2008 market rankings: * Sizes * Potentials * IPTV

February 9, 2009

25 Min Read
Top 10 Telecom Markets: Asia

The Asia/Pacific region now forms one of the largest telecom markets in the world, and almost certainly the one with the highest growth potential in many areas of telecom. As Pyramid Research pointed out in its October 2008 "Asia-Pacific Market Perspective," the region comprises “50% of the world’s population and has a relatively low mobile penetration of about 48% in 2008... More than 1.2bn handsets were purchased around the world in 2007, up from 1.05bn in 2006, and 38% of that growth came from Asia.” Penetrations for handsets could easily reach around 70 percent over the next five years.

Of course, at the moment it is anyone’s guess how heavily the global economic problems will affect Asia’s telecom markets, and there are already some signs that China’s mobile growth is slowing. (See Trouble in Old Shanghai?) But the sheer scale of the region’s economic activity, population, and development potential will ensure that Asia continues to become more and more important to global telecom.

The telecom center of gravity is largely moving to Asia. (See Does the US (or EU) Matter Anymore?) Once, the EU/North America combination dominated the world’s telecom markets. But by 2007, they accounted for only 33 percent of fixed lines and 20 percent of wireless ones, according to International Telecommunication Union (ITU) statistics.

Asia's growing reach
Not surprisingly, the international ambitions of some of the region’s operators are growing. Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY), for example, aims to be the leading regional ICT (information and communications technology) solutions provider among telcos in five years as part of its transformation, begun a couple of years ago, from being a provider of just pure "carriage" services. Another island-based telco, Taiwan’s Chunghwa Telecom Co. Ltd. (NYSE: CHT), formed two subsidiaries in Japan and Singapore in mid-2008 to apply for local telecom service licenses in these major regional hubs in order to expand its global reach.

In February 2008, India’s Tata Group – the country’s largest private industrial conglomerate – launched a new company, Tata Communications Ltd. , that integrates, among others, the former VSNL and Teleglobe brands. Tata Communications was to invest $2 billion over the next three years in its global expansion, and would leverage the assets it acquired from Tyco (the Tyco Global Network – now re-named the Tata Global Network, or TGN) and its experience of operating in emerging markets in Asia and Africa.

And the high operator interest in the region is also working in reverse, as demonstrated in late 2008 when the European operator Telenor Group (Nasdaq: TELN) announced that it was taking a 60 percent stake in Unitech Wireless, a startup Indian mobile operator with licenses in all 22 of the country’s telecom circles. Telenor said it saw gaining access to the world’s second largest mobile market as a “major achievement,” although subsequent issues over the financing of the acquisition have yet to be resolved. (See Telenor Takes Mobile Stake in India.)

Earlier in 2008, private-equity firm Kohlberg Kravis Roberts & Co. (KKR) agreed to invest $250 million in Bharti Infratel, which will provide passive infrastructure services to all wireless telecom operators in India. It owns over 20,000 sites and holds an approximately 42 percent stake in Indus Towers, a recent joint venture among Bharti, Vodafone UK , and Idea Cellular Ltd. , which has more than 70,000 sites. KKR’s action followed a $1 billion investment in the company by Temasek Holdings Pte. Ltd. , The Investment Corporation of Dubai (ICD), Goldman Sachs, Macquarie, AIF Capital, Citigroup, and India Equity Partners (IEP) in December 2007.

This report aims to capture something of Asia’s unique combination of size, operator activity, and growth potential through some selected data tables, together with some topical information and comment on aspects of the region’s telecom market evolution. It provides a ranking of the region’s separate markets by various key parameters, and also focuses on some key growth opportunities.

The data is supplied by Pyramid Research, a market research and advisory service company that's now part of the Light Reading Communications Network. Pyramid analyzes and forecasts demand for communications and media services, applications, networks, and devices in more than 100 countries, with a strong focus on developing markets.

Future editions of this report will update, replace, or extend the data tables as appropriate.

Here’s a hyperlinked contents list:

— Tim Hills is a freelance telecommunications writer and journalist. He's a regular author of Light Reading reports.

Next Page: Markets, Services & Definitions

This report is limited to a selection of Asian markets:

  • China

  • Hong Kong, China (treated separately in the Tables)

  • India

  • Indonesia

  • Japan

  • Malaysia

  • Philippines

  • Singapore

  • South Korea

  • Taiwan

  • Thailand

  • Vietnam

Services
The Tables are limited to the following telecom services:

  • Fixed Voice (includes both PSTN and VOIP)

  • Fixed Internet

  • Fixed IPTV/Video

  • Mobile Voice

  • Mobile Data

They include both business and residential customers. Services supplied exclusively to businesses, such as leased lines, are excluded.

Subscribers and Service Per-Population Penetrations
Penetration (calculated in various ways) is a measure of adoption of a telecommunications service in a country, and is generally used as a comparative measure of network development with other countries or to compare the different adoption rates of similar service offerings. The Per-Population penetrations in this report are calculated by dividing the total number of subscribers (or users in one case), both business and residential, by the midyear population of the country concerned.

This report looks at the per-population penetrations for:

Narrowband Subscriber Lines: Defined as a subscriber line with a transmission speed less than or equal to 128 kbit/s. Includes plain old telephone service (POTS) or publicly switched telephone network (PSTN), basic rate interface (BRI) ISDN connections, and low-speed fixed wireless connections.

Broadband Subscriber Lines: Defined as a subscriber line with a transmission speed greater than 128 kbit/s. Includes primary rate interface (PRI) ISDN connections, xDSL connections, cable modems, fiber connections, high-speed fixed wireless connections, and other broadband access technologies such as satellite and power line.

IPTV/Video Subscriber Lines: Includes all subscribers receiving video content (either broadcast or VOD) through IPTV set-top boxes (STBs), and primarily through ADSL or fiber broadband access lines. All IPTV STBs are accounted for, regardless of the revenue model (pay-TV, VOD-only, or broadcast channels only), and include hybrid set-top boxes (such as IPTV/Digital Terrestrial Television). The key criteria are the nature of the broadband access line used and the IPTV set-top box. This category does not include video streaming over the Internet, or any form of TV programming streamed over the PC.

Mobile Subscribers: Number of registered mobile accounts (prepaid or postpaid) as a percentage of the population.

Revenues
All revenues are retail and exclude VAT. Revenues are calculated on a bottom-up basis from their various components, as follows:

  • Total Fixed + Mobile Revenues is the sum of Total Fixed and Total Mobile Revenues.

  • Total Fixed Revenues is the sum of Voice Service, Internet Service, and Video/IPTV Revenues.

  • Total Mobile Revenues is the sum of Mobile Voice and Data Revenues.

Data Sources
All data in the Tables are sourced from Pyramid Research, which operates an ongoing and phased program of country research and data collection. Figures for 2008 are estimates released as part of Pyramid’s 4Q2008 Forecast Release in December 2008. Revenues are given in U.S. dollars, converted at the average exchange rate for the year concerned.

Next Page: The Big Spenders

Table 1 ranks the top 10 Asian markets according to spending on the following categories of telecom services:

  • Total Fixed = Total Fixed Voice + Total Fixed Internet + Total Fixed IPTV/Video

  • Total Mobile = Total Mobile Voice + Total Mobile Data

  • Total Fixed and Mobile

Table 1: Asia Top 10 Markets by Service Revenues, 2008

Market

Total Fixed + Mobile Revenues, $M

Market

Total Fixed Revenues, $M

Market

Total Mobile Revenues, $M

China

126,821

Japan

52,181

China

93,708

Japan

120,407

China

33,113

Japan

68,225

India

37,154

India

10,661

India

26,493

South Korea

28,368

South Korea

9,766

South Korea

18,602

Taiwan

10,473

Taiwan

3,617

Indonesia

7,646

Indonesia

9,623

Philippines

2,985

Taiwan

6,856

Malaysia

7,609

China Hong Kong

2,108

Malaysia

5,548

Thailand

7,228

Malaysia

2,061

Thailand

5,176

Philippines

6,520

Thailand

2,052

Philippines

3,536

Hong Kong, China

4,492

Indonesia

1,977

Vietnam

3,360

Source: Pyramid Research / Light Reading, 2009.



Not surprisingly, in view of its economic and demographic size and sustained rapid economic growth, China tops the list for total service spending, and dominates mobile because of its huge and growing customer base. The leader in fixed services by a considerable margin is Japan, which benefits from both its long-established position as the world’s second-largest economy and the major national expansion of fixed broadband Internet services, particularly through FTTH.

Overall, Table 1 is dominated by the Big Four of (alphabetically) China, India, Japan, and South Korea. Indonesia and Taiwan tend to form a linking middle group to the remaining markets, which are often fairly closely clustered. The main exceptions are Singapore, whose ranking is very skewed by the combination of a large economy and a small population (and so disappears off the scale for mass-market services such as mobile, but scores for innovations such as IPTV), and Vietnam, which is still an emerging economy.

Next Page: The Greatest Potentials

Per-population penetrations help to give a picture of both the state of telecom market development and its potential. Low figures suggest lots of scope for building up infrastructure and standard services, while high figures suggest scope for service innovation.

Table 2, by giving only the top ten, unfortunately omits some big-name markets. For example, both China and India fail to make the grade in per-population mobile subscribers (at 53% and 30%, respectively). And India and the Philippines are massively below the others in per-population narrowband subscribers (4% and 3%, respectively); similarly with India and Indonesia for broadband subscribers (effectively 0% for both).

Table 2: Asia Top 10 Markets by Telecom Service Per-Population Penetrations, 2008

Market

Per-population narrowband subscribers, %

Market

Per-population mobile subscribers, %

Taiwan

57%

Singapore

140%

Hong Kong, China

53%

Hong Kong, China

129%

South Korea

46%

Taiwan

110%

Singapore

41%

Malaysia

98%

Japan

38%

South Korea

93%

China

19%

Thailand

92%

Malaysia

16%

Japan

87%

Vietnam

13%

Philippines

75%

Thailand

10%

Vietnam

73%

Indonesia

10%

Indonesia

58%

Philippines

4%

China

53%

India

3%

India

30%

Market

Per-population broadband subscribers, %

Market

Per-population IPTV/Video subscribers, %

Hong Kong, China

34%

Hong Kong, China

11%

South Korea

33%

South Korea

4%

Taiwan

27%

Taiwan

3%

Japan

24%

Singapore

1%

Singapore

21%

Japan

1%

China

6%

India

0%

Malaysia

5%

China

0%

Vietnam

3%

Indonesia

0%

Thailand

2%

Thailand

0%

Philippines

2%

Malaysia

0%

India

0%

Philippines

0%

Indonesia

0%

Vietnam

0%

Source: Pyramid Research / Light Reading, 2009.



The region-wide extent of the mobile boom of past years is very obvious, as is the position of Indonesia, China, and India with significantly lower penetrations than the others. The older "Tiger" economies of Hong Kong, Singapore, South Korea, and Taiwan, plus Japan, tend to dominate the rankings.

There is clearly a huge regional split in the provision and takeup of fixed broadband, which must have considerable implications for the future of fixed IPTV/video services. Hong Kong’s top position for the latter service is notable, as penetration is several times that of its closest rivals with similar broadband penetrations. South Korea, too, like Japan, has made a big national investment in fiber-based broadband and the services, such as IPTV, that operate over it. But, for many markets in the region, mass-market fixed broadband has yet to take off.

Next Page: Operators, Infrastructure & Services

Despite the world’s current economic problems, Asia’s telecom capital expenditures so far appear to be holding up reasonably well, which is fortunate, as, according to market research company Infonetics Research Inc. , 25 percent of all optical network hardware revenue came from Asia/Pacific in 2007; and analysts at Ovum RHK Inc. pointed to a huge sequential increase on spending on next-generation multiservice SDH/Sonet gear during the year in the Asia/Pacific and CALA regions.

At least one analyst has recently put China’s telecom capital expenditure at $44 billion during 2009, and it has to be remembered that India’s mobile operators were adding about 10 million new subscribers a month during 2008.

But, as Light Reading recently noted, there are straws in the wind of some tougher times ahead, with reports that, in South Korea, mobile operator SK Telecom (Nasdaq: SKM) may cut its capex by up to 30 percent, and KT Freetel Co. may cut by 16 percent, while its fixed-line parent, KT Corp. , may, at best, freeze its spending. (See APAC Update: Bids, Bungs & Capex Concerns.)

Expanding networks
2008 has seen a lot of activity in long-distance transmission links, both within and into and out of the region, but this does not necessarily imply a shortage of undersea fiber cable.“Primarily, it is about diversity: That is the key driver for most of the global subsea cable investment activity,” says Byron Clatterbuck, Senior VP Global Transmission Services, Global Carrier Solutions, Tata Communications. “We are seeing a bit of an increase in investment in the past year, maybe two years, but it is still a long way away from the kind of building and investment frenzy that happened around 1999–2001. Now it is about smaller steps, and most of the new routes are being built by groups of operators who have large internal capacity demand, and are looking to add value to the marketplace.”

As an example, Clatterbuck points to the company’s construction of the $250 million TGN Intra-Asia submarine cable linking Singapore to Japan, with branches to Hong Kong, the Philippines, and Vietnam. TGN Intra-Asia is unusual in that one of its fibers runs directly between Singapore and Japan, rather than running into, and then out of, each intermediate landing station. This fiber provides a form of express link between the two countries, and also avoids the now notorious seismic area near Taiwan, which suffered a magnitude 6.7 earthquake in December 2006 that damaged several undersea cables.

Clatterbuck says that the cable overcomes a potential bottleneck north out of Singapore, where the only other privately owned subsea cables belong to a single company. He also sees a general trend to developing further private “shared” systems among a limited number of operators – rather than using the traditional consortium approach with up to 40 owners – when definite advantages can be obtained by doing so.

“So it’s a smaller private group, with very clean handoffs of capacity, no consortium rules, no C&MA and complex voting processes as in many traditional consortium systems,” he points out. “So everyone can upgrade the system as they need capacity – it is really just about shared infrastructure costs, shared risks, and shared rewards.”

Tata Communications is also building the $250 million TGN Eurasia Cable System linking Mumbai directly to Paris, London, and Madrid via Egypt, and is a major investor in SE-WE-ME 4 and in I-ME-WE, which is a new system between Mumbai and Europe.

In July, the Hokkaido–Sakhalin Cable System (HSCS), which directly links Nevelsk, in Sakhalin, Russia, and Ishikari, Hokkaido, Japan, by an undersea fiber cable, began commercial operations. The 570km cable has a capacity of 640 Gbit/s and was jointly constructed by NTT Communications Corp. (NYSE: NTT) and the Russian backbone operator, TransTeleCom Co. CJSC (TTK) . It provides NTT Com with a shorter route to Europe than via the existing transpacific and transindianic ocean routes, and will be added to NTT Com's global IP Tier 1 network covering Asia/Pacific, Europe, and North America, with connection to major ISPs worldwide.

Even bigger is the Trans-Pacific Express Cable (TPE), completed towards the end of the year and described by consortium member China Telecom Corp. Ltd. (NYSE: CHA) as the first next-generation undersea optical cable system directly linking the U.S. and China, and the first major undersea system to land on the U.S. West Coast in more than seven years. (Other members are Korea Telecom, China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906), Chunghwa Telecom Co. Ltd. (NYSE: CHT), and Verizon Communications Inc. (NYSE: VZ).) TPE will span about 20,000 km, and, operating at 2.56 Tbit/s, will offer more than 60 times the capacity of the current direct cable link. It is designed to support future Internet growth and advanced applications such as e-commerce and video.

Next Page: Operators, Infrastructure & Services II

Yet to be completed, but announced in midyear, is China's first 40-Gbit/s Wavelength-Division Multiplexing (WDM) transmission network, linking Shanghai and Wuxi. To be built by Huawei Technologies Co. Ltd. , the link is an ultra-high-capacity 80-wavelengths x 40 Gbit/s transmission solution capable of 10/40-Gbit/s hybrid transmission to address China Telecom's increasing requirements for Internet bandwidth and to lay a foundation for the provision of future high-bandwidth services.

Elsewhere, operators like Tata Communications are investigating 40 Gbit/s but do not yet see it as a commercial proposition for their circumstances, given the much higher costs of deploying incremental 40 Gbit/s equipment compared to 10 Gbit/s technology, and the huge amounts of currently unused capacity available on many long-distance links (typically 70 to 90 percent on undersea systems, for example). However, as the cost premium inevitably decreases, in certain markets with a shortage of long-distance fiber, 40 Gbit/s will be more actively deployed.

Tata Communications is also one of the world’s biggest investors in WiMax, which it is using for both residential and enterprise customers in India. The great attractions of WiMax for countries like India with limited wireline access networks is that it can be deployed relatively quickly and cheaply to provide ubiquitous coverage in certain areas of at least a basic level of several megabits per second broadband access.

Satellite networks may tend to have a lower profile than terrestrial fiber these days, but they continue to play an important role in many industries, especially for mobile applications. Globalstar Inc. (Nasdaq: GSAT), provider of mobile satellite voice and data services, in midyear completed the construction of its Singapore gateway, located at its Seletar Satellite Earth-station facility. This will provide the company with coverage to important parts of Southeast Asia (including Singapore, Malaysia, and significant portions of Indonesia) and the surrounding maritime region (including the Strait of Malacca, one of the world's busiest and most important shipping lanes). An agreement with Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY) means that the latter will be able to offer services such as Globalstar Simplex data solutions for a variety of logistics, supply chain management, government, and maritime asset tracking applications, plus personal tracking and messaging products.

Building on broadband
Given the region’s progressive stance on broadband, it’s no real surprise that Jupiter Telecommunications Co. Ltd. (J:COM) , Japan's largest cable operator, has moved swiftly to deploy Docsis 3.0 on all of its systems. As Light Reading’s Cable Digital News reported, although J:COM's Docsis 3.0 deployment is still in the early stages, 25 percent of all new Internet subscribers signed up for the 160 Mbit/s service in the first quarter of 2008. The company has cited heavy competition from telcos that are using either fiber-to-the-premises (FTTP) or advanced VDSL to deliver speeds in excess of 100 Mbit/s as a reason to move quickly to Docsis 3.0. (See J:COM Does Docsis 3.0 All Over.)

Light Reading has also reported on Singapore’s ambition to establish itself as a regional hub for digital media hosting and service delivery in Southeast Asia, and on its plan to build a new, next-generation network to help it do so (see Singapore Unveils Digital Hub Vision). The formal iN2015 strategy includes the rollout of a nationwide fiber-to-the-home (FTTH) network; and the government in mid-2008 announced the launch of the Digital Marketplace Program, described at the time by Dr. Lee Boon Yang, the Minister for Information, Communications, and the Arts, as "to develop a trusted and conducive environment for digital media businesses to hub, manage, distribute, and trade digital media assets such as movies, video programs, music, and mobile content through and from Singapore."

One support for the hub will be the existing 28 Tbit/s of international transmission capacity, of which only about 1 Tbit/s is so far lit.

Singapore is not alone in seeing a bright future in the telecom trappings of digital media. Level 3 Communications Inc. (NYSE: LVLT) announced in September 2008 that it had expanded its content delivery network (CDN) capacity tenfold in Asia/Pacific by opening new points of presence (POPs) and upgrading existing infrastructure, and has plans for expanding its live and streaming video capability.

India’s Tata Communications, too, has entered the global CDN business, and is using CDN technology from startup BitGravity Inc. , with which it announced a strategic partnership in March 2008. The company sees the services as addressing several key demands in the CDN market, such as high-definition video and live-event broadcasting. Services are available in Europe, Asia, North America, and India. Such services have been made possible by the growth of global and regional networks, frequently private, offering a combination of low costs (making mesh networks affordable) and 10 Gbit/s wave capability on a linear basis.

One of the biggest question marks on broadband for the region must be China’s recent decision to license three mobile operators to launch the country’s first 3G networks – a long-delayed move that could have a big impact in a market that has well over 600 million mobile subscribers and about 250 million Internet users in a population of 1.3 billion. However, the details almost defy belief (but not politics): The dominant China Mobile Ltd. (NYSE: CHL) is to use China’s home-grown TD-SCDMA technology; China Unicom Ltd. (NYSE: CHU) is to use W-CDMA; and China Telecom is to use CDMA 2000. A combination of three incompatible technologies, especially when one has no track record anywhere else, would seem guaranteed to slow the expansion of 3G service and takeup.

Next Page: IPTV & Fiber

Thanks to the efforts of a handful of countries, Asia has become a global powerhouse for mass-market fiber access, either as fiber to the home (FTTH) or fiber to the building (FTTB), and for one of its prime mass-market applications: IPTV and Video such as Video on Demand (VoD). Japan, China, South Korea, Taiwan, and Hong Kong totally dominate FTTH/B access and also (in the order China, South Korea, Japan, Hong Kong, and Taiwan) IPTV/video subscriber lines, as Table 3 shows.

Table 3: Asia Top 10 Markets for IPTV, 2008

Market

IPTV/Video subscriber lines, 000

Market

Annual change in IPTV/Video subscriber lines, 000

China

2,450

China

1,638

South Korea

2,113

South Korea

803

Japan

1,561

Japan

586

Hong Kong, China

772

Taiwan

282

Taiwan

709

Hong Kong, China

74

India

107

India

49

Singapore

58

Singapore

31

Thailand

15

Thailand

9

Indonesia

0

Indonesia

0

Malaysia

0

Malaysia

0

Source: Pyramid Research / Light Reading, 2009.



In global terms, South Korea, Hong Kong, and Taiwan are way out in front for household penetration by fiber – at about 31 percent, 23 percent, and 21 percent of households, respectively, in early 2008, according to the FTTH Council Europe . (See Asia, Europe Dominate FTTH Elite.) Roughly, about three-quarters of the world’s residential fiber access lines were in the Asia/Pacific region at the end of 2007, according to the recent Heavy Reading report, "FTTH Worldwide Technology Update & Market Forecast."

Interestingly, India could develop an anomalous position in fixed broadband. Heavy Reading’s Graham Finnie has argued that India’s fixed broadband penetration is being held back by failing regulation, and that the country could become the first big economy to become dependent on wireless broadband unless the regulatory issues are solved. (See Puzzling Out India.)

Both relatively and absolutely, IPTV/video service is growing significantly across a widening area of the region, and three of its providers (PCCW, Chunghwa Telecom, and China Telecom) featured in Light Reading's Top Ten: IPTV Carriers.

Here's Light Reading's Ray Le Maistre on IPTV's development in Asia, compared to the rest of the world:

As Le Maistre noted, it’s clear that IPTV in the region is already moving away from its basic telco me-too form of conventional TV. PCCW Ltd. (NYSE: PCW; Hong Kong: 0008), for example, is emphasizing the opportunities for innovation in IPTV services and marketing, as well as in technology. (See PCCW: IPTV Demands Innovation.) It has obtained some unique content (English Premiership soccer) and developed IPTV channels of its own (such as sports channels and a business news service), and has introduced interactive services (such as sports betting, theater ticket booking, and online directory services), and a range of interactive advertising models (such as opt-in video ads and split-screen presentations). {column}Ultimately, the combination of FTTH and IPTV would lead the company to offering home-networking services. And PCCW is now hoping to exploit its extensive experience with telco IPTV by launching PCCW MediaCore, an all-inclusive IPTV package for operators looking to introduce telco TV services. (See CommunicAsia: APAC's TV Times.)

— Tim Hills is a freelance telecommunications writer and journalist. He's a regular author of Light Reading reports.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like