Asia-Pacific: incumbents fight back

Nathan Burley, Analyst

Nathan Burley claims that incumbents in Asia-Pacific are fighting back across the region as mobile and broadband revenue growth continues.

In 2007, many incumbents in developed markets in Asia-Pacific out-performed their market in certain areas. Market share losses have been reversed as incumbents come to grips with competition and learn to leverage differentiators.

Incumbent strategies are increasingly defined by leveraging services, content, sales and customer relationships across all platforms and technologies.

Most operators have moved away from technology-defined business units (mobile, fixed, broadband) to customer-focused segments (consumer, enterprise) - independent of access technology.

Continued growth in core mobile and broadband products aided incumbents. After falling in 2006, growth in both broadband revenues and mobile connections & revenues increased in 2007. Contrary to common expectation, there is no slow-down, even as the markets mature and penetration increases.

In mobile, multiple connections and wireless broadband are significant drivers. Mobile data provides further potential for operators with growth increasing in multimedia services, content, data and wireless broadband. Data revenues are aided by improvements in devices, pricing, services, user awareness and 3G migration, which is gathering pace across the region. 3G is dominating net additions in developed markets while 2G connections are now declining.

In 2007, broadband and data revenues growth compensated for the fall in public switched telephone network revenues. In previous years, average broadband and data revenue growth did not fill the gap created by the decline in fixed voice revenues. The result is attributable to improved broadband and fixed voice performance.

Although broadband revenue growth increased, the impact of broadband upgrades was not as significant as operators had hoped. Traffic and speed requirements are growing and users are upgrading to faster speeds (ADSL 2+, VDSL and FTTx), often without paying more (ARPU is relatively flat).

Numerous FTTx deployments are now occurring as operators invest for the future. As the market matures, reducing churn is increasingly important. Incumbents are achieving this through bundling and by differentiating on value-added services and content. However, finding effective differentiators is increasingly difficult!

The inevitable decline in fixed voice continues, but not at a chaotic rate. After three years of slowing, the average decline in fixed voice access lines increased marginally to 3% in 2007. Average fixed voice revenue decline was marginally less than access decline, with initiatives such as subscription-based pricing, bundling and loss of low-ARPU users (due to fixed-to-mobile substitution) holding up ARPU. We expect single-digit declines in access and revenue going forward.

Nathan Burley is an analyst in the Asia-Pacific research team. Nathan focuses on the Asia-Pacific wireless industry, specialising in wireless broadband access technologies and services, and 3G migration.