APAC Carrier Consolidation: Red Alert!

SINGAPORE -- CommunicAsia 2009 -- It started as rumor, became a whisper, and has now been upgraded to a near audible roar: Consolidation amongst Asia/Pacific's mobile operators is on its way, and could be coming to a market near you very soon. (See Asia Minnows Face Cash Crunch .)

Speaking here in Singapore, Walid Irshaid, president and CEO at Pakistan Telecommunication Co. Ltd. (PTCL), says consolidation in Pakistan -- where there are currently five mobile carriers "mostly operating in the red" -- is distinctly possible.

Rahadian Krishna Sundara -- head of Business Research at incumbent carrier PT Telekomunikasi Indonesia Tbk. (Telkom) , which owns mobile operator PT Telekomunikasi Selular (Telkomsel) -- is much more certain about impending merger and acquisition activity. He expects the current 11 players in his market to fall to five or six relatively quickly.

What Sundara describes as a two-year "bloody" price war has squeezed operator revenues, cutting ARPU (average revenue per user) from $12 a month to just $4. But, he says, it has failed to upset the market balance with the top three -- Telkomsel, PT Excelcomindo Pratama , and PT Indosat Tbk -- still accounting for the majority of subscribers, leaving the rest struggling.

This is a trend that is being repeated all over Asia. (See Strapped Telcos Hunt Cash and Desperately Seeking Investors.)

With the Indonesian regulator now imposing QoS (quality of service) measures on key performance indicators (KPIs) such as coverage, drop call rate, and signal strength, struggling operators are under more pressure.

Telkom's Sundara believes the most likely to become involved in consolidation activity will be the country's CDMA operators, PT Sampoerna Telekomunikasi Indonesia (brand name Ceria), PT Mobile-8 Telecom , and PT Smart Telecom .

Finally, Dato' Jamaludin Ibrahim, CEO of Axiata Group Berhad (formerly TM International Bhd. ), tells Light Reading Asia that while the company's stated strategy is not to look for acquisitions in new markets, improving its position in its existing markets through consolidation is a very different proposition and one it would consider. (See Mobile Subscriber Growth Boosts Telekom Malaysia.)

Axiata has controlling interests in mobile operations in Malaysia, Indonesia, Sri Lanka, Bangladesh, and Cambodia, as well as strategic stakes in India, Singapore, Iran, Pakistan, and Thailand through its various subsidiaries and affiliates, so it is well placed to take advantage of opportunities as they arise.

— Catherine Haslam, Asia Editor, Light Reading