To assess the percentage of mobile workers in the economy. a mobile phone (and other mobile technologies) has enabled them to plan and coordinate their activities more easily. 15 We used 1. the economic impact extends beyond the supply-side effects. firstly the economic value add14 of MNOs and adjacent industries in the ecosystem was estimated based on a sample of companies across the value chain in various countries in AP17. and thus. mobile phones are often the only form of communication. from the chief executive of a large business who can communicate with his/her team while travelling. It has also greatly improved the productivity of workers who use mobile technologies for work purposes. Value add = EBIT + Wages – CAPEX + Depreciation or approximately Revenues – Cost of Sales. we linearly interpolated the missing counry data that were not available. This impacts various individuals in the workforce. and on the road. the percentage of mobile workers in each country’s workforce16 and their average GDP contribution was estimated (total GDP divided by total workforce) and multiplied by an estimated productivity gain from mobile usage.7% of the aggregate GDP across AP17. or nearly four times greater than the direct contribution of mobile ecosystem. In total.35 Figure 26 Framework for Calculating the Mobile Ecosystem’s Economic Contribution Figure 24: Framework for Calculating the Mobile Ecosystem’s Economic Contribution Direct Value-add from MNOs Outcomes Supply-Side Effects Economic Contribution of the Mobile Ecosystem Value Add from Related Industries in the Ecosystem Contribution to GDP Contribution to Employment Multiplier Effect Contribution to Public Funding Demand-Side Effects Source: A.6% for emerging countries based on a range of percentages used in previous studies (5-10%). A multiplier15 was then applied to the direct contribution of the mobile ecosystem to estimate the impact of mobile ecosystem on other industries. we correlated the GDP per Capita (at PPP) to the % of mobile workers for selected countries. Across AP17. Kearney analysis Productivity Gain from Workers who use Mobile Phones for Work Purposes To determine the mobile ecosystem’s supply-side effects on the economy. at home.
of which 1 million were employed by mobile operators ■ Over 4 million people were employed indirectly through support service companies and the ecosystem’s contribution to public funding An additional 3. Informa.1% 39. PWC.23% 0. Frost & Sullivan.0% of GDP in be attributed to a numbercontribution can be foundnot the appendix). 2008) ■ Mobile penetration rate and affordability of mobile services The proliferation of mobile services in the workplace (mobile workers in the workforce) What is certain. the direct and indirect economic contribution of the mobile industry varied significantly from 3.3 60.5% 27 Indonesia (country-level in Figureof GDP in Singapore to 2.2% 13. 10 more jobs in the economy. Ovum. is that the mobile industry has a major direct impact and an even stronger ripple effect on the economic growth in countries in Asia Pacific.82% Source: Wireless Intelligence.9% Mobile Operators Related Industries Multiplier Effect Supply-Side Impact Productivity/ Demand-side Impact 1. over 10 million people were employed directly and indirectly in the mobile ecosystem (see Figure 26): ■ Approximately 2.4 million induced jobs were generated through direct and indirect employee spending (derived using the multiplier effect) ■ The strong ripple effect from mobile operators generates 10 times more jobs directly and indirectly by the mobile ecosystem.2 30.8% 48. TIA.11% 2.3 The Mobile Ecosystem’s Contribution to Employment The mobile ecosystem is also a major contributor to employment in the markets it operates in. 2008) 223. Kearney Analysis 4. A.36 Asia Pacific Mobile Observatory On a country level.T.8 368. A country-by-country breakdown for AP17 can be found in the appendix.3 66.1 17.5 100% % of GDP 0.2% 144. The variance in GDP contribution can of factors including (but limited to): ■ MobileGDP size.51% 0. In 2008. on average. This provides impetus for further development of the mobile industries across Asia Pacific as every job created in mobile operators generates. IDC. . Merrill Lynch. Telenor.6 million people were employed directly by the mobile ecosystem.37% 1. Figure 25: Mobile Ecosystem Value Add (VA) in AP17 (US$bn. however.71% Total Value Add 8. GDPValue Add (VA) in AP17 rates ■ Total Ecosystem per capita and average wage (US$bn.
37 Figure 28 Employment Created by the Mobile Ecosystem in AP17 Figure 26: Mobile Ecosystem Contribution to Employment in AP17 (‘000 of Employees.4 Contribution to Public Funding 15. Merrill Lynch.3% 4. A. income taxes. Frost & Sullivan. In 2008. IDC.5 5. and it contributes greatly to public funding to enable governments to achieve their national development agendas. Beyond its direct contribution. Kearney estimated that the mobile ecosystem’s total contribution to public funding amounted to over US$100 billion of which mobile operators directly and indirectly generated 75%.112 Figure 29 (1) Indirect Employment from Support Services Companies and employment generated from taxes paid (2) Indirect employment generated from spend of direct / indirect employees. Merrill Lynch. social security taxes of direct and indirect employees. Kearney Analysis Conclusion: The mobile industry is a major contributor to the economic development of nations across Asia Pacific.1% Mobile Operator Employment Related Industries Employment Indirect Employment1 Induced Employment (’Multiplier’ Effect)2 Total 15. Figure 27: Mobile Ecosystem Contribution to Public Funding in AP17 (US$bn) 4.1% 10.T. Telenor. As governments consider levers to further develop their economies and societies.532K 3. 2008) Direct Employees: 2.6 15.9% 11.T. PWC.4 102.580K Indirect Employees: 7.5 31. and creating the conditions for greater investment in the mobile industry will drive economic development far beyond its direct domain.4% 41. TIA. and ) regulatory fees. TIA. as can be seen in Figure 27.5 Source: Wireless Intelligence. A.161 ~10X 1. it drives considerable direct and indirect employment.0 32. PWC. they must consider the mobile industry as an enabler of development beyond its direct means. Frost & Sullivan. corporate tax. Ovum. Kearney Analysis The Mobile Industry Contribution to to public Funding AP17:mobile ecosystem also makes a major contributionPublic funding through various levers including ( VAT/indirect tax. A. IDC.3% 37. Investing in. calculated using a multiplier of 1.371 33. .0 36.8% 4.560 1. Informa. It generates significant economic value add to the economy.7% 11. Informa.020 10. Ovum. Telenor.T. the mobile industry has a powerful ripple effect on other industries within and beyond the mobile ecosystem.3% Corporation tax Social Security Tax Income tax of employees Indirect taxes Regulatory fees Total Source: Wireless Intelligence.
38 Asia Pacific Mobile Observatory 5. The Forefront of Innovation: Delivering on Unique Customer Needs .
innovations in the Asia Pacific mobile industry that are enabling the industry’s (and more broadly society’s) development will be profiled. pioneering new innovations and rolling them out globally. Innovations in service delivery. services and applications that will improve their lifestyles along several dimensions: ■ Convenience: Services that enable customers to more easily access goods and services through their mobile devices ■ Entertainment: Services that offer entertainment through various means (gaming. It is therefore not surprising that the top prize in the 2009 GSMA Global Mobile Innovation Awards was given to a company from Asia Pacific: Cootek China won recognition for its innovative soft keyboard used in touch-screen mobile phones. entertainment. The low-cost handset has transformed the industry by lowering entry barriers for millions of users. pioneering new innovations. Operators have pioneered new business models like outsourcing.2 Developed market innovations 5. ■ Emerging market service innovation has focused on enriching lives through health. In this chapter. ■ ■ Advanced market service innovation has focused on convenience. music) and allow for intense personalisation and self-expression. 5. pictures. These innovations are profiled below and organised into four categories: a) mobile services (new products/services developed by operators). The rise of the smart phone and Asian handset vendors who now have almost 40% of global market share has driven mobile data revenues. handsets and networks have all been instrumental in pushing the boundaries of mobile services. The mobile industry in Asia Pacific is fast becoming the industry’s hub for innovation. and d) network (innovations in the network business) areas of the mobile ecosystem. videos.2. and rolling them out globally. b) business models (changes made to the operators’ business to deliver a new innovation).1 Service Innovation Customers in developed markets have a deep attachment to their mobile phones and seek innovative content. as well as driving access to the next billion customers. 5. One sub-segment of entertainment is the use of mobile for social networking communications Productivity and efficiency: Services that increase output or reduce time taken to perform various activities (mostly work-related) with the assistance of mobile technology ■ . c) devices (innovations in end-user devices). operators’ business models. trade and commerce applications. distribution and tower sharing.1 Innovation Along Two Paths To manage the dual development paths in Asia Pacific. productivity and efficiency. education. players in the mobile ecosystem have made great progress in challenging their business models and developing products and services in order to meet the unique demands of customers in both developed and emerging markets.39 Key Messages: ■ The mobile industry in Asia Pacific is fast becoming the industry’s hub for innovation.
Music. purchase tickets and obtain discount vouchers. and a host of platform and content providers are emerging.000 minutes of music streaming from the full “MOOV on mobile” library. 17 NTT DOCOMO website. Frost and Sullivan. the total Asia Pacific LBS market stood at US$384m. games and shopping are also other services that can be easily obtained through operators. To deliver these services. where adults can keep track of the location of their family members. Phones with the ‘Osaifu-Keitai’ e-wallet service can also serve as train tickets and member ID cards while allowing users to check account balances. PCCW’s Moov on Mobile music service makes 60. Australia and New Zealand with operators. friends’ locations.35. For example. Consumers in developed markets are able to more conveniently access goods and services with their mobile phones. is truly delivering convenience through mobile. and enable automatic updates and store preference memory. NTT DOCOMO now has approximately 10 million users of its DCMX credit service17. A special US$68 plan also allows users to enjoy up to 4. 19 PCCW website. Public services providers can also benefit from monitoring street lighting and water tanks. bundled into their voice packages. Elderly citizens can also notify hospitals in case of emergency by pressing specific buttons to transmit their location. where personalised information or services can be found by subscribers based on their location. This was further enhanced with the Becktermap in 2004 that pinpoints a specific location on the user screen. Hong Kong. the fee for download is highly affordable. and book movie tickets through their mobile phones. as well as remote energy inspection. In Singapore.21 – US$0. Operators are also tying up with ‘physical’ businesses like shopping malls and restaurants to enable mobile browsing and purchasing. SingTel’s “IDEAS” portal enables users to store MMS’s. SK Telecom started its pilot LBS services in 2002 with NATE GPS offering users information on facilities. A host of innovative mobile commerce applications are pushing the boundaries of mobile technology to provide consumers with seamless access to finance. with Asia Pacific content providers flourishing with the provision of local content. with operators across the region rushing to set up their own versions. a recent trend in Asia Pacific is the emulation of the ‘App Store’ concept. Productivity and efficiency are being addressed by mobile services through location-based navigation and information provision for businesses. download ringtones and purchase content. increased growth in this market is expected from Singapore. The introduction of location-based services (LBS). where purchases can be made with a wave of their phones over a reader for handsets equipped with Sony’s contactless cards. By 2007. resulting in rapid subscriber take-up.000 songs available to PCCW mobile users via streaming technology. shopping and trading facilities on the go. Entertainment. along with 100 minutes of airtime19. Moving forward. A popular LBS service launched by SK Telecom is the child and elderly safety service. and emergency notification.40 Asia Pacific Mobile Observatory Convenience. Businesses can also use mobile communications to track delivery schedules and manage physical goods through immediate real-time tracking. book transport services. 2008. In many developed countries. consumers now have the option to locate restaurants. August 2009. between US$0. thanks to innovative services from the mobile industry. users and regulators encouraging the proliferation of services in the market. In Korea. This popular service has also been exported to the Netherlands. Entertainment services are also seeing a huge jump in Asia Pacific with the increased usage of mobile social networking tools such as INQ handsets and networking providers like BuzzCity and Tencent QQ. However. Mobile widgets and applications can be downloaded by users to customise their content requests. with Japan and Korea leading the majority of revenues18. Productivity. this ‘app-based’ approach will allow users to personalise their mobile interaction and enable the flourishing of content from a variety of users in collaboration with mobile operators. catering to the lifestyles of consumers. Many countries have already seen operators launching music download plans and even video streaming services to users. 18 Source: Asia Pacific Location Based Services Highlights. SK Telecom is catering to many specialised segments of this market by providing powerful solutions that make couriers. . vehicle management and even vending machine companies more productive and efficient.
Digitalmediaasia.344 16% Others 29% 24% 17% 14% 18% 20 Source: Data price wars begin: many mobile operator are trying to stifle the threat posed by the launch of WiMax services by cutting prices.These data plans have also gone one step further to segment the market through targeting specific brands of devices. 25 Mobile alliances go toe to toe on data roaming. mobile broadband has in fact become less expensive then fixed line ADSL services.2 Business Model Innovation Delivering on the service innovations will not be easy. Malaysia and Singapore are also countries where the popularity of unlimited plans has started to emerge. often bundled with free content. Asian handset vendors make up a significant portion of the global handset market. 24 Asia Pacific Premium Content Market. One of the most recent developments seen in the market is a new focus on micro-segmentation – a concept well known to consumer goods companies but rarely seen in emerging market telecom operators. 22 Optus website.2. They have been identifying micro-segments and modifying their business models to attract and retain these customers in an efficient.121 15% 1. All major South Korean operators offer data intensive plans for users.227 18% 1. To grow in saturated markets. 3’s launch of the X-series internet-connected mobile phones accelerated the adoption of unlimited data plans in the market with handsets and networks supporting the ultimate mobile internet experience24. 2009. For example.3 Handset Innovation Market Share are ranked among the top 5 vendors in the world with a combined market share of 34% in Sony Ericsson who in the Global Handset Market Figure 28: Market Share in the Global Handset Market Units (m) 681 817 1. Chunghwa in Taiwan has a reduced-price data plan targeting smart-phone users at US$5.263 15% 1. mobile operators have begun to reinvent their business models to deliver services profitably and sustainably. Many operators now have BlackBerry and iPhone specific plans at affordable prices: Optus Australia has launched its personal iPhone plans at a cap of approximately US$1622. Figure 30 5. targeting youths and young working adults23. 23 SingTel launches entrylevel BlackBerry plan.41 5. extending data ‘buffet’ flat rate plans to users roaming on member networks25. Samsung and 2008 (see Figure 28). led by LG. In Singapore.com & DME Ltd. 2008. operators have been active in challenging traditional assumptions in which customers are profitable and valuable. while SingTel recently introduced new entry-level BlackBerry plans including 1GB of data at less than US$10 a month. Telecom Asia. 2009. 2007. operators are also partnering with ICT companies to offer bundled packages to users. some with SIMs already embedded inside.2. The move towards unlimited flat rates was arguably pioneered by South Korean operators. Frost and Sullivan. These bundling initiatives have helped to increase user adoption and decrease total cost of ownership in a convenient package. These flat rate plans have even been extended to roaming travellers with major mobile alliances Conexus and Bridge.002 1. Users can expect to find operators bundling data plans with net-books. 21 Source: M1 cuts mobile data prices. Hong Kong. sustainable manner. M1 and Starhub now offer unlimited mobile data plans capped at approximately US$2021. Straits Times. Taiwan. In Taiwan. 2009.45 a month for 1GB of data20. Moving beyond mobile. Telecom Asia. Motorola 15% 22% 9% 8% 8% 39% Nokia 31% 32% 35% 40% 39% 38% 1% 1% 1% 8% 8% 9% 9% 1% 10% 10% Asia Pacific vendors: 34% market share in 2008 HTC Sony Ericsson LG Samsung 6% 7% 13% 2004 6% 7% 13% 2005 1% 8% 6% 11% 2006 9% 7% 14% 2007 17% 17% 18% 2008 2009 2010 (1) Average selling price Source: Mirae Asset Research .
Also. the handset comes equipped with an 8MP camera and DOCOMO’s standard service and applications offerings. mobile phones have gone a long way from being purely voice devices to becoming an integral and indispensable part of people’s lives. widget (i-WidgetTM) and application platform (i-appliTM). in response to the mobile phone’s status as a fashion accessory. The Watch Phone is among the latest in a series of stylish concepts from one of the world’s leading handset vendors: other innovations include collaborations with renowned fashion brand Prada and the world’s first transparent phone. In 2006. ABI Research. where 10 minutes of solar recharging can provide 1 minute of talk time. with 7.7 Per Cent Increase in Fourth Quarter of 2008. Two megapixel (MP) cameras with autofocus and zoom functionalities are now common. Samsung’s Innov8 won the GSMA Mobile Award for best mobile broadband handset. Smart-phones are widely available in developed markets in Asia Pacific. LG Crystal (see Figure 29). Figure 29: Innovative Advanced Handsets Samsug Innov8 DoCoMo Solar Hybrid LG Watch Phone LG Prada LG Cyrstal 26 Source: Japanese and South Korean Mobile Handsets Leading the World in Mobile TV.5 million units sold in 2008 and seeing sustained growth27. 2006. the majority of handsets now come equipped with built-in cameras. Moreover. and 5MP models have gained momentum. 27 Source: Gartner Says Worldwide Smartphone Sales Reached Its Lowest Growth Rate With 3. . Digital Imaging. Besides providing voice and messaging on a host of platforms from touch screens to keypads to styluses. Newer displays are also revolutionising the market with bigger. For example. music download application (Chaku-Uta Full®). NTT DOCOMO’s latest addition is the Solar Hybrid waterproof mobile phone. Gartner. including its personalised information service (i-concierTM). LG Korea has developed the world’s first 3GSM Watch Phone that integrates wireless technology into a miniature wearable phone at 49x39mm. music players. video players and internet browsers. Design and style are other areas where Asia Pacific manufacturers are pushing boundaries. brighter and more efficient screens that also consume less power26. approximately 75% of all handsets in Japan and 52% in South Korea included cameras: today’s figures are likely far greater. Manufacturers are also seeking ways to differentiate their offerings.42 Asia Pacific Mobile Observatory In developed markets. and Display Innovation. including appealing to the environmentally conscious. 2008.
Gartner. these manufacturers have been highly committed to research and development. are challenging the incumbents through their technically-advanced yet costcompetitive network equipment innovations. Telefonica in Spain. upcoming Asia Pacific vendors. Additionally. 29 Huawei statistics and news obtained from corporate website. Huawei is also a major contributor to LTE patents. 28 Source: Mobile Network Infrastructure Vendors Starting to Feel the Heat. Huawei has also recently achieved major wins in Singapore’s National Broadband Network. In August 2009. While global firms have been active in Asia Pacific for a long time. power amplifiers and consumption management to reduce power consumption by up to 60%. As a result. representing almost 12% of the total patents assigned by the European Telecommunications Standards Institute (ETSI). 31 Source: Gartner rates ZTE among the top 3 LTE vendors. ZTE has a range of base stations that utilise a multiple-density frequency approach to achieve power consumption reduction and smaller dimensioning. ZTE was named a ‘Top 3’ LTE network infrastructure vendor by Gartner31 based on its products and services.4 Network Infrastructure Innovation In an industry traditionally dominated by European and American companies. which has significant cost improvement and environmental impact. while Huawei offers a ‘Green Sites Solution’ using hardware. In addition. Recently. Huawei was also selected by Grameenphone in August 2009 to deploy solar powered Base Transceiver Stations in Bangladesh. For example. Sonaecom Portugal and a global master agreement for mobile broadband modems with Telenor Group29. deployment contracts with China Unicom. although arguably late entrants. with Huawei recently partnering with Optus to establish a mobile innovation centre in Sydney to investigate the acceleration of high-speed mobile and wireless broadband adoption. have helped these vendors carve out an increasingly larger share of the market. Huawei is ranked third in global market share in mobile network equipment and first in mobile broadband devices at 20 million shipments worldwide. particularly in China where mobile infrastructure spending is forecasted to be US$80bn over the next three years28. on the other hand. 2009. cost-competitive solutions are being deployed in telecom networks globally. market understanding and offering strategy. New wins around the world. 2008.2. China Mobile. and a global top 3 player for GSM base station suppliers30. Asia Pacific network vendors are being recognised globally for their growth and innovation. ZTE. Vodafone Germany is also collaborating with Huawei to conduct joint tests in investigating the performance of LTE in the Digital Dividend Band. Asian network equipment vendors – particularly China’s Huawei and ZTE – are making waves in the industry globally. ABI Research. The report cited ZTE as a strong player in the LTE industry with a quality product portfolio and a strong financial position which helps to maintain its R&D spending at 10% of revenues. is the largest provider of 3G mobile equipment in China. Huawei launched the first LTE mobile broadband internet connection for TeliaSonera in Norway. .43 5. 30 ZTE statistics and news obtained from corporate website. Their innovative. among other criteria. many Asian vendors are also driving innovation in optimising base station power consumption. Finally.
In a study by LIRNEasia on the role of ICT in the production and sale of agricultural produce in Sri Lanka. the researchers found that transaction costs make up as much as 15% of total costs.3 Emerging Market Innovations 5. and other trades-people at the BOP. co-ordination. with information costs contributing the majority. bargaining. In looking at the information costs associated with each step of the production chain (see Figure 31). monitoring.” . Examples of Service Innovations in Emerging Markets Figure 32 Figure 30: Examples of Service Innovation in Emerging Markets Initiatives TeleDoctor 1911 SMS Blood 7777 Citycell(1) HEAR Text2Teach Mobile Eco School PC for Schools Mobile Library *1677 Farmer Info Frontline SMS lffco Kisan Sanchar Market Lite Nong Xin Tong CellBazaar Mobile Money Initiative Leader Telenor Pakistan Dialog Citycell DiGi Globe Softbank Excelcom AIS Happy/DTAC NAMA(2) Bharti & IFFC(3) Reuters China Mobile Grameenphone GSMA. fisherman. In fact. press search Trade-related information (prices. such as Health. weather information for farmers) help to improve the capability and productivity of farmers. In these markets. Operators Description Ring 1911 to get medical advice at US$0. screening.3. people at the “bottom of the pyramid” (BOP) typically use their mobile device in vastly different ways from their neighbours in developed markets. it appears that there are many opportunities for mobile communications to reduce these costs.17 a minute Coordinate blood bank with SMS notification for emergency donor Offer medical help through data-powered laptops at remote outlets Help facilitates communication between ambulances and hospitals Help public schools access educational materials through mobile Promote environmental awareness and education on handsets Providing computing facilities and internet connections to schools Mobile mini libraries allow children to access reading content 24/7 news updates via on sms market trends and prices SMS field communications on maize and soybean prices Uses network to send agricultural information to >50m farmers Provides weather and price information for farmers on mobile Information provider for news. BOP consumers often rely on wireless connections as their only means of accessing these basic facilities. volumes. Trade Information and Commerce (see Figure 30).44 Asia Pacific Mobile Observatory 5. the services demanded by BOP consumers relate to practical applications that help resolve essential needs in their lives.1 Service Innovation As discussed in Chapter 3. Unlike users in the developed markets. Education. enforcement and facilitating a transaction. It also reduces their transaction costs relating to the cost of information in searching. deciding which [market] would offer the best price was sheer guesswork. operator websites. suppliers) and production-related information (e. A similar study of fishermen by Harvard economist Robert Jensen cites that “before mobile phones. Both transaction costs can be reduced when there is less information asymmetry – where timely and accurate information is made available. (2) Northwest Agricultural Marketing Association.g. and there is strong market demand for such services. whose lives are enriched by convenient mobile services. the researchers found that a 50% increase in the use of mobile and ICT can reduce information costs by as much as 33%. (3) Indian Farmers Fertilizer Cooperative Source: Operator provided data. weather and government policies Provides trading platform on a pay-as-you-use service Aims to provide personal banking services for the unconnected Health Education Trade Information Commerce (1) Hospital Emergency Ambulance Radio.
commerce is another area where mobile communications have revolutionised the industry. This service also provides regular market information about price. 2009. pesticides weedicides etc. one such information provider is the *1677 Farmer Information Superhighway hotline. In Thailand. and post information about their businesses. thus creating a new revenue stream. Again. pesticides weedicides if unavailable Harvesting. Grameenphone’s CellBazaar is one popular success story.000 DTAC customers have subscribed to the service since its launch in 200832. These initiatives are particularly impactful for mobile operators who are able to leverage on their strong brands and wide distribution networks to roll out these services. more than 180.45 Figure 33 Figure 31: Examples of “Cost of Information” Faced Examples of “Cost of Information” Faced Decision Visits to meet farmer association officials to decide on a crop Cost of phone calls to agriculture officers to information about the crops Seed Cost of finding information about a particular type of seed Cost of traveling to purchase seeds if the seeds were not available Land and Planting Cost of finding labour Costs finding machines to prepare the land Growing Cost of finding fertilizer. More than one million subscribers have accessed the service since 2006 and the site gets an average of 210 new postings and 34. 32 Lifting of advertisement ban urged to help stations survive. such as market trends and movements. trading platforms and markets have often sprung up to mitigate the buying and selling dilemma to enable better decision-making. at a spend of almost US$41 Source: LIRNEasia DDEC study To support this growing trend. At the end of the production chain. Bangkok Post. In Bangladesh. Packing. Riding on the success of this convenient method of personal banking.21% of cost of information (at US$0. a fast-developing market where text messaging is among the predominant means of communication. Mobile money first began with subscribers using airtime as a currency to transfer money between one another. In this aspect. Costs of traveling to purchase fertilizer. Of course. and where many of its 96 million people continue to live below the poverty line. by raising income levels and improving wealth distribution to people at the bottom of the pyramid. as well as by enabling real-time visibility over an entire market. this is an area where the transaction costs of information asymmetry are high. by allowing traders to make the decision on transport (and preventing sunk costs). it allows users to buy and sell goods and services through SMS. the benefits are far greater for BOP subscribers: evidence suggests that access to financial services has a positive impact on growth. This platform allows traders to find others. mobile money initiatives have emerged. WAP or the internet using their mobile phones. Other such services include the collaboration between Frontline SMS and Northwest Agricultural Marketing Association in Cambodia. . With the goal of assisting farmers to maximise crop yields and minimising costs. Mobile information can take this even further by reducing the costs of transport in travelling to these markets. which provides SMS updates on agricultural news. Another commercial aspect that has resonated with BOP subscribers is mobile money. service providers have introduced innovative offerings that act as an information intermediary. and arbitrage and waste often occurs as a result of insufficient communication. Market Lite by Reuters in India and Nong Xin Tong in China. which has reportedly more than 50 million subscribers today. enabling people to cash in their accounts and withdraw money where needed. crop prices and also production techniques. The GSMA Development Fund’s Mobile Money for the Unbanked initiative seeks to financially connect the world’s population living on less than US$2 with the goal of making the service available to 20 million previously unbanked customers by 2011 . quantity and suppliers on a pay-as-use basis. travelling incurs a higher cost. Mobile money in Asia Pacific has been led by Smart and Globe Telecom in the Philippines. Storing Cost of finding market prices Costs finding labour Cost of finding storage. Selling Cost of comparing prices of different traders Cost of finding transport All of which can be reduced through the use of mobile phones In the survey.35 a call) Comparatively.000 hits a day. packing materials etc. the cost of phone calls is only 0.
it becomes a mainstream mechanism where people truly believe that the system is credible. user-friendly (with minimal registration hassle). Figure 33: Perceptions of Mobile in the Philippines Perceptions of Mobile MoneyMoney in the Philippines Mobile operator. as well as faster processing speeds (see Figure 33). In fact. and caters to their informal banking needs. The rapid adoption of mobile money services rides on lower service charges. . the ‘unbanked’ Figure 34 often have savings of their own (for example. Savings Survey in the the Philippines Figure 32: Savings Survey inPhilippines Approach used to save 52% 2% Do not trust another to store 2% Do not know another place 3% Get satisfaction in counting 4% Get satisfaction in seeing the money 11 % Money stored in just in small amount 29% Safer 7% At home Family/ Friend/ HH member Village savings club 6% 0% Kept in the wallet Bank account 0% MM account Mobile savings offerings can be positioned as a safe way to save money. The programme Figure 35 has met huge success. as these traditional financial channels are often too expensive or do not meet their non-conventional needs. the average unbanked person in the Philippines has about US$34 in savings). and new initiatives rolled out to include Western Union in its list of partners that will enable cross-border remittances from the Philippines’ large overseas workforce. but do so almost entirely through informal mechanisms such as home savings or village savings clubs (See Figure 32). bank and mobile money awareness 88% 67% 56% 45% 64% What customers say when they talk about mobile money Cheaper service compared to other money charge transfer services Convenient/easy-because minimal requirements/personal info Convenient/easy-because numerous case-in/cash-out established Urban Bank Urban telco Rural bank Rural telco Mobile money Faster process of sending/ receiving money Safe/more reliable process of sending/receiving money Awareness of mobile money in the Philippines is higher than bank brand awareness and on par with mobile operator awareness Source: LIRNEasia DDEC study 48% 12% 2% 29% 8% When asked what they would say when recommending mobile money. but must address the importance the unbanked place on access savings quickly in case of emergency 49% Quicker to access in emergency Rationale for saving at home 35% Source: LIRNEasia DDEC study Operators in the Philippines are rolling out initiatives to meet the needs of these users through driving awareness and educating users on mobile money.46 Asia Pacific Mobile Observatory The people at the bottom of the pyramid frequently lack access to banking facilities. increased convenience. In particular. advocates highlighted the relative cost and speed 33 GSMA Development Fund: Mobile Money for the Unbanked Annual Report 2009. with almost 7 million subscribers to the Smart Money scheme. reduced requirements for private information. demand is driven by network externalities: with increasing user adoption.
On the other hand. These individuals. Second. facilitating this low-cost segment to top up only when needed. . Customers can either link their bank accounts to their True Money accounts.14 a week. Innovative new channel structures have been developed to reach consumers who had previously never been able to afford or gain access to telephone services. therefore. mobile phones are imported to large wholesale distributors who channel the devices to thousands of small electronic shops. Innovative Distribution Models. while Dialog Sri Lanka has a minimum reload of US$0. In India. Another powerful example of an innovative distribution model is Grameenphone’s Village Phone programme.000 new users added every month. True Money launched in Thailand three years ago and is available to banked and unbanked customers.2 Business Model Innovation Pre-paid Services. use them until they run out. in cash-driven societies. this ‘sachet pack’ mentality has operators allowing top-ups from as low as US$0. In countries like Indonesia and India.17 which enables low value but frequent purchases.47 In other parts of Asia Pacific. By the end of 2009. Additionally. often women who are referred to as ‘phone ladies’.6 million users of its e-Wallet service with 100. earning a steady income in the process. True expects to reach 10 million users. Operators and distributors in these countries have found success in building channel structures that allow them to focus on selling prepaid cards through a smaller number of powerful indirect channels who are able to distribute prepaid calling time to thousands of small (often family owned) shops. True Money customers can pay bills and purchase airtime through their phones. This is becoming increasingly common in other countries such as India where some villages are sharing a ‘community mobile phone’ in order to extend mobile services where telecoms infrastructure is lacking. In the Philippines. 5. users can top up their account by as little as 30 pesos (approximately US$0. The introduction of pre-paid services has been arguably the most impactful innovation in the industry. or even pay for goods and services in retail outlets by using an RFID device that sits next to their SIM card. giving them the flexibility to buy talking credits. or buy scratch cards to load money onto their phones. The result is a more cost-effective and manageable distribution model that greatly increases reach to people in rural areas. the de-coupling of mobile phones and prepaid SIM cards was an important aspect of the success of the distribution model. similar mobile money and mobile payment schemes have been launched to enable financial transactions through mobile. Operators have continued to adapt this model to serve the delicate purchasing habits and the little disposable income that people at the BOP have at any given time. Today. their payment secured by credit facilities. However. operators in Asia Pacific have had to innovate to implement new distribution models to ensure access to vastly rural and often remote lands in South and East Asia is economically viable. The pre-paid model has also lowered the cost base of operators by lowering the cost of bill issuance and collection. Pre-paid schemes. where selected individuals take a loan from Grameen Bank to buy a handset and subscription that comes with training on its operation. some operators offer per-minute denomination top-ups on customer accounts. Doing so has opened the market to a significant portion of the population that could not have conceived of mobile ownership under the post-paid model. post-paid services are often tied to long-term contracts. The post-paid model that is common in many developed countries works on a credit system where people utilise the services and pay after usage. then offer access to the mobile phone service to fellow villagers. as well as to top up their phone with additional credits as needed.3. The company has 5. suitable credit mechanisms hardly exist and people rarely have the means or the willingness to commit to long-term contracts. have fundamentally changed the way individuals buy mobile services.60).
Spice India has a low-cost handset retailing at US$14 made especially for the blind. reports suggested that India. As a result. 2009. without requiring significant CAPEX investments.3 Handset Innovation At the end of 2008. ‘Phone for the visually impaired’ is a simple voice-only phone which comes with a Braille keypad that announces the number dialled. security. Concurrently. which is a basic low-cost handset that comes without a display in order to reduce costs. As operators seek ways to make their operating model leaner in order to reduce costs and hence make services more affordable. priced around US$58 under its low cost line ‘Guru’. electricity ■ Deployment. As most markets in Asia Pacific are prepaid and do not have a subsidy model in place.48 Asia Pacific Mobile Observatory IT Outsourcing. However. Bharti has also outsourced the construction of its networks under a managed capacity scheme. To facilitate handset sharing more efficiently. where Bharti only pays for the capacity it needs. Other features include an FM radio. operators have also begun to cater to niche segments of this immense market. as well as saving 30% from outsourcing IT34. Outsourcing has been a key theme in India. Tower sharing also presents other benefits: in Indonesia. Bangladesh and Sri Lanka successfully reduced the total cost of ownership for a mobile consumer to US$5 a month. the government has mandated tower sharing to help new industry entrants to expand coverage across the archipelago. manufacturers have been active in driving handset innovation to make devices more affordable to the masses. Samsung recently launched a low-cost handset. with operators leading the efforts. the management of its mobile network to Nokia Siemens Networks and its customer care to IBM and a group of local firms. The Economist. which increased the affordability of a mobile service to consumers at the ‘bottom of the pyramid’ (BOP)35. This concept was pioneered by Bharti Airtel.3. where some operators outsource much of their IT and network operations. including switching CAPEX to OPEX. Pakistan. torchlight and a ‘Mobile Tracker’ that alerts phone users when the SIM card is changed. This phone retails at the same price as the ‘People Phone’. including: ■ Financial. who outsourced its IT operations entirely to IBM. Nokia Siemens Networks . 35 Source: Mobiles become more affordable in many. tower sharing was driven by the market. In other markets such as India. To accommodate consumers in areas where electricity supply is unstable. September 26. including enhanced viability of sites leading to better rural availability and better asset utilisation resulting in lower costs to the end customer ■ In markets such as China. some have found great success in outsourcing key parts of their value chain. some low-cost handsets are loaded with multiple contact folders. 34 Mobile Marvels: A Special Report on Telecoms in Emerging Markets. Tower Sharing. Tower sharing has brought about significant benefits. powered on solar energy that consumers can charge using sunlight. along with 10 speed dials. Bharti has reported saving 15% in operating expenses from outsourcing its network build and operations. low-cost handsets need not be featureless basic phones. Malaysia. Religious prayers and wallpapers are also included as a specialised feature of ‘Mobile Prayer’. For example. they are adapted to serve the needs of customers at the BOP. Instead. but not all countries. Another powerful innovation that is increasing availability while maintaining economic viability is tower sharing. 5. Chinese manufacturer ZTE has introduced a range of low-cost phones priced between US$23 – US$79 (see Figure 34). and Indonesia tower sharing is mandated or strongly encouraged by the government. or to send out an SOS message in an emergency. including gaining access to bottleneck sites in rural areas (where infrastructure is poor) and dense urban sites (where site availability can be a constraint) Regulatory. lower operating costs from site rental.
enable access. the mobile industry is spurring innovations in other industries as well. faster and more stylish handsets to users. finance. users can reach out to a host of other industries and to connect to the rest of the world. Because of its role as an enabler. This has brought better. entertainment. provide entertainment and increase productivity. or information transmission. community development. many mobile innovations have become integral to the lives of users only because of the impact on real life needs – whether in trade. networking. this highlights the mobile industry’s role as a facilitator and transmitter of information in society and how. as well as more efficient and cheaper infrastructure to network operators. by enabling access. Once again.49 Figure 34: Low Cost Handset Innovations ZTE’s A261 – low cost handset Spice – Phone for the visually impaired Samsung – Guru range This section has highlighted the innovations carried out in the mobile industry to create better products. These industries are taking advantage of the access that mobile services have provided. to innovate and to extend their services beyond traditional boundaries. . Yet in all the examples mentioned.
50 Asia Pacific Mobile Observatory 6. Corporate Sustainability: The Environmental and Social Impact .
This chapter completes the discussion of the mobile industry’s performance along “the triple bottom line” by reviewing its contribution to environmental sustainability and further discussing its social impact. Scientists and experts forecast that global emissions need to be stabilised by 2015 to prevent reaching potentially irreversible levels but targeted declines in emissions have yet to materialise36. job creation and government funding in Asia Pacific countries. China Mobile reports that in Jiangsu. NGOs and governments each have an important role to play. it is acting as a catalyst to enable emissions reductions in other sectors through the development of smart solutions enabled by mobile technologies. While the mobile industry does not belong among the “smoking chimney” industries that pose a major threat to the environment. utilising solar. Mobile operators in Asia have deep CSR commitment to the societies in which they operate and have made major contributions through essential initiatives often focused on health. 6. on Cheniushan Island in the Yellow Sea.1 The Environmental Impact of the Mobile Industry Mitigating climate change is an unprecedented challenge for the world: a challenge where consumers. This is being done in two ways: ■ ■ Improving the energy efficiency of the mobile industry Acting as a catalyst to enable emissions reductions in other sectors Improving the energy efficiency of the mobile industry Mobile operators and vendors are finding innovative ways to increase energy efficiency and reduce the greenhouse gas (GHG) emissions resulting from the operation of mobile networks as well as from the usage of mobile phones. education. 515 are powered by solar and wind energy and five are powered by alternative sources such as hydrogen (see Figure 35). 36 Vodafone 2009.” . Second. ■ ■ ■ In previous chapters we have shown that the mobile industry is a major contributor to economic development. Improving the industry’s energy efficiency is broadly done in four ways: ■ Designing low energy base station sites ■ Deploying base-stations powered by renewable energy ■ Implementing infrastructure optimisation and sharing ■ Reducing mobile device life cycle emissions through design and recycling The following are examples of such operator-led initiatives currently taking place in Asia Pacific: Mobile operators in Asia Pacific have been actively deploying Green Power technologies to power their base stations. companies. a base station powered by solar and wind energy generates enough energy to provide additional power for some of the island’s residents. wind and bio-fuels as alternative energy sources. 1. it is nonetheless taking an increasing role in mitigating the effects of climate change. Of these.51 Key Messages: ■ The mobile industry has steadily decreased its CO2e emissions per subscriber and is undertaking an increasing role in mitigating the effects of climate change in two ways: ■ First.135 sites across 25 provincial subsidiaries in 2008. and community development.615 are powered by solar energy. China Mobile has one of the world’s largest deployments of alternative energy-powered BTSs with 2. The mobile industry has had a profound impact on social development in Asia Pacific by connecting 2 billion people in Asia (the first phone connection for many of these people). “Carbon Connections: Quantifying mobile’s role in tackling climate change. it is improving the energy-efficiency within the mobile industry directly by deploying low-energy mobile networks (increasingly powered by alternative energy). implementing infrastructure optimisation and sharing initiatives and reducing mobile device life cycle emissions through design and recycling.
Dialog Telekom is piloting a green power trial in collaboration with the GSMA Development Fund with 10 hybrid renewable energy powered BTSs across the country. modernisation of the network. DiGi has declared an aggressive target of achieving 30% CO2 reduction by 2011. . including eight mission-critical backbone sites carrying up to 60% of Digicel’s traffic. and could be a major source of income for local copra producers. Through this project. Total = 2. DiGi expects significant investment in green-driven initiatives in the next three years. mobile operators in Asia Pacific have made significant inroads towards tackling climate change. Similarly. The benefits have extended beyond just a reduction in emissions to achieving cost savings and extending network coverage to areas where stable power supplies do not exist. As showcased. Given the volatility in global fuel prices.856 kg of lead that would have otherwise damaged the environment. a tower was run on pure coconut oil for over two months. and therefore. Digicel is working with the GSMA Development to assess and develop commercial scale rollouts of green power technology. If all goes well. with an additional donation of 49. more environmentally-friendly alternative. 100% of all the lead-acid batteries used in operations have been recycled. The multi-vendor trial is enabling Dialog and the GSMA to evaluate the effectiveness of the different technologies. 9. There are currently 24 live sites in the Digicel Vanuatu network running on green power. In a successful pilot. For example. to reduce its carbon footprint from 70 million tonnes in 2007. In Malaysia. Furthermore. Globe Philippines initiated its “Bantay Baterya” project in 2003 to manage the proper disposal of mobile waste through an accredited treatment and recycling facility. coconut oil is a cheaper. This contribution translates to 1. and community engagement. Finally.959 litres of sulphuric acid and 34. Other Green initiatives by operators in AP include programmes for mobile waste reduction. Digicel has experimented using coconut oil to power one of its cell sites.52 Asia Pacific Mobile Observatory Figure 38 Figure 35: China Mobile’s Alternative Energy BTS Deployment China Mobile Alternative Energy BTS Deployment (2008.794 kg of used batteries to Bantay Kalikasan. inspired by the booming local coconut oil industry. an island nation located in the South Pacific Ocean east of northern Australia. DiGi aims to be a pioneer in this area for the ICT industry by setting an addition reduction target of 50% in the next 3-4 years. carbon emissions.256 m3 of landfill space. In Vanuatu.135) Other 5 Solar & Wind 515 Solar 1. a local conservation group. including initiatives related to TRX swapping. In doing so. in Papua New Guinea. they have found new means for reducing power consumption. a similar move could be launched across other Pacific markets. handset recycling and carbon footprint reduction. The findings of the initial assessment shows that commercial scale implementation of green power solutions is viable for replacement of diesel generators. the mobile industry is acting as an enabler for driving carbon emission reductions across numerous industries through improved communication and remote monitoring technologies that reduce the need for physical travel.615 Source: China Mobile 2008 Annual Report In Sri Lanka.
This data is combined with other sources including GPS-equipped vehicles and journalistic or traffic incident data to produce extensive traffic information including current journey times. SMART won for its outstanding achievements in using alternative energy sources to power cell sites in off-grid locations. 68 sites in various parts of the country are powered by renewable energy. lowemissions buildings both for new and existing building stock ■ ■ Dematerialisation. A. Kearney global head of the firm’s Communications & High-Tech Practice. and electricity and gas metering Smart buildings which use mobile and other ICT technologies to deliver highly energy efficient. with the automated system. expected trip delays. incident cause and effect. current traffic speed. Of these. congestion management. intelligent routing and congestion indexes all of which could have considerable benefits for reducing emissions and increasing energy efficiency. onboard telematics to encourage eco-driving. sponsored by A. At present. and road pricing ■ Smart grids and smart meters solutions including electricity network monitoring. meter reading for utilities players has typically been an arduous.000 KMs of roads by analysing location data collected anonymously from mobile phones. Martin Sonnenschein.T. navigation and government markets. Smart solutions enabling energy efficiency through the use of mobile technology can be categorised into five types: ■ ■ Smart logistics solutions including fleet tracking systems and load optimisation Smart transportation solutions including synchronised traffic and notification systems. historic and predictive traffic flow information to the automotive. SMART’s program also benefits the environment as the CO2 emissions per litre of diesel are far higher than using the power grid. . routing and journey management optimisation.53 And the Winner is… At the 2009 Mobile World Congress in Barcelona. However. Next to these benefits. It also eliminates the risk of polluting waters. 41 are run by wind energy and 27 by a combination of wind and solar power. in order to improve efficiency in meter reading. inaccurate and expensive process. Given its vast infrastructure. enabling further reductions through the use of Machine-to-Machine (M2M) mobile technologies to deliver ‘smart solutions’. Huawei. The award recognises companies that employ new and innovative concepts and programs that promote environmental protection and sustainability. SMART is addressing a fundamental issue – both economically and environmentally – that operators in emerging countries are struggling with: how to power base stations in remote areas with diesel generators which tends to be very expensive. to Philippines-based SMART Communications. SMART is improving its cost efficiency while reducing environmental impact in a very seamless way. this impressive project makes mobile communication more widely available by enabling cell sites in off-grid locations.” Acting as a catalyst to enable emissions reductions in other sectors Beyond directly undertaking carbon reduction efforts. Optus recently launched Optus TrafficView.T. a national road traffic information service that monitors traffic conditions across 70. the GSMA presented the Green Mobile Award. and Hongdian. the substitution of high carbon products and activities with low carbon alternatives (substituting face-to-face meetings with video-conferencing) The following are examples of such ‘smart solutions’ enabled by mobile technologies which have begun to emerge across Asia Pacific: In Australia. the mobile industry is also acting as a catalyst for other sectors. CSG is now able to track end-users’ electricity usage in real-time. By using wind and solar energy to power base stations. as diesel is normally carried by pump boats from mainland to island sites. allowing it to accurately bill customers and optimise demand planning. In China. which uses 1 million remote monitoring devices. commented: “With its alternative power for cell sites program. Optus TrafficView uses a combination of 2G and 3G mobile data to deliver real-time. China Southern Power Grid (CSG) has installed an automated meter reading solution from China Mobile. Kearney.
medical file maintenance and other services online through the set-up of data device-enabled laptops at remote outlets. In chapter 4. new infrastructure investments. While the CSR agendas of mobile operators vary significantly from operator to operator and from country to country. case history transfer.000 students and 300 teachers annually. easier deployment. Globe Telecom is helping public elementary schools access educational materials through the ‘Text2Teach program’. improved data accuracy through automation. we will expand further on the social impact of the mobile industry by showcasing how mobile operators are positively contributing to the development of the societies they operate in through innovative corporate social responsibility (CSR) programmes. The mobile industry has an important role and high-impact opportunity to spread healthcare services across Asia Pacific through mobile health (m-health) services. reaching 6. and so forth. CSG can obtain real-time information to support remote troubleshooting and maintenance. Since 2000. a more reliable power network. we estimated the mobile industry’s direct and indirect contribution to public funding in AP17. maintenance and troubleshooting costs. and plans to actively measure the programme’s success through periodic testing of computer literacy. this programme has brought the internet to more than 800 schools across the country. pathological test views.2 The Social Impact of the Mobile Industry The mobile industry has had a profound impact on social development in Asia Pacific. by enabling learning through mobile devices (m-learning) and by increasing mobile and internet access for schools. In chapter 3. By connecting the communications module to additional equipment. There are a number of ways to evaluate the social impact of the mobile industry. In the Philippines. Excelcom launched a five-year ‘Computer for Schools’ programme in 2008. The mobile phones provided for the programme are pre-loaded with education videos on English. we highlighted how the proliferation of mobile services has improved the lives of individuals and met the specific needs of people across the region. Community development programmes. Health Initiatives by Mobile Operators High-quality and reliable healthcare is among society’s basic necessities that are lacking in some emerging countries in Asia Pacific. power lines and primary nodes). Citycell is revolutionising the way healthcare is delivered to the masses with the set-up of Televideo Health Services for farmers and the general public. The automated solution has provided to CSG significant benefits: reduced data collection. In this section. several themes consistently appear: ■ ■ ■ Education programmes. Math and Science subjects. The mobile industry typically contributes in two ways. This contribution enables governments in the region to underwrite socio-economic and national agenda priorities. Excelcom will provide training to teachers. particularly in remote or rural areas. 6. and considerable carbon reduction through automated meter reading and fault detection. Doctors at hospitals can offer consultancy and prescriptions. Globe has also pioneered the ‘Internet in Schools’ programme to connect children to the internet.54 Asia Pacific Mobile Observatory CSG is also using M2M technology to monitor other parts of its electricity network (substations. . where it targets to provide computing facilities and internet connections to 60 educational institutions and schools throughout Indonesia. Health programmes. upgraded healthcare facilities. be it improving education systems. In Indonesia. Education Initiatives by Mobile Operators The mobile industry improves and spreads education in Asia Pacific by facilitating access to information. and. In Bangladesh. such as cameras or monitoring equipment. communication and the world.
. if necessary. employees can take at least one additional paid leave day each year to volunteer with their favourite community organisation. Employee volunteering programmes: Vodafone Australia’s Employee Engagement Programme encourages its employees to be active in their communities but. DiGi has collaborated with the Ministry of Health since 2007 to expand existing radio communications between ambulances and hospitals to uncovered areas through the ‘Hospital Emergency Ambulance Radio (HEAR)’ programme. Such operator programmes range from disaster relief to employee volunteerism and to child protection. Additionally. While the initiatives and programmes showcased in this chapter are obviously not exhaustive.55 In Sri Lanka. Ordering additional images. Donors are then notified by SMS during emergency situations or when the national supply of their blood type is low. Child and senior citizen protection: In South Korea. with the potential to transform the mobile phone into a life-saving device. can be done immediately rather than requiring a repeat visit.. By installing radio equipment at high-altitude locations. by sending an SMS with their blood type. enabling two-way communications between ambulances and hospital in the surrounding areas. Individuals register as donors for this service. For example. They highlight the deep commitment that the mobile industry has towards acting sustainably and responsibly. employees can have the money they raise for charity matched by the Vodafone Australia Foundation on a dollar for dollar basis. mobile operators are actively leveraging their services and resources in the development and protection of their communities and citizens. Community Development Initiatives by Mobile Operators Finally. These initiatives also emphasise the pivotal role that the mobile industry plays in facilitating other industries’ environmental and social contributions. BreastScreen Victoria leverages Telstra’s Next G™ mobile broadband network to send digital mammogram files of about 40MB in size directly to an assessment clinic for review. BreastScreen Victoria’s Mobile Screening Services showcases the potential power of mobile broadband in providing high-quality health services beyond the clinic. unlike other companies. SK Telecom provides a location-based service which provides parents with information on the whereabouts of their children in order to prevent crime and ‘missing-child/elderly’ incidents. Dialog Telekom provides an important service in collaboration with the National Blood Transfusion Service to facilitate and coordinate more donors to add to the blood supply system. senior citizens or the disabled can notify hospitals in case of emergencies by pressing pre-specified buttons on their mobile handsets to send an SMS to patrons or emergency services. DiGi play a small but meaningful role in ensuring people in need of emergency assistance can receive help without delay. Disaster alleviation and relief: In collaboration with the Dialog University of Moratuwa Mobile Communications Research Laboratory and Microimage Ltd. DEWN has national significance. In Australia. For some rural clients. Additionally. they are representative of the comprehensive CSR programmes around the AP region. Parents are notified by SMS in cases where children are out of pre-defined safe areas. Dialog Telekom is developing a Disaster and Emergency Warning Network (DEWN) based on R&D undertaken after the 2004 Tsunami. its encouragement is backed by support from the company. In Malaysia. and measuring its success along the triple bottom line. called ‘SMS Blood (7777)’. this means not having to travel vast distances to attend a fixed screening site.
56 Asia Pacific Mobile Observatory 7. Regulatory Enablers to Spur Further Growth .
Incentives to drive universal access.57 Key Messages: ■ ■ Regulatory policies in Asia Pacific are key to drive sustained growth in the industry. not USFs Driving improvements to spectrum allocation 7.1 The Need for Transparent. These areas are: ■ ■ ■ ■ The need for a transparent. Forward-thinking regulators who view the mobile industry as a fundamental driver of the economy and society can continue to positively drive growth and draw further investment by enacting newer. opaque foreign ownership rules. Issues cited include a lack of transparency in decisionmaking. unclear (or lack of) industry development plans. and no information-rich country that is poor and underdeveloped. the level of transparency and predictability in the regulatory regime are clearly important decision criteria. Predictable and Consultative Regulatory Regimes Perhaps the most commonly stated concern that operators identified was the need for a transparent. . Kearney consultants and GSMA public policy specialists interviewed mobile operators from both emerging and developed markets in the region to assess the regional relevance and resulting impact of the different policy enablers. The role of regulators is. Mobile operators need to consider investing significant funds into the deployment of mobile broadband licences and infrastructure. governments and regulators in Asia Pacific have already seen some successful policy initiatives implemented in the past. to ensure that affordable access to telecommunication services is available for all. Mahathir Mohammed. predictable and consultative regulatory regime. Some operators have observed regulatory decisions that have altered the viability of business cases overnight.The need for a transparent. Telecommunications’ policy has a major impact on the development of the mobile industry and its ability to deliver affordable services. Transparency and predictability in the regulatory regime are necessary to attract investments. This chapter will focus on regulatory policy issues that have relevance across the Asia Pacific region and how governments and regulators can create an environment that allows the mobile industry to further innovate and create value for consumers. unfair practices that favour certain companies or technologies. In deciding where and how much to invest. progressive policies.Reducing ineffective taxation to drive penetration . Dr. . Former Prime Minister of Malaysia. predictable and consultative regulatory regime Reducing ineffective taxation to drive penetration Incentives to drive universal access. predictable and consultative regulatory regime . a joint team of A. reduce prices and also generate industry value. A consistent message from the interviews was that governments should focus on enabling progressive policy making in four areas. Decisions made by regulators or other policy-making bodies can potentially change the business case for long-term investment within short notice. not USFs . For this study. however. there is always more to do. Indeed. and the inability to enforce and enact contracts.T.Driving improvements to spectrum allocation Four key regulatory themes emerged that had cross-regional relevance in Asia Pacific: ■ Regulatory policy in these four areas can be an influential means to benefit consumers. once said that “It can be no accident that there is today no wealthy developed country that is information-poor.” Regulators are important actors in the mobile ecosystem. Progressive governments and regulators understand the benefit of a connected society and therefore the benefits of a thriving telecommunications industry. ultimately.
. opaque and ineffective legal practices and processes make it difficult to enforce business contracts (e.58 Asia Pacific Mobile Observatory Figure 39 The World Economic Forum (WEF) together with INSEAD evaluated and ranked the political and regulatory environment of countries around the world (including 22 countries in Asia Pacific) as part of the Networked Readiness Index published in their annual Global Information Technology Report (2008-09). The ranking considered factors such as: the effectiveness of law-making bodies. to Bangladesh and Timor-Leste that placed at the bottom of the ranking (130th and 134th respectively out of 134 countries) (see Figure 36). Singapore ranked atop the world in other related rankings including the Government prioritisation of the ICT industry and the importance of the ICT industry to the Government’s vision for the future. World Economic Forum The stability and predictability of the political and regulatory environment is important for the telecom industry for several reasons: ■ First. the WEF found that contract enforcement/dispute resolution in Bangladesh takes an average of 1440 days compared to 150 days in Singapore) with the risk being transferred to consumers. Figure 36: WEF Network Readiness Index: Political and Regulatory Ranking WEF Network Readiness Index:Political and Regulatory (Environment Sub-Index)Environment Ra Country Singapore Australia Hong Kong SAR New Zealand Japan Korea. transparency and industry inclusion in regulator decisions can stifle competition in the mobile industry and reduces the level of trust among stakeholders. The results for Asia Pacific ranged from Singapore and Australia placing 1st and 9th in the world respectively. the lack of consistency. Rep. Malaysia Taiwan China Thailand Vietnam India Sri Lanka Brunei Darussalam Indonesia Philippines Mongolia Pakistan Nepal Cambodia Bangladesh Timor-Leste Asia Pacific Rank (22 Countries) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Global Rank (134 Countries) 1 9 11 14 18 23 24 43 45 48 53 57 71 78 83 87 102 107 115 117 130 134 Source: Global Information Technology Report 2008-2009: Mobility in a Networked World. ICT-related laws and the speed and process to enforce contracts. Second.g. ■ ■ Third. uncertainty in the regulatory regime and lack of a clear long-term path for the industry’s development increases the risk profile and worsens the overall investment climate.
unlimited Figure 40 use plans.2 Reducing Ineffective Taxation to Drive Penetration If mobile telecommunications is an important engine for economic growth. However. the proposal met with widespread opposition from consumers.3% tax on usage charges (reduced from 12. Telecom-specific taxes raise entry barriers. effectively pushing mobile access beyond reach for the customers who need mobile access the most – those sitting at the bottom of the pyramid. However. there was intense debate and even public uproar when the parliament in Manila announced it was planning on implementing an excise tax of five-centavo on every SMS sent. Nation Building Tax (3%) 10% Handset import duty 3% usage levy 18% handset import duty India Pakistan Sri Lanka Cambodia Indonesia Source: Interviews with regulatory bodies. in addition to these taxes. In the Philippines. Encouraging adoption of mobile services will only be possible through lowering prices and breaking down entry barriers for endcustomers – taxation will be an important lever to consider in overall telecoms policy. in an attempt to raise funds to close the budget deficit. industry groups and operators as it was most likely to hurt the poor the most. all of these factors reduce industry investments. As each of the 70 million subscribers send between 10-12 text messages a day. drive prices higher and thus negatively impact affordability. service taxes. the barriers to growth in mobile (and mobile broadband) are 1) affordability. where the cost of providing services is higher and the per capita income is significantly lower. continuing to stimulate growth will require further liberalisation and reform to telecoms policy in many countries in Asia Pacific. many countries in Asia Pacific have telecom-specific taxes that directly hit end customers (see Figure 37). spectrum usage charges. the proposed excise tax could raise over half a billion dollars.002 per SMS (introduced in 2009-10 Budget) 33% tax on handset imports 10% tax for Mobile Subscriber Levy Additional taxes like Environment Conservation Levy (2%). inclusive and consultative process drawing inputs and feedback from all industry stakeholders ■ Regulatory policy should have its foundations based on sound and efficient laws that enable timely contract enforcement.T.24% tax on usage charges 13% tax on handset imports $1. governments and regulators should adopt the following principles and practices: ■ Major regulatory decisions (such as spectrum issuance and licensing frameworks) should be made in a transparent. adequate appeal processes and effective implementation procedures Regulatory frameworks should be clear and long-term in nature as well as neutral both from a technology standpoint and a company standpoint (incumbents vs. Mobile operators already face a slew of charges like licence fees. regulator websites. A main driver for reform is that growth in teledensity will now come from growth in rural areas.63 tax on SIMs 12. new-entrants) ■ 7. 2) availability and 3) content and services. as 92% of the text messaging traffic was generated through cut price.5% in Feb 2009) $3 tax on handset imports $3 tax for activation $0. etc. USO.10 tax on usage $0. Kearney analysis . As discussed earlier. constrain competition and ultimately weaken affordable access for consumers. GST.36 tax on SIMs 10. In order to ensure a thriving telecoms sector that maximises benefits for society.59 Ultimately. A. Examples of Telecom-specific Taxes in Asia Pacific Figure 37: Examples of Telecom-specific Taxes in Asia Pacific Country Bangladesh Examples of Telecom-Specific Taxes (not exhaustive) 12% duty on handsets (decreased from 25% in 2009/10 budget) $11.
At least seven countries in Asia Pacific currently have USF operator levies in place.50% 1. regulators and citizens as well as mobile operators and the larger mobile industry as a whole. This is a shared vision across governments. This implies that either operator levies are higher than required or an effective funds distribution strategy does not exist. Not USFs Universal Access regimes have a formidable vision: to spread access to communication to all citizens. Though mobile operators contributed approximated one third of USF monies. less than 5% of distributed funds have been have given to mobile operators. redistributed as one-time subsidies in auctions to interested operators in order to fill the ‘financial gap’ required to make rollouts commercially viable. The levy is approximately equal to 2% of the sector’s total gross turnover according to the regulator.7 billion of funds collected from operators are sitting unutilised in government coffers. 7. which includes the following services: international calls. Figure 38: USF Operator Levies in Asia Pacific India Thailand Malaysia1 Nepal Mongolia Pakistan Indonesia 0% 1% 1. . USFs have been unfairly and unevenly distributed to fixed-line operators rather than mobile operators. Moreover. the impact of these funds is limited for several reasons. However it appears to be higher than this on mobile operators.00% Figure 42 USF Operator Levies in Asia Pacific 5. meaning that over US$3.38 billion) have been distributed. most of the monies (74%) that have been collected through USFs have not been distributed (see Figure 40). First. Second. in some countries such as India mobile operators are entirely barred from receiving funds. freephone service. cellular mobile.60 Asia Pacific Mobile Observatory Governments should focus on removing telecom-specific taxes completely as well as reducing consumer/ indirect taxes and corporate taxes (or offering tax breaks and subsidies) over time.00% 2. the means to achieve this vision are disputable. Regulators in many emerging countries have instituted Universal Service Funds (USF) in order to ‘subsidise’ increased universal access. IP telephony. with India (5%) and Thailand (4%) amongst the highest in the world (see Figure 38). in theory. However. international roaming. Regulator websites. Governments can be reassured that the loss in taxation revenues will be more than offset by the net positive effect of increased mobile penetration and usage on government tax receipts. call termination service for foreign service providers. USFs typically work on a ‘pay or play’ model where levies are collected from operators (mostly as a percentage of adjusted gross revenues) and are. Source: GSM Association Universal Access Report.3 Incentives to Drive Universal Access. leased lines.00% Note: (1) Malaysia’s USPF levies 6% of operator “weighted net revenues”. other activities subject to an individual or class license.00% 4.25% 2% 3% 4% Percentage of Adjusted Gross Revenues 5% 6% 2. ISDN. Operator interviews However. A review of India’s USF reported activities in 2009 shows that only 31% of the total funds collected since 2003 (US$5. MCMC.00% 2. according to a 2007 study commissioned by the GSMA that reviewed USFs in 15 developing countries.
especially among those at the BOP. targets.61 Figure 43 Fourth. Governments and regulators are urged to consider the following recommendations: ■ USFs should have clear goals. Even successful USFs should be short-term solutions and should be reduced and phased out as markets reach full coverage and penetration. Malaysia. For example. ■ ■ USFs could be spent on infrastructure that could be shared among multiple players (such as towers and backhaul) to achieve greater efficiency of funds. Peru. . timelines and processes for both the collection and distribution of funds to ensure the transparency and measurement. for example. the allocation strategy that is heavily biased towards fixed communication technologies. has a 2% levy in and yet its population coverage (92%) and mobile penetration rates (92%) have grown over the past decade to be amongst the highest in Asia Pacific (though not as a result of the USF). governments and regulators can positively influence penetration by reducing telecom-specific taxes which hamper mobile take-up. to increase coverage.20 Mobile Other 34% Fixed-Line USF Performance in India2 (2009. ■ ■ Funds collected by USFs should be distributed in open and consultative process involving industry stakeholders. Vietnam Source: GSM Association Universal Access Report Lessons Learned for USFs in Asia Pacific The failure of USFs in Asia Pacific and around the world begs the questions of how governments and regulators should reform their USFs and what should be done with funds already collected but not yet distributed. in the Philippines. regulators could introduce innovative licensing frameworks to attach coverage requirements for underserved areas to new coveted spectrum/licenses issuing. Colombia. does not Figure 39: Performance of Universal Service Funds Performance of Universal Service Funds USFs in 15 Developed Countries1 (2007. As previously discussed. regulators combined Metro Manila licences with licences for less-coveted regional territories to incentivise operators to expand coverage across the entire country.62 5% 3% Only 31% of Funds collected have been utilized 66% 1. Incentives to Drive Increased Coverage and Penetration Beyond USFs. South Africa. US$ Billion) 6. Second. Guatemala. Brazil. Indonesia. India. Total India USF Only 26% of Funds collected have been utilized 1. governments should aim to increase the penetration rate among citizens who are already covered by mobile services (thus reducing the gap between population coverage and penetration). USF allocation policy should be on a least-cost technology basis that drives the highest population connectivity at the lowest cost (often mobile communications). Dominican Republic. meet the principle of universal access (spreading communication for all) since deploying fixed-line is more expensive and more time-consuming than mobile technologies.45 93% Collected Distributed Collected (2) Breakdown of mobile and fixed-line not available Source: India Department of Telecommunications Distributed (1) USF in Bolivia. Pakistan.38 Third. Malaysia. Uganda. USFs should be reviewed on a regular basis and should be removed upon the achievement of the original goals. USF policies have not adapted to market developments. US$ Billion) 5. Nicaragua. Chile.
has been internationally allocated by ITU Radio Regulations and most countries have either already allocated this band for mobile or are currently in the process of assessing it. Countries which have awarded spectrum for UMTS/HSPA predominantly use the 2100MHz band. and ultimately. Indonesia) or are planned to be issued by end of 2009/early 2010 (India. In most developed markets. Thailand). governments should provide mobile operators with UHF spectrum which will reduce rollout costs. Allocation of UHF spectrum to mobile should be the next step towards achieving mobile broadband for all. Telstra has been able to achieve a staggering 99% population coverage (in one of the world’s most sparsely-populated geographies) for mobile broadband using HSPA+ technology and attributes much of the success to deploying its network in the 850MHz spectrum frequency band37. The 2600MHz band is expected to become a capacity band for LTE. the mobile industry needs allocation of internationally harmonised frequency bands and implementation of internationally harmonised band plans. fair and transparent spectrum allocation processes Access to the Right Spectrum The ‘type’ of spectrum issued – or the frequency band where the spectrum is allocated – greatly affects mobile operators’ ability to achieve ubiquitous population coverage in a cost-effective manner. To enable take-up in rural areas and among citizens with lower income. To provide the desired mobile services at the lowest possible cost and to allow consumers to use the widest selection and lowest possible cost handsets. Australia is one example of the benefit of access to coverage spectrum. The 1800MHz capacity bands is currently most utilised though some countries use 1900MHz band for GSM. However. the 700MHz band (698-806MHz) is most likely to be the harmonised solution for mobile in the UHF band. The 2600MHz band. Estimates carried out by SCF Associates shows that the cost of providing mobile broadband using the 700/800MHz band is approximately 70 percent lower than providing the services based on 2100MHz band. In such markets. particularly in rural areas. a relatively new capacity band often referred to as the ‘3G extension band’. 3G spectrum licences have been available in the market for a number of years already. sufficient spectrum must be allocated to the industry. spectrum allocation ultimately impacts how many people will gain access. GSMA Case Study Series. As shown in previous chapters. . the take-up of 3G and mobile broadband (HSPA and EV-DO) and the corresponding rapid increase in data usage is putting pressure on the bandwidth available for operators to meet the needs of customers. Broadly speaking. In most countries in Asia Pacific. the 850MHz band is used as a coverage band for HSPA. mobile technologies are the primary sources of communication for much of the population in Asia Pacific and mobile broadband is expected to be the critical technology that will finally bridge the digital divide and connect the unconnected across the region. The mobile industry must have access to internationally harmonised coverage bands and internationally harmonised capacity bands and each operator depends upon the right mix of coverage and capacity bands. reduce prices to consumers. The coverage band used in most countries currently is the 900MHz band for GSM and. The licensing and spectrum landscape across Asia Pacific to a certain extent differs along the lines of emerging and developed economies. for ubiquitous and seamless mobile communication and broadband to exist. Telstra estimates that an HSPA BTS using the 850MHz band can achieve four times more coverage than the same BTS using the 2100MHz band (the 3G standard in much of Europe and Asia). there are four key factors related to spectrum management and its impact on the mobile industry’s ability to deliver affordable and high-quality access and services to consumers: ■ ■ ■ ■ Access to the right ‘type’ of spectrum and to a right combination of frequency bands Access to sufficient spectrum Spectrum pricing Efficient.62 Asia Pacific Mobile Observatory 7.4 Driving Improvements in Spectrum Allocation Spectrum management is among the most important issues for the telecoms industry globally. 37 Telstra Case Study: Stretching the Boundaries of Mobile Broadband. In emerging markets. in some countries. where 3G licences have recently been issued (China. October 2008. Spectrum is a valuable and limited social ‘asset’ – effectively a scarce natural resource – that governments control and need to best utilise to maximise economic and social benefits for their citizens.
and users begin to experience the true power of an ‘always connected’ experience. however. an unprecedented amount of spectrum is expected to become available – this phenomenon is commonly referred to as the digital dividend. These policies hamper network roll-out and the development of mobile services and thereby reduce the mobile sector’s contribution to GDP growth. a seemingly reasonable demand given the widespread economic and social benefits that can be generated from it. for example. It is instrumental in achieving costeffective roll-out of networks and drives service up-take.63 International harmonisation of frequency bands has many benefits. It is flawed to assume that governments would be maximising societal welfare by reducing supply and driving up price per MHz for spectrum. . China. The unintended consequence of this phenomenon is that either operators will opt for offering very poor-quality services because their network load will be far over capacity. Access to Sufficient Spectrum The amount of spectrum issued to mobile operators determines their ability to deliver high-quality services to consumers and manage the bandwidth required to handle increasing traffic volume from the uptake of mobile internet services. In densely populated regions (like in many Asia Pacific countries) it is feasible that even one 5MHz block reserved for voice services could suffer capacity constraints due to network congestion. for other purposes are looking into allocating UHF spectrum to mobile. Spectrum Pricing The demand for. positioning the market to deliver greater takeup and usage and therefore. as mobile broadband take-up increases. The GSM Association is seeking 25% of digital dividend spectrum (at least 100 MHz of the 400 MHz expected to become available). governments could find themselves even eroding their net licence fees if they restrict the amount of bandwidth released. If this happens. this is a narrow and short-term view. recently issued operators two blocks of 15MHz (minimum). Harmonisation of frequency bands is especially important for emerging economies where affordability is the greatest barrier for access as it can drive the down rollout costs and consumer pricing. In contrast. 2x10MHz will likely prove to be insufficient and larger blocks per operator will be required to meet consumer demands. The short-term goals of maximising revenue from a public good for governments desperately seeking a means of reducing their budget deficits are actually harmful to society. It is absolutely essential that sufficient harmonised UHF spectrum is re-allocated to the mobile technology for the industry to continue to deliver high-quality services (mobile broadband. neither outcome meets the needs of consumers. and limited supply of spectrum may sometimes tempt governments to drive spectrum prices high under the guise of maximising public good. India and Pakistan) which have previously used the same spectrum. especially during peak times. Australia) and some emerging markets (Malaysia). LTE developments emerge. the upcoming 3G auction in India will issue only one 5MHz spectrum block to each operator. even though the price per MHz is kept high. In fact. There are also significant economies of scale in the production of radio equipment and handsets as harmonisation of technical specifications can result in up to 50% reduction in the cost of terminal manufacturing. The issue with this strategy is that operators typically will reserve an entire 5MHz block for the provision of voice services alone. The mobile industry argues that the promise of LTE can only be achieved if sufficient digital dividend spectrum is allocated to the industry. As the transition from terrestrial to digital TV looms on the horizon for developed markets (Singapore. Regardless. the value of spectrum to society cannot be measured in terms of price per MHz because the real value comes through welfare improvements stemming from using the available spectrum to deliver mobile services. the minimum amount of spectrum licensed to operators has been 2 blocks of 10MHz (2X10) though in many markets licenses of 2X15Mhz of 2100MHz spectrum exist. in particular). In most markets. However. the UHF band. Most importantly. or operators will be enticed into reluctantly pricing their 3G and mobile broadband services such that only a very small portion of the population will be able to afford them. It also reduces harmful cross-border interference and helps facilitate international roaming. greater benefits for the economy and society as a whole. At the same time some countries in Asia (e.g. providing mobile internet services to the broader population is unlikely to occur.
For example. reduce the impact and value derived from the spectrum. and spectrally-efficient solutions. Implementing policies with the aim of ensuring one player (typically the state-owned incumbent) is given the advantage of going to market well before others. India’s telecom regulator had earlier recommended a reserve price of US$250 million per licence. the industry makes considerable contributions to the social development of a country and its people. Government policies should also be fair to all industry players. this gives them an undue competitive first-mover advantage. For example. Thailand is now the last remaining country in the ASEAN group without 3G services (Vietnam and Laos finally received licences in 2009) as policies presented by the National Telecommunications Commission (NTC) face strong opposition from labour unions at the two state telecoms enterprises. the likely consequence of this action is that rural deployment of 3G services will be hampered. Unreasonably high and irrational spectrum prices will ultimately be passed on to consumers which will inhibit penetration growth and ultimately. it should be focused on how to maximise the overall economic and social returns from spectrum. in Thailand the state-owned operator is the only 2100MHz licensee while other players in the market have not yet been given the opportunity to compete for 2100MHz spectrum. and allowing the deployment of internationally harmonised spectrum plans). governments should relax restrictions on the specific technology to be deployed so that. similar cases have been seen in other countries. for example. It should be noted that India is not the only nation in the world to grant such advantages to their incumbent. While it is understood that India’s Department of Telecommunication hopes to raise US$5 billion in proceeds from this auction to help close the government’s large fiscal deficit. a GSM operator can consider using its current spectrum for upgrading to third generation technology (UMTS/HSPA) or even fourth generation technology (LTE). up from US$414 million. there is a strong correlation between mobile and broadband penetration and economic growth. Though these incumbents will still be required to pay for the licence and spectrum (at the highest price resulting from pending regulation). For example in the upcoming Indian 3G licence auction. in India 3G licences and spectrum were awarded directly to incumbents in mid-2008 well before any competitors were allowed to compete for licences or spectrum.64 Asia Pacific Mobile Observatory The theory states that when an operator purchases spectrum. Furthermore. . Government policies should aim to develop a technology neutral environment (while ensuring interference is managed. a ministerial panel nearly doubled the reserve price for national coverage spectrum to US$722 million. Also. technology neutral. One might consider this as allowing operators to follow a natural upgrade path. fair and transparent manner to keep participant costs low and deliver usage benefits to citizens as quickly as possible. There have been several examples in Asia Pacific where the spectrum award procedure has been unclear and thus inefficient. the costs can be considered as “sunk”. and ensure that they are using the most cost-effective. However. in the real world mobile operators treat the price of spectrum as a true (recoverable) cost in their business cases which then leads them to reduce other costs such as CAPEX needed to roll out networks and/or to increase prices. Spectrum award procedures Governments should design and implement spectrum award procedures in an efficient. Lack of clarity around the spectrum award procedures can send mixed (and even negative) signals about the investment climate in a country. To facilitate innovation and a smooth technology development curve. Instead. the Bangladeshi government has been discussing award of the 2100MHz band for several years without reaching firm conclusions or even starting the process for designing and implementing the award. For example. As discussed in earlier chapters. Public discourse related to maximising public good from spectrum should not be focused on how much money can be generated for public funds. does not create a level playing field.
As countries across Asia Pacific begin to consider re-farming (by either relaxing GSM-only restrictions allowing deployment of UMTS. regulators have invited mobile industry players to comment on the future use of the UHF band and have given the industry the opportunity to express their preferences on which bands to allocate and which harmonisation measures are preferred (band plans). Investments in spectrum have long lead-times and thus require a high degree of certainty. In Indonesia. While this is a good example of how not to run a transparent. publishing a spectrum allocation and award roadmap of both the coverage bands (700. . Indonesian government awarded separate licences to Indosat. These consultation processes are taking place well in advance of spectrum issuing and are inclusive of all stakeholders. priced to achieve maximum benefits for the economy and society as a whole. GSM only) or potentially relaxing technology restrictions. ■ ■ The Indonesian market has learnt a great deal from its own unclear spectrum allocation process in the past. efficient tendering process the learning has been good for the regulator. Governments should realise that there are many ways to promote investment and attract bidders. in India. and preparations should include public consultations with market players. Australia has recently embarked on a major consultation process regarding the revision of its spectrum management policies in advance of pending licence expiry (in 2013 the HSPA and 2G expiry on 850MHz/1800MHz. 2100 and 2600 MHz bands) Publicly committing to and actually implementing international harmonised band plans Clarifying the key technical and operational terms and conditions such as potential technology restrictions (e. Similarly. New Zealand recently carried out a major public consultation on the future use of the UHF band when analogue shut-off of broadcasting is accomplished in a few years from now (deadline for responses was end September 2009 and the consultation process included both options for written responses and participation in public meetings set up by the relevant government branches). in 2015 the 2G expiry on 1800MHz.65 Finally. as the initial process of awarding the first two licences had been ‘unfair’. no services and no business. The objective of providing voice connections and internet access to all citizens cannot happen without ensuring the mobile industry receives sufficient amount of spectrum and the right combinations of coverage and capacity bands. HSPA and LTE in the “GSM bands”. The first tender had resulted in two winners (Cyber Access Communications and Natrindo Telepon Selular) and neither player was even capable of rolling out a 3G network. Also. In September 2005. regulators are strongly encouraged to adopt the recommendations made above to allocate sufficient spectrum in the right frequency bands. 3G licenses were awarded twice: the first time was in July 2003 and the second time in January 2006. In February 2006. spectrum is fundamentally important for the success of the mobile industry. no spectrum means no networks. The Chief Economics Minister went on record to say the government would repeat the tender for 3G licences. for a large profit.g. Some good examples have already begun emerging. Spectrum is considered a vital factor for the mobile industry’s ability to truly deliver affordable services to all. 1900 if US band plan adopted. Both players quickly sold the majority of their stakes to foreign investors. the regulator (DGPT) ‘encouraged’ CAC and Natrindo to each hand back 5MHz of 3G spectrum frequency for reallocation in a re-tendering process that would involve the country’s leading telecom operators. 800. Excelcomindo and Telkomsel and subsequently halved the 3G spectrum allocated to Natrindo and Hutchinson (formerly CAC) to create a “level playing field”. In economic terms it is an essential input. preparing for spectrum awards and implementing and accomplishing award procedures should be carried out transparently.g. As such. like: ■ ■ Clarifying the regulatory framework Clarifying future spectrum availability. Clearly. that has since run efficient auctions for spectrum allocation (the latest being the WiMax auction in July 2009). e. and in 2017 the 3G expiry on 2100MHz). or by re-planning the use of UHF band previously used for terrestrial broadcasting and various public services) the principles of transparency and public consultations will become increasingly important. in an open and fair award process. 850 and 900 MHz bands) and the capacity bands (1800.
Informa.22% 3. calculated using a multiplier of 1.5% 2. TIA.38% 3.890 Induced Employment (’Multiplier’ Effect)2 Indirect Employment1 Related Industries Employment Mobile Operator Employment 900 800 700 600 500 400 300 200 100 0 CHN IND JPN INA VIE THA KOR PHI PAK MAS BAN TPE AUS SRI SIN HKG NZL 347 288 277 259 244 205 730 653 156 114 106 42 40 37 19 (1) Indirect Employment from Support Services Companies and employment generated from taxes paid (2) Indirect employment generated from spend of direct / indirect employees.78% 2.900 3.73% 2.73% 2. 2008) 3. IDC. 2008) 3.T.06% 2. Kearney Analysis .T. Frost & Sullivan.5% SIN JPN MAS VIE KOR BAN IND HKG AUS CHN TPE THA NZL PHI PAK SRI INA Figure 45 Source: Wireless Intelligence.70% 2.0% 3. Merrill Lynch.40% 2.40% 2.21% 2.0% 0.28% Productivity / Demand-side Impact Multiplier Effect Related Industries Mobile Operators 2. Frost & Sullivan. Telenor.74% 2. Telenor.700 2. PWC. IDC.14% 2.01% 2. Appendix: Country-Level Economic Contribution Estimates in AP17 Figure 44 Mobile Contribution Value Add Ecosystem Value Add in AP17 by Country Figure 40: Mobile Ecosystem Value Add in AP17 (by Country) (Value Add as % of GDP.25% 2.5% 3.5 Source: Wireless Intelligence.800 3.66 Asia Pacific Mobile Observatory 8.0% 2. Kearney Analysis Contribution to Employment by the Mobile Ecosystem in AP17 Employment Created Figure 41: Mobile Ecosystem Contribution to Employment (by Country) (‘000 of Employees. Merrill Lynch. PWC.5% 1. Ovum.706 2. A. A. Ovum.01% 1.46% 3. TIA.
PWC.0 2.6 0.T.5 1.2 4 2 0 CHN JPN IND KOR AUS INA MAS PAK THA TPE PHI VIE BAN NZL SIN HKG SRI 3. IDC.7 1.3 Source: Wireless Intelligence.2 4.67 Figure 46 (US$bn) AP17: Mobile Industry Contribution to Public Funding by Country Public Funding Contribution Figure 42: Mobile Ecosystem Contribution to Public Funding in AP17 (by Country) Regulatory fees 36 35.0 1. Merrill Lynch. Informa.6 1.8 0.8 Indirect taxes Income tax of employees Social Security Tax 20 16 Corporation tax 16. Frost & Sullivan. TIA.4 0. Telenor.6 0.4 23.2 12 8 6 7.0 0. Kearney Analysis . Ovum.8 1. A.
A. cable and satellite operators as well as vendors on their most important strategic and operational challenges. A.T. The GSMA represents the interests of the worldwide mobile communications industry. we have been trusted advisors on CEO-agenda issues to the world’s leading corporations across all major industries. Internet companies. tailored solutions and a collaborative working style to help clients achieve sustainable results. including handset makers. Spanning 219 countries.T. About the Authors The inaugural Asian Pacific Mobile Observatory was a joint research study between the GSMA. Any questions on the content of this document can be directed to the authors of the study.menon@atkearney. incubating and creating new opportunities for its membership. Project Manager A. Consultant . Ltd. Director of Spectrum Policy Richard Cockle.T. Kearney and Wireless Intelligence.org Kristin Due Hauge. London EC4A 3BF www.com Roi Ross.T. The GSMA is focused on innovating.atkearney.68 Asia Pacific Mobile Observatory 9. 438 Alexandra Road #05-03 Alexandra Point Singapore 119958 www. the GSMA unites nearly 800 of the world’s mobile operators. all with the end goal of driving the growth of the mobile communications industry. software companies. as well as more than 200 companies in the broader mobile ecosystem. Principal naveen. The GSM Association (GSMA) is the operator-led trade association representing the global mobile industry. 7th Floor. Kearney Pte. Since 1926. and media and entertainment organisations. Consultant Janice Tan. equipment providers.com Authors: Naveen Menon. Kearney’s offices are located in major business centres in 36 countries. Kearney is a global management consulting firm that uses strategic insight. mobile. The firm’s telecoms practice works with the senior management teams of fixed line.gsmworld. Head of Regulatory Policy adenton@gsm. A.com Authors: Adam Denton. 5 New Street Square.
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