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ISSN: 1750-7685

Asia Pacific Telecommunications

REGIONAL FOCUS

BMIs monthly market intelligence, trend analysis and forecasts for the telecommunications industry across Asia Pacific

INSIGHT

January 2010

Issue 45

Samsung Wins New WiMAX Contracts, Plans Asia Expansion

South Korea-based wireless equipment manufacturer Samsung Electronics has unveiled plans to ramp up its participation in the commercialisation of wireless broadband access platforms based on the mobile WiMAX family of technologies. The company has agreed to join the WiMAX Innovation Network, headed by Malaysian WiMAX operator YTL Communications. Samsung also announced a new supply contract with UQ Communications of Japan. The WiMAX Innovation Network encourages and supports the development of mobile WiMAX applications and products and has been created to build a so-called WiMAX Centre of Excellence in Kuala Lumpur, Malaysia. Other backers of the project include Clearwire, Cisco Systems, Intel and GCT Semiconductor, but Samsung will take on the role of knowledge provider and technical assistant, providing its interoperability test laboratory in Malaysia for approved developers. BMI particularly welcomes Samsungs assertion that the collaborative effort will allow its participants to take an active and leading role in developing and expanding WiMAX throughout the Asian region. Involvement will also give Samsung considerable leverage when marketing equipment to new operators. Demand for mobile broadband access is growing rapidly throughout Asia, and, in markets where traditional broadband penetration is low and mobile operators have yet to deploy 3G, the opportunities for leaping straight to 4G are all too clear to many industry players. As yet, rival 4G technology LTE has yet to find much favour in Asia, and this has allowed many operators to concentrate heavily on mobile WiMAX development. The accompanying table shows the key mobile WiMAX (IEEE 8012.16e) players and their suppliers in Asia. Samsung is the principal supplier of WiMAX solutions to UQ Communications, and services have already been rolled out to Tokyo, Nagoya and Osaka in Japan. Samsung is to supply additional base stations to UQ in 2010. By March 2013, more than 93% of the population of Japan will be covered by its network. Meanwhile, YTL Communications has yet to launch its commercial mobile WiMAX offering, but the company remains on track to be covering all of Malaysia by late 2010. Samsung is supplying a comprehensive WiMAX solution to YTL, including a range of mobile internet devices.

CONTENTS
Regional Focus/Sri Lanka/Brunei/Cambodia/China/Hong Kong
Huaweis Meteoric Rise Continues ......................................................................... 2 Asia Mobile Handsets Market Set For Shake Up....................................................... 3 GSMA Awards Mobile Money Grants To Six Operators .............................................. 4 Sri Lanka Telekom Plans US$6.55mn Investment .................................................... 4 Brunei Prepares Ambitious Broadband Project ........................................................ 5 Minister Calling For More Infrastructure Sharing ..................................................... 5 Quarterly Results Signal Strong Chinese 3G Market ................................................. 6 OFTA Sells More Spectrum As Mobile Data Usage Rises ........................................... 7

INDUSTRY PROJECTIONS
Selected 802.16e Deployments In Asia
Country Bangladesh Japan Malaysia Operator Augere Wireless Broadband BanglaLion Communications Reinan Cable UQ Communications Redtone Y-Max AsiaSpace DotCom Green Packet Pakistan Wi-Tribe Mobilink Wateen Telecom Philippines Taiwan Innove Communications Globe Telecom Fitel Global Mobile Tatung Far EasTone
Source: WiMAX Forum

Equipment Suppliers Huawei NA Huawei Fujitsu, Samsung Motorola NA Huawei Alcatel Lucent, ZTE Motorola Huawei Huawei, Motorola Huawei Huawei Motorola NA Alcatel Lucent, NEC Alcatel Lucent, Motorola, Nortel

Indonesia/Bangladesh/Japan/Malaysia/Pakistan
BlackBerry Offer Competes With Local Brand.......................................................... 7 Indonesian WiMAX Deployment Accelerates ........................................................... 8 Regulator Planning To Rate Operators Performance ................................................ 9 Second WiMAX Launch For Bangladesh .................................................................. 9 Softbank Introducing Android Phone.....................................................................10 DiGi To Invest MYR400mn Annually In 3G Expansion .............................................10 Higher Import Duties Blunt Mobile Growth In 2008/09 ...........................................11 Pakistan Government Enforces Broadband Competition ..........................................11

South Korea/Singapore/Australia/Taiwan/India
ONSE Telecom Looks To Mobiles As Finances Pick Up .............................................12 SingTel Starts LTE Trials, NTT DoCoMo Sees LTE In 2010 .......................................12 Vodafone, Chunghwa Telecom Partner On Mobile ..................................................13 500mn Subscribers In India, One Year Early ..........................................................14 India 3G, Wireless Broadband Auctions Delayed Again ...........................................15 US$3.5bn Investment Planned By Sistema Shyam..................................................16

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rEgIoNAL focUS

Asia Pacific

Telecommunications

VEN

DAILy ALErT

NTT Communications Buys Pacific Crossing

Japan-based global broadband backbone operator NTT Commu- up by 2.3% from the JPY273.9bn of the quarter ended June 30 2008. nications has completed the previously announced acquisition of IP-based services account for a little over one-third of revenues each quarter, and this proportion is submarine cable operator Pacific CrossNTT: Looking To Grow In Global Bandwidth rising over time due to increased cusing. The value of the transaction, which Market tomer consumption of internet-centric had been announced in May 2009, was NTT Communications: Revenue Breakdown, Q209 high bandwidth services. By contrast, not immediately disclosed. Others Solution 2.5% revenue from traditional data communiBy combining capacity on the PC-1 services 15.8% cations services is falling. Such services trans-Pacific submarine cable network Voice generated revenue of JPY30.9bn in the with the extensive domestic and internatransmission services quarter to June 30 2009 (11.5% of total tional backbone owned and operated by 36.2% revenues). This was down by 9.0% NTT Communications, the resulting entiData communfrom JPY33.9bn a year earlier (12.4% ty will be able to offer both enterprise and ications 11.5% of the total). carrier customers high-quality network NTT Communications infrastrucand data transfer speeds between multiple ture includes Arcstar-branded Global locations in Asia, Japan and the US. IP-VPN and Global e-VLAN, as well The transaction is important for NTT as a Tier-1 IP backbone that reaches Communications as it provides some of IP services more than 150 countries in partnership the most heavily used submarine cable 34.0% with major ISPs and secure data centres systems that connect Asia with the Source: NTT, BMI around the world. The 21,000km PC-1 rest of the world. Its submarine cable network was upgraded with Fujitsus portfolio is also fundamental to the development of the broadband, fixed-line telephony and mobile FLASHWAVE S650 submarine wavelength division multiplexing solutions in March 2008, giving the cable system an operational communications operations of its parent company, NTT. For the three-month period ended June 30 2009, NTT Communi- capacity of 1.98Tbit/s. This complements the 1.98Tbit/s capacity cations posted non-consolidated operating revenues of JPY267.6bn, provided by NTT Communications backbone.

coMPANy NEwS ALErT

Huaweis Meteoric Rise Continues

Huawei, Chinas largest mobile network equipment vendor, is competitive dynamic, as it strengthens Ericssons presence in North now the number two mobile network infrastructure provider in the America, which is an area as yet all but closed to Huawei. Huaweis world, reports rethink-wireless. The report cites a study by research impressive growth has depended on its home market, which is of course enormous and thus very imporgroup dellOro, which showed that, Revenue Growth Accelerating tant to the Chinese operator, and also to during Q309, Huawei overtook Nokia Huawei Contract Sales (US$bn) international expansion. Huaweis global Siemens Networks (NSN) to become presence was initially concentrated in the world number two in terms of value 25 Asia, but it has gradually moved more of mobile infrastructure sales. It is now 20 into Africa, the Middle East and Europe, only behind Ericsson. and, in the last year or two, has indeed According to the study, NSNs share been seeing very strong growth in the of the global mobile network equip- 15 number of contracts it wins in Europe. ment markets fell from 24% in Q308 Europe will probably become a key to just under the 20% that Huawei now 10 battleground for the two network vencommands in Q309. With only a very dors, as Ericsson, too, as a European marginal difference between the two, it 5 company, has a strong presence there. is not inconceivable that NSN could reBoth will be battling for more LTE trial cover its second place, but in truth BMI 0 and upgrade contracts as advanced Eurodoes not expect this to happen. 2004 2005 2006 2007 2008 pean markets move towards 4G technolHuawei, and to some extent its ogy. Africa is another key area. There compatriot ZTE, has been growing ag- Source: Huawei is still a good deal of network roll-out gressively over recent years. The chart shows how Huaweis total sales figures have been expanding rapidly, activity in the region, and both Ericsson and Huawei have traditionand indications are that they have yet to dramatically slow down. ally done well there. Huawei is beginning to find more advantages It will be Ericsson that should next start looking behind as Huawei as it can sometimes benefit from Chinese finance agreements. In other news for Huawei, it has announced the first trial deploybegins to catch up. However, thanks to Ericssons Nortel acquisiment of the TD-LTE standard with China Mobile, in a network tions, this will take longer than previously expected. In fact, this will now give Huawei and Ericsson an interesting covering the site of the 2010 Shanghai World Expo.

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NEZUELA rEgIoNAL focUS

INDUSTry TrEND ANALySIS

Asia Pacific

Telecommunications

Asia Mobile Handsets Market Set For Shake Up

Spurred on by the success of the Apple iPhone and the mobile services China and Korea. Governments have been concerned that the open and applications storefront business model, many of Asias smaller software platforms on which these devices operate may allow lohandset vendors are having to look again at their business strategies cal users to access undesirable content. More importantly, though, and adapt to changing market conditions they have feared that the popularity of and customer demands. A handful of an- Smarter Focus For Handset Vendors & Operators the software used for data transmission Asian Mobile Handset Sales, Q308-Q309 nouncements made this week at the Asian and internet access may lead to a loss 140 Mobile Congress in Hong Kong show of usage of locally developed services, Handset Shipments, Asia Pacific (mn devices) Handset Shipments, Greater China (mn devices) that the message of adapt or perish is 120 a key contributor to economic growth. beginning to get through. Open-source operating systems Most notable among these announce- 100 such as the Android system developed ments is the news that Taiwan-based Hon by Google are becoming increasingly 80 Hai Precision Industry which trades prevalent, through use on popular mid-tier as Foxconn is to develop a handset for handsets such as those developed by HTC 60 China Mobile that will support software of Taiwan. A mobile version of the Linux 40 developed by the Joint Innovation Lab computer OS LiMo is also gaining cur(JIL), a partnership between Vodafone, rency in the region. SK Telekom of Korea 20 Verizon Wireless, Softbank Mobile of has announced plans to launch a Samsung0 Japan and China Mobile. This software made LiMo smartphone in the near future. Q308 Q408 Q109 Q209 Q309 will run and manage a common set of This could be a breakthrough move for services and applications that can be ac- Source: Nokia LiMo as it has previously been restricted cessed by suitable handsets connected to to less than 45 handset models, most of these operators networks. Between them, the four operators currently which have only been offered in Japan and certain European markets. serve well over 1.1bn subscribers, indicating the huge adoption potential. This does not even take into account an agreement in October 2009 Japanese Vendors Sidelined for Research In Motion (RIM), Samsung Electronics, LG Elec- Japans leading handset makers are now in danger of becoming mitronics and Sharp to incorporate JIL software in their future devices. nor players in a market they once dominated. Their overreliance on The move would give operators a chance to participate in the the indigenously developed i-mode platform meant that they were efhugely lucrative mobile applications marketplace, a field currently fectively left without a market when interest in i-mode outside Japan dominated by the handset vendors themselves, such as Apple with its slumped earlier in the decade. They were also slower to respond to Apps Store. Operators are in danger of becoming mere dumb pipes, consumer demand for more media-rich but less technically complex there simply to deliver the applications to customers direct from the devices. Waning financial fortunes also dictated that they withdraw developers store; if they do not change their business models, they from the global market and, as of today, very few Japanese handset risk losing valuable revenues to handset vendors. makers have a presence on the worldwide stage. As Japan begins to see new handsets arrive from China, Korea and Taiwan with Smarter Phones Are The Way Forward North Americas iPhone and BlackBerry surely not far behind so As in developed markets, so emerging markets are now moving Japanese vendors need to return to the global market with features quickly to take advantage of the smartphone concept. Finland-based and functionality that will appeal to non-Japanese consumers. This is Nokia is the premier supplier of handsets to these regions, and, the message being sent to vendors such as Panasonic, NEC, Sharp until recently, it has experienced only limited competition from Fujitsu and Kyocera, among others, even as consolidation looms. the likes of the iPhone and BlackBerry due mainly to the high cost In September 2009, Casio, NEC and Hitachi agreed to combine of those devices. But local vendors are now coming up with their their mobile handset businesses in a stand-alone joint venture. The own smartphone portfolios. stated aim is to help the three companies make significant savings China-based Qiao Xing Universal Telephone, which trades under in production and marketing costs and to improve their positions in the CECT brand, has just agreed to sell its low-end handsets business the cut-throat domestic market. to Dragon Fu Investment for an undisclosed sum. The unit reportedly The venture, a combination of the handsets division of NEC with recorded a loss of CNY291mn in 2008. Qiao Xing wants to concen- a pre-existing partnership between Casio and Hitachi, will have a trate on its more popular and, hence, more profitable high-end combined share of the Japanese handset market of just over 20%, handset business. Its smartphones are offered under the VEVA brand based on unit sales data for the year ended March 31 2009. name, and the range is being augmented with products incorporatDemand for mobile handsets in Asia remains fairly buoyant, ing 3G TD-SCDMA chips from Datang Telecom Technology. It is despite the economic downturn. Industry leader Nokia believes that also collaborating with China Techfaith Wireless Communication 47mn devices were shipped in the Greater China region in Q309, up by Technology to develop high-end 3G smartphones. 9.3% from 43mn in Q209, yet down slightly from the 49mn of Q308. In the background, and perhaps acting as a catalyst for these In the rest of Asia, 70mn devices were shipped in Q309, up by 4.5% developments, is an acceleration in the opening up of markets from 67mn in Q209 and on a par with the 70mn shipped a year ago. to advanced software-driven devices from foreign manufactur- Nokia remains the market leader in both regions with market shares ers. South Korea and Indonesia have recently permitted RIMs of 39.4% and 43.6%, respectively, in Q309 but it is coming under BlackBerry to go on sale, while the iPhone has just arrived in both greater pressure from rivals, particularly in the smartphone market.

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rEgIoNAL focUS/SrI LANkA

Asia Pacific

Telecommunications

VEN

INDUSTry TrENDS AND DEVELoPMENTS

GSMA Awards Mobile Money Grants To Six Operators

The GSM Association (GSMA) has awarded grants from its Mobile services. By awarding MMU grants to AKTEL and GrameenPhone, Money for the Unbanked Fund (MMU) to six companies operat- this situation can begin to be redressed. AKTEL is to launch a bill ing in Asia and Africa. The grants are to be used for promoting payment service via mobile handsets for electricity customers, in the uptake and usage of mobile money services for the unbanked collaboration with the Bangladesh Power Development Board. and underbanked populations in emerging markets. Together with AKTEL is also introducing SMS and interactive voice response previously announced MMU grants, mo(IVR)-based services with the aim of Banking On Mobiles bile network operators involved in the assisting financially constrained rural Grantees Mobile Subscriber Bases, Q209 initiative are giving low- or subsistencecommunities wishing to mobilise money level consumers in rural areas access to 25,000 in an easier and faster manner. financial services for the first time. For its part, GrameenPhone aims to 20,000 The new grantees are AKTEL of improve penetration of financial services Bangladesh, Dialog Telekom of Sri 15,000 to rural areas to enable migrant workers Lanka, GrameenPhone of Bangladesh, in urban locations to remit funds to their MTN Cameroon, MTN Uganda and 10,000 families in those rural communities. Vodacom Tanzania. According to GrameenPhone, a partnership between 5,000 BMIs databases, these six operators Telenor of Norway and the Grameen were serving 50.4mn mobile subscribFoundation (part of the Grameen 0 ers between them as of Q209. If even a Bank), is already an active player in few percent of these subscribers were the process of extending electronic to embrace mobile banking, the benefits commerce services and financial supwould be significant. port to mobile customers in Bangladesh. The GSMA believes that mobile Source: BMI The partners operate the Village Phone money services can change the lives of scheme, aimed at putting low-cost handunbanked people for the better. Such services can deliver enormous sets and services in the hands of millions of people, living off less social benefits simply by helping people carry out basic financial than US$2 per day. Similar projects have been adopted in Uganda, transactions or by providing essential tools to help run or set up Rwanda and Cameroon, as well as in Indonesia. a small business. For many, such services will give the worlds The implementation of mobile money services will enable rural unbanked their first digital identity. and low-income consumers to take advantage of more efficient, less As an example, the GSMA quotes recent research that shows time-consuming and more secure new services. In the long term, that only 13% of the population of Bangladesh has a bank account. such services will help in alleviating poverty in many emerging Around 130mn individuals have no access to formal financial markets and help drive growth in weaker or less dynamic economies.
MTN Cameroon Dialog Telekom GrameenPhone MTN Uganda AKTEL

SrI LANkA
coMPANy NEwS ALErT

Sri Lanka Telekom Plans US$6.55mn Investment

Incumbent fixed-line and broadband operator Sri Lanka Telekom (SLT) has outlined its plans to accelerate the modernisation and development of the north eastern region of Sri Lanka, an area of the country long neglected due to the threat of terrorism and endemic poverty. The company plans to spend more than US$6.5mn on highspeed communications infrastructure to ensure that the inhabitants can quickly regain access to basic voice and broadband services. In an interview with the Ceylon Daily News, SLT chairperson Leisha De Silva Chandrasena said that the company would prioritise the expansion of the copper transmission system and switching facilities as well as the deployment of fibre-optic cables and fixed wireless CDMA base stations. The company believes that, despite the relatively low economic wealth of the region, there is great potential for development and growth in the years ahead. SLT claims to have established 2,000 broadband connections, 11,000 CDMA phones and 1,500 fixed lines in the Northern and Eastern provinces since the region was returned to government control in June 2009. BMI believes that, although fixed wireless CDMA services are a short-term, low-cost alternative to delivering a copper or fibre connection to the home or business, it will prove useful in kick-starting interest in voice and data services while mobile communications networks still offer only limited coverage in these war-torn areas. We are particularly interested in learning that SLT plans to deploy WiMAX-based wireless broadband solutions in the Northern and Eastern provinces, given the success the technology has in quickly and costeffectively delivering broadband services in emerging markets. SLT claims that it will begin installing WiMAX base stations in the affected areas in December 2009. It accounts for 75% of the broadband user base in Sri Lanka and claims to have been serving 150,000 customers by end-September 2009, up from 90,000 at the beginning of the year. Fixed-line penetration in Sri Lanka is low at around 21 lines per 100 inhabitants at present. We do not expect to see penetration reach 28% before 2014, as consumers are more likely to avail themselves of mobile telephone services. BMI forecasts that mobile teledensity will rise from 76% this year to 125% by 2014. Meanwhile, due to cost issues and operators reluctance to extend services beyond the major population centres, we expect that broadband penetration will reach only 13% by 2014, up from 1% at present.

Vodacom Tanzania

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NEZUELA BrUNEI/cAMBoDIA
DAILy ALErT

Asia Pacific

Telecommunications

Brunei Prepares Ambitious Broadband Project

The Brunei Times reports that the Authority for Info-communications Technology Industry (AITI), Bruneis state-controlled telecoms regulatory authority, has received expressions of interest from 19 parties in response to a consultancy tender connected with the development of the countrys new Broadband Strategic Plan. As previously announced, the scheme will ensure that every house in the tiny Asian Sultanate will be connected with high-speed fibre-optic cables. The government believes that increased broadband availability and heightened IT and e-commerce awareness will raise economic diversification and reduce reliance on state resources. The tender closed at the end of September, and proposals have come from organisations in the US, UK and Singapore. The AITI has also solicited proposals for the development of a nationwide wireless broadband platform, to further support and foster the development of a so-called ubiquitous society, where everyone can access the internet anytime and anywhere to avail themselves of voice telephony, video and information services. The AITI expects that proposals may include plans to build next generation wireless platforms based on technologies such as WiMAX and LTE. BMI welcomes this possibility as it would represent a major technological jump for the countrys existing ageing infrastructure and meet pent-up demand for fast and reliable services. Incumbent fixed-line and mobile operator Telekom Brunei (TelBru) and mobile operator DataStream Technologies (DST) are also looking to accelerate their broadband service roll-outs, but BMI believes that, as commercial operations, they are more likely to focus on the more densely populated areas of the country. A government-backed project, supported by one or more technology partners, would be better positioned to fill the gap. Lower costs are also expected to help fuel demand for services. BMI estimates that there had been only 13,000 broadband subscribers to the services of TelBru and DST at the end of 2008, representing a penetration rate of around 3.1%. Roll-out is hampered by the lack of fixed-line infrastructure (the number of lines has fallen in recent years as TelBru replaces older plant with new digital systems) and low penetration of PCs.

cAMBoDIA
INDUSTry NEwS

Minister Calling For More Infrastucture Sharing

The minister of posts and telecommunications, So Khun, has only a fraction of national coverage. Presumably it is planning a renewed calls for greater co-operation and infrastructure sharing cautious approach to see what the uptake is like from the network between mobile networks in Cambodia, reports cellular-news. operators. Operators will be able to install their equipment on Tower Speaking at a conference, the minister emphasised the need to avoid Masters infrastructure. However, the operators themselves could still form agreements the unnecessary building of multiple antennas. The ministers comments appeared to focus on the environ- to work together to build their own basic infrastructure to roll out services to new areas, sharing the cost mental and aesthetic problems with and thus reducing the investment burbuilding multiple sets of infrastruc2009 Will Be A Bumper Growth Year Cambodia Mobile Market Growth 2000-2008 (mn) den. There are sometimes competition ture, but there are a number of other 1.4 concerns over such plans, as coverage benefits, which could be particularly 5.0 No of Subscribers (mn) LHS can be a competitive factor. However, relevant in Cambodia. Cambodia has 4.5 1.2 Net Additions (mn) RHS the operators appear to be concentrating nine mobile operators, which of course 4.0 on competing bitterly over the more luprovides great potential for the build- 3.5 1.0 crative urban market, and their apparent ing of repeated infrastructure develop3.0 0.8 rivalries may even be discouraging the ments. However, mobile penetration 2.5 kind of co-operation that the minister is still fairly low, and the operators 0.6 2.0 is trying to encourage. appear to remain reluctant to spend on 0.4 By the end of 2009, BMI expects significant rural roll-outs, as the rural 1.5 the mobile penetration rate in Cambopopulation, while it makes up a signifi- 1.0 0.2 dia to have reached nearly 42%, folcant portion of the total population, is 0.5 lowing a boost in growth that resulted still very spread out, and generally on 0.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q109 from the introduction of three new extremely low incomes. Plus, the cost operators. However, there is a danger of rolling out to more remote regions Source: ITU; BMI that this growth boost was caused is significantly higher than in easier to more by multiple SIM ownership and reach areas, thanks to issues of terrain inactive SIMs among the population already having access to and other infrastructure networks. Realistically, the only way that more outlying regions are go- mobile services. The increased competition will in the end force ing to get significant services is through shared infrastructure. The more expansion of services, and with the government so keen to government has already granted a private company a licence to build avoid excessive building, the operators may also be forced to set shared infrastructure across the country. Tower Master, however, aside some of their differences and acknowledge the advantage is planning only a US$20mn initial investment, which will produce of co-operation.

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chINA

Asia Pacific

Telecommunications

VEN

INDUSTry TrENDS AND DEVELoPMENTS

Quarterly Results Signal Strong Chinese 3G Market

Datang Telecom, a key supplier of chipsets to the nascent 3G mobile communications market in China, has posted very healthy financial results for the quarter ended September 30 2009. The Shanghailisted company attributed its good performance to strong sales of 3G-related products: it sells software, TD-SCDMA chipsets and other 3G-related products. Revenue amounted to CNY702mn (US$102.7mn) in Q309, versus CNY527mn in Q308, which represented a year-on-year (y-o-y) rise of around 33%. The companys net profit rose by 18% to CNY24.25mn from CNY20.56mn over the same period. For the first nine months of 2009, revenue grew by 26% to CNY2.181bn while net profit rose by nearly 38% to CNY38.96bn. These strong results reflect the bullish performance of Chinas youthful 3G market. There are three 3G operators in China, all of which are state controlled. China Mobile is operating the sole network based on the indigenously developed TD-SCDMA technology and reported having more than 600,000 3G subscribers as of May 2009. Other suppliers of TD-SCDMA equipment to China Mobile are Huawei Technologies, ZTE and others such as Putian Group and Nokia Siemens Networks. This heavy investment in 3G is being echoed by the other two 3G operators: China Unicom and China Telecom. BMI expects this to continue as coverage of urban areas is built out, and we forecast that there will be around 2.3mn 3G subscribers by end-2009, representing a mere 0.3% of the total mobile market. We expect that subscriber numbers will have swelled to 96.2mn by 2014, or 5.5% of the overall market. China is currently served by a host of local and overseas handset vendors for 3G devices. An important new entrant is Apple with its much-lauded iPhone. China Unicom began marketing the device on an exclusive basis on November 2, and it will be interesting to see whether this long-expected move will help accelerate 3G take-up in the country, particularly among affluent youth-dominated social groups. China Unicom claimed 142.8mn cellular subscribers in September 2009; it has yet to launch its W-CDMA-based 3G network.

coMPANy NEwS ALErT

China Unicom 3G ARPU Double That Of GSM

China Unicom, the second largest mobile network operator in fall as low as CNY38, almost half the level seen in 2007. China Telecom is probably exposed most to changing consumer China, has reported that its average revenue per user (ARPU) from habits in China, as its CDMA-based network is expensive to use 3G services has already passed that of ARPU from its core 2G GSM services. Indeed, 3G ARPU for the nine-month period to September and cannot compete effectively with its rivals offerings. The high 2009 was a little over CNY100, versus the CNY41.6 recorded by GSM cost of deploying 3G infrastructure will also impact on its earnings users. According to Reuters, China Unicom believes that increased and may force it to be more selective in developing next generation competition and the attractiveness of 3G have accelerated the move products. We believe its ARPU will decline much faster than its rivals over the next five years. to value-added data services from voice. Even as 3G is getting off the ground The company said that it was difficult, Will 3G Contributions Offset ARPU Declines? in China, industry observers as well as if not impossible, to grow voice ARPUs, China Mobile ARPU Forecast, 2007-2014 (CNY) the network operators themselves are a reflection of the maturity of the Chinese 100 now considering the possibilities for mobile market. However, China Unicom China Mobile 90 next generation platforms and which socontinues to see voice services as having China Unicom 80 China Telecom called 4G technologies should be used. growth potential in rural and underserved Average 70 The GSM Association believes that both areas, and among low-income social China Mobile and China Telecom will groups. BMI believes that the company 60 opt to deploy LTE, possibly as soon as will seek to concentrate on developing 50 2011, due to recent decisions to trial the its 3G networks and services in the more 40 nascent wireless broadband technology. urban and economically productive areas 30 China Mobile, for example, is to build of the country and that rival operators 20 a pilot LTE system in Shanghai as a cenChina Telecom and China Mobile will 10 trepiece of the World Expo due to be held encounter similar issues as they also roll 0 there in 2010. There is, as yet, no formal out their 3G offerings. 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f commitment on the part of China Mobile BMIs research shows that averto expand this project into a nationwide age mobile ARPU in China fell from f = forecast. Source: BMI commercial platform, but many observCNY64.4 in 2007 to CNY58.4 in 2008. Based on operators published results for the first half of 2009, we are ers believe that the company would prefer to use an internationally expecting that the average ARPU level will fall further this year, to accepted standard like LTE for its next generation services rather around CNY54.5. For the next two years, we believe that the rate of than relying on upgrades to its existing 3G platform, which is based decline will not be so steep, as the initial set of 3G services stimulates on the indigenously developed and largely ill-favoured TD-SCDMA increased demand for premium value-added services. This will be standard. This may be bad news for chipset manufacturer Qualcomm, undermined, to a considerable extent, by continued price competition which is poised to begin marketing its new TD-SCDMA products in in 2G/2.5G services based on GSM and CDMA technology. These China next year. Although it also sells to China Unicom, Qualcomms will, instead, become more attractive to consumers on low incomes. principal Chinese client is China Mobile. Qualcomm competes in the Looking ahead to 2014, we believe that average mobile ARPU could TD-SCDMA chip market with Marvell Technology and MediaTek.

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NEZUELA koNg/INDoNESIA hoNg

DAILy ALErT

Asia Pacific

Telecommunications

OFTA Sells More Spectrum As Mobile Data Usage Rises

The Office of the Telecommunications Authority (OFTA) of Hong tion from the 23.6MB per subscriber one year earlier, in August 2008. Kong is proposing to auction additional spectrum in the 850MHz, By comparison, the number of 2.5G and 3G subscribers grew by 35.8% 900MHz and 2GHz bands. The regulaover the period. The vast majority (72%) Data Usage Rises, More Capacity Needed tor believes that the new frequencies will are now 3G subscribers. OFTA reports that Mobile Data Usage Per 2.5G/3G Customer (MB), 2008-2009 prove beneficial to existing players and 27.2% of all mobile subscribers in Hong new entrants alike at a time when demand 100 Kong were on 3G networks as of August 90 for mobile data services is booming. 2009, versus 22.5% a year earlier. 80 In announcing the auction, OFTA OFTA plans to sell one frequency 70 commented that the growth of mobile data block of 2 x 5MHz in the 850MHz band, 60 usage over the past two years had proved one frequency block of 2 x 5MHz in the 50 remarkable. Statistics published by the 900MHz band and two frequency blocks 40 regulator show that mobile data usage as of 4.8MHz and 4.9MHz in the 2GHz 30 of August 2009 was 13 times higher than it band. No spectrum cap is contemplated. 20 had been in August 2007. With a view to As the overall number of subscribers 10 meeting the need of additional frequency rose by just 6% in the year to August 0 spectrum for capacity expansion and 2009, BMI believes that the successful enabling further service development, the applicants for this spectrum will most Government has proposed to release a total likely be the established operators, such as Source: OFTA of 29.7MHz, OFTA said. SmarTone and CSL New World MobilIn August 2009, Hong Kongs 2.5G ity, keen to hold sufficient capacity for and 3G mobile subscribers consumed 418.06mn MB of data via their their customers future needs and looking to migrate to next generation handsets or USB modem-equipped mobile computers. This is equivalent platforms. Any new player, should one emerge, would probably be well to 92.8MB per customer, as there were 4.5mn 2.5G and 3G customers at advised to focus on offering competitively priced mobile broadband that time. This corresponds to a 293% increase in mobile data consump- services to those PSTN and cable subscribers that have yet to migrate.
Oct-08 Mar-09 Nov-08 Dec-08 Jan-09 May-09 Sep-08 Feb-09 Apr-09 Jun-09 Jul-09

INDoNESIA
DAILy ALErT

BlackBerry Offer Competes With Local Brand

Indonesian mobile network operator Smart Telecom has launched Berry family of devices will have to compete with local brand Nexian, the BlackBerry service in partnership with Canada-based Research which offers a very similar look, feel and performance to the top-end In Motion (RIM). The EV-DO-enabled BlackBerry Curve 8330 BlackBerrys at about a third of the cost of a low-cost BlackBerry. smartphone is initially being offered through a special promoNexian offers a growing range of GSM and CDMA-based handsets tion with Citibank for IDR499,000 built to its own specifications in China, Playing It Smart With Phones (US$53.2) per month over a 12-month which has allowed the vendor to signifiMobile Market Shares by Operator, Q109 period, plus a discount of up to 25% cantly undercut larger competitors such as Indosat Excelcomindo when redeeming Citbank point rewards. Nokia and RIM. In a market where cost is 22.1% 16.5% Smart is focusing on serving highthe ultimate deciding factor when purchasvalue, enterprise customers with this ing handsets and mobile phone services, Bakrie service, which is unsurprising given the the Nexian brand stands every chance of Telecom 5.3% dominance of rivals such as Telkomsel, winning out over global rivals. Reportedly, PT Indosat and Excelcomindo (XL) Indosat was serving 300,000 subscribers Mobile-8 (e) 2.3% in the Indonesian consumer segment. using Nexian phones as of September Hutchison Also, Smart has pumped a great deal of 2009, versus 200,000 BlackBerry users. Telecom (3) investment into its next generation platBMI research shows that there were 3.5% Smart (e) form, based on CDMA2000 1x EV-DO approximately 150.8mn mobile phone 1.7% technology. The EV-DO network was users in Indonesia as of March 2009, of Axis (e) Telkomsel only launched in March 2009, meaning which nearly 48% were served by market 0.8% 47.8% that Smart needs to begin recouping leader Telkomsel. We believe Smart was e = estimate. Source: BMI, operators its investment as soon as possible. Deserving 2.5mn subscribers at that time, ployment of a media-rich device to its 1.7% of the market, reflecting its recent customers makes sound commercial sense. arrival. With established players such as Indosat and XL recording BMI believes Smart could pigeonhole itself as a business-only pro- net customer losses in recent quarters, Smart has considerable opporvider and risk limiting its presence in Indonesia. While the choice of the tunities to pick up disaffected customers from other operators with its BlackBerry Curve as a flagship product is a sound decision, the Black- attractively priced tariffs and desirable ranges of handsets.

Aug-08

Aug-09

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INDoNESIA

Asia Pacific

Telecommunications

VEN

DAILy ALErT

New Phones And Services Target Low-Income Users

Nokia has launched five new low-cost mobile handsets aimed at con- those marketed by Nokia, this could prove a better incentive than sumers in rural and sparsely populated areas in emerging markets. The relying on ultra-low tariffs and prepay schemes. cheapest of these new phones the Nokia 1280, Nokia 1616 and Nokia An additional tool in attracting low-income users to the mobile mar1800 range in cost between EUR20 and ket is Nokias suite of Life Tools, a packNokia Upwardly Mobile In Indonesia EUR26 (US$29 and US$38), but include age of livelihood and life-improvement Indonesia Mobile Subscriber Growth Forecast, 2007-2014 features such a long battery lives, essential 450,000 centric services and applications aimed at 180 for frequent use in places where access to 400,000 developing the users commercial, online 160 electricity is limited. and IT skills, again all at very low usage 350,000 140 Two more expensive handsets the costs. These will launch in Indonesia in 300,000 120 Nokia 220 slide and Nokia 2690 support December 2009, following a successful 250,000 100 email via Nokias proprietary Ovi Mail commercial launch in India earlier this 80 service, effectively giving many low- 200,000 year. Agriculture-based services will 60 income users in emerging markets their 150,000 launch in Java and Sumatra and Educa40 first online experience. Ovi Mail accounts 100,000 tion and Entertainment services will be 50,000 20 can be created on the device, and users available nationwide. Network operators 0 0 can start sending and receiving emails Telkomsel, Indosat, Excelcomindo (XL) 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f without needing access to a computer. and Hutch (3) will support the offering. No. of Mobile Phone Subscribers ('000) LHS No. of 3G Phone Subscribers ('000) LHS These handsets also include cameras and BMI believes that Nokias efforts to No. of Mobile Phone Subscribers/100 Inhabitants RHS GPRS/MMS support, thus offering a full ultimately reduce the total cost of ownerf = forecast. Source: BMI range of multimedia capabilities. ship (TCO) of mobile phone ownership BMI considers it vital that handset and usage to around US$5 per month manufacturers focus on low-cost handsets as much of the mobile will be a vital tool in helping the vendor as well as its network sectors future subscriber growth opportunities are going to come and service provider partners in tapping and growing a vast and from the lower income levels of societies in emerging markets. previously underserved part of the market. In Indonesia, mobile With penetration in mature markets essentially played out, network phone penetration stood at around 62.4% in 2008; BMI forecasts operators need to attract users with very low levels of disposable that penetration will rise to around 157% by 2014, when overall income to their services, and by offering low-cost devices such as mobile user numbers will have risen by 169% to 393.8mn.

coMPANy NEwS ALErT

Indonesian WiMAX Deployment Accelerates

PT First Media, the Indonesian broadband and cable TV operator serv- will need to move quickly to sign up subscribers and begin to realise ing key cities such as Jakarta and Surabaya, has initiated construction a return on its investment. The company aims to sign up 100,000 of its new wireless broadband platform, based on WiMAX technology. users within a year of launch; its goal is to be serving 1mn users within four years. The vast majority of The Jakarta Post reports that four out WiMAX To Provide Broadband Boost these will be connected to First Medias of a planned 10 WiMAX base stations Broadband Market Growth, 2007-2014 existing cable infrastructure. The comhave now been built and are ready to go 6 14,000 pany already has 145,000 FastNet cable into service in Greater Jakarta, including broadband subscribers. certain satellite cities. 12,000 5 BMIs research shows that there Having successfully bid in August 10,000 4 were approximately 1.457mn broadband 2009 for WiMAX licences covering three 8,000 subscribers in Indonesia at the end of regions of Indonesia (Zone I, covering 3 2008, representing a penetration rate of North Sumatra and Aceh provinces, and 6,000 2 0.6%. Based on recent activity at prinZones VI and IV, covering Jakarta, Bo4,000 cipal broadband operators PT Telkom gor, Depok, Tangerang and Banten), First 1 2,000 and PT Indosat, we believe it likely that Media has become the first of eight licenthe national subscriber base will reach 0 0 sees to reveal advanced plans regarding 2.267mn (1% penetration) by the end of network deployment. Reportedly, First 2009. Over the next five years, to 2014, Media will invest IDR1trn (US$107mn) No. of Broadband Internet Subscribers ('000) LHS No. of Broadband Internet Subscribers/100 Inhabitants RHS broadband penetration will rise to no in establishing its WiMAX network. f = forecast. Source: BMI more than 5%. Funding is coming from internal cash Our growth projection is conservative, flows as well as bank loans. based on relatively weak sales of broadband services by the major The licence for the highly urbanised and, therefore, relatively affluent Zone IV (the Greater Jakarta region) carried a reserve bid- players in recent quarters (attributed to the high prices of existing ding price of IDR15,116mn in the WiMAX auctions. As such, it wired broadband services and customers reticence to take on these was the most expensive licence on offer. Consequently, First Media services at a time of economic hardship).
2007 2008 2009f 2010f 2011f 2012f 2013f

2014f

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NEZUELA BANgLADESh
rEgULATory DEVELoPMENT

Asia Pacific

Telecommunications

Regulator Planning To Rate Operators Performance

The Bangladesh Telecommunications Regulatory Commission (BTRC) is planning to begin publishing monthly ratings of the performance of the countrys mobile operators, reports cellularnews. Publication of the draft procedure for producing the ratings is expected to be published shortly, following consultation with the operators themselves. A Swiss network quality measurement company, SwissQual, will provide the necessary equipment and software for the regulator to make its measurements. lines and the rate of dropped calls or lost SMS. Network coverage is also a factor. The rating system will take these and other factors such as customer care into account. It should in theory provide consumers with better information, allowing competition to function more effectively. However, the impact of the ratings will depend a great deal on how widely they are published, and how well they are understood and trusted. If these issues are not carefully addressed, this runs a considerable risk of being a superfluous investment. The Bangladeshi telecoms market is supervised by the BTRC, an independent commission that was established by the Bangladesh Telecommunication Act of 2001. The BTRC started operating at the end of January 2002. The long-term goal of the BTRC is to ensure the provision of affordable telecoms services of an acceptable quality, anywhere in Bangladesh. Specific targets include the promotion of ICT applications that support poverty reduction and the countrys socio-economic development. Other regulatory targets include the creation of an environment that enables customer choice for ICT services and encourages joint public-private co-operation in ICT development.

A Ripe Market
Bangladesh is a highly competitive mobile market. With six active mobile operators, this suggests that the market could be ripe for consolidation. With SIM registration and an increase in SIM taxation both having recently squeezed market growth, operators need to be competitive on many fronts in order to attract the reduced number of new subscribers available on the market. Price competition is of course very important in a generally low-income market like Bangladesh, but with prices already driven almost as low as they can go, other factors come into play more significantly. These include network quality issues, such as the quality of the

coMPANy NEwS ALErT

Second WiMAX Launch For Bangladesh

BanglaLion Communications has announced the launch of a pilot Augere may be a tough act for BanglaLion to follow. Sixty service of its new wireless broadband network, based on WiMAX percent of the Bangladeshi operators shares are held by Augere technology. Based in Dhaka, BanglaLion plans to rapidly roll out Holdings of the UK, a company that has acquired WiMAX its infrastructure to key population and business centres across spectrum in several Asian and African markets and which has Bangladesh. To do so, it will spend US$250mn in deploying 6,000 recently received a capital injection from Harbinger Capital WiMAX base stations over a five-year period. Approximately 900 Partners. Augere Holdings has a good telecoms pedigree, too, such base stations are being used within with France Tlcom owning 22% of the pilot service. the UK holding company and giving WiMAX Helps To Grow Broadband Usage, But Penetration Stays Low The new operator will be competit excellent potential market access Broadband Market Growth, 2007-2013 ing for customers with Augere Wireleverage in Africa. It is also being 1.8 less Broadband Bangladesh, which 3,000 managed by a former CEO of Orange. 1.6 launched its WiMAX network in 2,500 Augere is already operating a WiMAX 1.4 October, also focusing on Dhaka. Auservice in Pakistan and will launch 1.2 geres service is being marketed under 2,000 services in Uganda and Rwanda in the 1.0 the Qubee brand name at BDT3,400 1,500 near future. The company claims it is 0.8 (US$49.35) per month for low-speed actively seeking to acquire spectrum 1,000 0.6 512kbps access and at BDT6,200 and licences in key Asian and African 0.4 500 (US$89.99) per month for very highmarkets, such as Indonesia, the Philip0.2 speed 1Mbps access, so BMI expects pines and Nigeria. 0 0.0 that BanglaLions commercial tariffs There were 1.007mn broadband will closely mirror the charges set by subscribers in Bangladesh at the end No of Broadband Internet Subscribers ('000) (LHS) Augere Wireless. of 2008, representing a penetration No of Broadband Internet Subscribers/100 Inhabitants (RHS) The Bangladesh Telecommunicarate of just 0.7%. By the end of 2009, tion Regulatory Commission (BRTC) f = forecast. Source: BMI subscriber numbers in the country will auctioned three WiMAX licences in have risen to 1.4mn (1% penetration). September 2008. BanglaLion and Augere acquired one licence Thanks to increased investment in fixed-line infrastructure, as apiece, while the third was initially awarded to BRAC BD Mail well as the roll-out of wireless broadband platforms such as Network before being returned to the regulator after BRAC WiMAX, BMI believes that the Bangladeshi market will be supdeclined to pay its licence fee. BMI understands that this third porting 2.432mn broadband subscribers by 2013. However, this licence has since been awarded to international operator Mango will still equate to a penetration rate of less than 2%, indicating Teleservices. Meanwhile, KDDI of Japan has just acquired a 50% that a vast wellspring of demand for low-cost broadband services stake in BRAC. will remain untapped for many years to come.
2007 2008 2009f 2010f 2011f 2012f 2013f

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JAPAN/MALAySIA

Asia Pacific

Telecommunications

VEN

coMPANy NEwS ALErT

Softbank Introducing Android Phone

Smartphones and other advanced handsets play an integral role Softbank has revealed plans to launch a new handset to its range that will run using the Google Android operating system, reports in the Japanese mobile market. At the end of June, 3G subscribers Reuters. It has not revealed the manufacturer of the new model, officially accounted for over 90% of the market, clearly indicating the popularity of advanced services, and the but has confirmed that it will be a new Price Currently Key Competitive Element handsets that deliver them effectively. model not yet on sale anywhere else. Japan Mobile Market June 2009 (mn) Apples iPhone has, globally speaking, Softbanks main competitors, NTT Softbank been the star of the smartphones, and DoCoMo and KDDI, have both already Mobile 20.95 Softbank is the exclusive iPhone partner launched Android phones. Willcom 4.543 network in Japan. NTT DoCoMo has Softbank is the third-ranked mobile KDDI remained determined that it will soon operator in Japan, with 20.95mn mobile eMobile 1.672 30.996 also offer the iPhone, but progress does subscriber at the end of June 2009, givnot seem to be forthcoming. However, ing it an 18.5% market share. While it is the impact of the iPhone in Japan has still a considerable distance behind both been fairly muted and does not appear NTT DoCoMo and KDDI, Softbank to have brought Softbank the advantage has been making good gains in recent that many expected, with tariffs seeming months, leading the quarterly net addito have become much more important in tions. Softbanks aggressive marketing NTT DoCoMo the battle for new subscribers. campaigns, including special offers and 54.864 Despite being a nation of gadget price cutting, have been identified as the Source: TCA lovers, Japans handset market has principle reason for its strong performbeen contracting considerably. The ance in the first and second quarters of 2009. Results for July 2009 show that NTT DoCoMo began to contraction was kicked off in 2007 following the withdrawal of a overtake Softbank in that month, following the introduction of its considerable amount of the handset subsidies previously provided by operators. It has accelerated thanks to declining consumer spending. own, more competitive pricing initiative.

MALAySIA
coMPANy NEwS ALErT

DiGi To Invest MYR400mn Annually In 3G Expansion

For each of the next three years, Malaysian mobile network operator countrys mobile operators to effectively target different demographic DiGi.Com will invest MYR400mn (US$118mn) in extending its re- groups and win new subscribers on an ongoing basis. The relatively cently launched Turbo 3G service to around 70% of the population. The recent introduction of number portability has also made it much easier company says that it sees mobile internet and more attractive for customers of one Prices, Customer Focus and Network Reach Drive usage as being its primary growth driver mobile network to switch to another, also 3G Growth for at least the next two years, and that its driving subscriber growth opportunities Mobile Subscriber Forecasts, 2007-2013 new low 3G tariffs it has introduced will 40,000 going forward. 9,000 sustain that growth. As part of the Turbo 3G scheme, 8,000 35,000 DiGi is a late arrival to the Malaysian 30,000 7,000 DiGi provides the Internet Unlimited 6,000 3G market, having only launched its 25,000 Max 5 service to prepaid customers, 5,000 services in the Klang Valley region in 20,000 offering unlimited mobile internet ac4,000 March 2009, almost four years after ri- 15,000 cess for just MYR5 (US$1.50) per day. 3,000 vals Celcom and Maxis. A fourth player 10,000 Postpaid customers are offered the Inter2,000 MiTV has yet to launch its 3G netnet Unlimited Monthly 58 plan and the 5,000 1,000 work. At the time of writing, DiGis 3G BlackBerry Unlimited plan, each costing 0 0 networks had gone live in Penang and MYR58 per month. Kota Kinabalu, and plans are in place to DiGi has already signed up almost No of Mobile Phone Subscribers ('000) (LHS) extend coverage to Johor Bahru, Ipoh 30,000 mobile broadband users since the No of Mobile Phone Subscribers/100 Inhabitants (RHS) and Kuching in 2010. By the middle of March 2009 launch; BMI expects that No of 3G Phone Subscribers ('000) (RHS) next year, 50% of the country will have f = forecast. Source: BMI the number of users will now grow very access to the DiGi 3G network. quickly thanks to these new low tariffs Price competition is key to the continand improved geographic reach. There ued growth of the mobile services market in Malaysia, where penetra- were 2.501mn 3G subscribers in Malaysia at end-2008, a figure we tion passed the 100% mark in late 2008 and is likely to approach 100% forecast will reach 3.690mn (12.3% of the overall mobile user base) by the end of this year, according to BMI research. We believe that by the end of 2009. By 2013, we expect that the number of 3G subhighly focused market segmentation is being used successfully by the scribers will be 8.437mn, or 23.4% of the overall mobile user base.
2007 2008 2009f 2010f 2011f 2012f

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NEZUELA PAkISTAN
INDUSTry NEwS

Asia Pacific

Telecommunications

Higher Import Duties Blunt Mobile Growth in 2008/09

New data published by the Pakistan Telecommunications Authority continued fierce price war among the countrys six mobile network (PTA) show that the value of mobile handsets imported into the country operators meant that customers could not be persuaded to upgrade in the 2008/09 financial year fell for a sectheir handsets or move from prepaid to Handset Taxes Affecting Imports And Customer ond consecutive year, from US$446mn to postpaid schemes. Consequently, ARPU Growth US$130mn. In 2006/07 imported handsets levels continued to fall, reaching an Mobile Subscriber Growth, 2007-2009 had reached a value of US$670mn. There 100 industry average of US$2.48, down by 8 have been two main reasons for this de20% y-o-y. 90 7 cline. Firstly, the government raised taxes These developments coincided with 80 6 on sales of mobile phones in order to help renewed regulatory pressure on opera70 5 60 its growing debt burden, and secondly the tors to eliminate inactive customers and 4 50 global recession began to force consumers tighten up customer application proce3 40 to defer buying new phones. dures in order to safeguard national se2 30 Pakistans trade deficit has been climbcurity and to stop the smuggling of non1 20 ing steadily in recent years and its repayregistered handsets into Pakistan. This 0 10 ment commitments have been depleting would account for a net loss of 296,000 0 -1 its foreign exchange reserves. In order to subscribers in Q408 and abnormally low help deal with its cash problems, the state subscriber addition volumes in H109. No. of Mobile Telephone Subscribers (mn) LHS raised customs and regulatory duties on Growth should soon resume its preNet Additions (mn) RHS mobile phones to PKR750 (US$9). This vious momentum, thanks to continued Source: BMI followed a similar move in 2007/08, when aggressive pricing competition between such duties were raised from PKR250 to the operators as well as the governments PKR500. In consequence, customers have been less keen to spend on decision to return mobile handset taxes to PKR250. The operators have new mobile phones or upgrading their existing handsets. passed on the full custom duty cut to end-users by reducing the cost of Although mobile subscriber numbers were up by 7.5% in each handset by PKR500. BMI believes that operators now have ample 2008/09, to around 94mn in June 2009, this was greatly reduced opportunities to look to rural and underserved areas for customer addifrom the 39.4% growth in 2007/08. Nevertheless, mobile opera- tions, particularly if they continue to focus on offering low-cost handsets tors revenues still grew by 16% year-on-year (y-o-y), although the (such devices reportedly account for 80% of imported handsets).
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109

INDUSTry TrEND ANALySIS

Pakistan Government Enforces Broadband Competition

The Pakistan Telecommunications Authority (PTA) has forced the available for US$8 per month. In Pakistan, however, such services averincumbent fixed-line and broadband operator Pakistan Telecommu- age US$16 per month. With the countrys mobile operators electing to nication Company Ltd (PTCL) to enter a formal interconnection deploy wireless broadband mainly in urban areas, customers in many agreement with rival operators in the smaller population centres have little or no Broadband Growth Now Possible For Pakistan xDSL broadband market. The broadhigh-speed access to the internet. Forecast Broadband Subscriber Growth, 2007-2014 band operators, many of which are small The Pakistani government has tried to 40,000 18 and privately owned, have petitioned for encourage service providers to take advanBroadband Internet Subscribers ('000) LHS Broadband Internet Subscribers/100 Inhabitants RHS 16 reasonable access to PTCLs fixed-line 35,000 tage of rural service provision subsidies via 14 network to help them reduce costs and 30,000 the Universal Services Fund, but roll-out offer more competitive tariffs. has been slow, affected by service provid12 25,000 BMI welcomes this long overdue ers inability to quickly source and deploy 10 move by the regulator, which we believe 20,000 infrastructure. Further problems include 8 will be instrumental in breaking the 15,000 the relatively high cost of PCs and laptops 6 dominance of the incumbent and cause and a widespread lack of IT literacy. a much-needed price war for broadband 10,000 At just 0.2% in 2008, broadband pen4 services provision in this market, which etration in Pakistan is among the lowest 5,000 2 served just 272,626 subscribers at the in the Asia region, and we expect this to 0 0 end of March 2009 (latest published rise to just 0.4% by the end of 2009, as 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f PTA data). Although the market was private operators such as Transworld f = forecast. Source: BMI liberalised in 2004, it has been difficult Associates, WorldCall, Wateen Telto discourage PTCL from making the ecom and MultiNet failed to meet the most of its fixed-line infrastructure. initial mid-June 2009 interconnection agreement deadline set by the BMI has consistently identified cost as being the single largest PTA. With an agreement now in place, BMI expects that broadband barrier to growth in the Pakistani broadband market. In India, where subscriber numbers will rise from 267,000 in 2008 to about 317,000 the government is actively pushing for growth, broadband services are by end-2014, when penetration ought to reach 15%.

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SoUTh korEA/SINgAPorE

Asia Pacific

Telecommunications

VEN

coMPANy NEwS ALErT

ONSE Telecom Looks To Mobiles As Finances Pick Up

The leading provider of long-distance and international voice telephony services and infrastructure in South Korea, ONSE Telecom, is pointing to greatly improved financial performance in recent months that will finally allow it to return to growth after years of mediocre achievements. To capitalise on this upswing in fortunes, the company is looking to break into the lucrative mobile services market. However, will ONSE be joining the field too late to make much of a difference? Taihan Electric Wire gained control of ONSE Telecom in April 2008 and has spent much of the intervening time restructuring the company and rationalising its assets. Although its core business is still offering public telecommunications services to business and residential consumers via its long-distance and local telephony platforms, ONSE is focusing on growing its ICT business, providing integrated IT and telecommunications services to large enterprises. Although precise details concerning its financials are rarely disclosed, Korean media reported that ONSE recorded operating profits in each of the last three quarters. If a positive result is also reported in the fourth quarter, FY09 would be only the second time the company has been able to report an annual profit since it was established in 1997. To sustain this level of growth, it is clear that the company cannot continue to rely on its international long-distance telephony business, which is under severe competitive pressure from domestic rivals such as KT and global players such as AT&T and NTT Communications. ONSE does have a very strong asset in its international calling card business in Korea, where it is the number one player, but it is under threat from the very low-cost VoIP-based offerings from a host of smaller and nimbler players. Entering the mobile phone market, therefore, would seem to offer great potential for growth, given current usage volumes in the country and signs of unabated demand for services.

SINgAPorE
coMPANy NEwS ALErT

SingTel Starts LTE Trials, NTT DoCoMo Sees LTE In 2010

Next generation networks and services are clearly weighing heavily proponent Verizon Wireless has yet to commit and incumbent on the minds of vendors and operators alike at this years Mobile Telstra could be barred from acquiring the spectrum and licences Asia Congress in Hong Kong, as regional heavyweight Singapore it needs for LTE unless it capitulates to government and regulatory Telecom (SingTel) has announced trials of LTE technology in pressure to break up into separate wholesale and retail businesses. several of its key markets and NTT DoCoMo has outlined plans to SingTel Optus would therefore stand to benefit greatly from a firstramp up the roll-out of its 4G service. mover advantage as usage of 3G services in Australia is growing SingTel used the conference to announce a contract with Alcatel- at a rapid rate. More than 46% of mobile users took 3G services in Lucent for the supply of LTE equipment 2008, a figure BMI believes will reach Keen 3G Demand Suggests LTE Has Prospects for use in trials to be held in Australia, 62% by the end of this year. By 2013, 3G Subscriber Growth, 2007-2013 (mn) Indonesia, the Philippines and Singapore around 96% of mobile users will be on 30 beginning in the first half of 2010. The 3G networks. These forecasts are predi3G/3.5G Subscribers (mn) 2G/2.5G Subscribers (mn) results of these trials will be shared with 25 cated on the understanding that LTE will the groups operations in other countries, not be widely available before 2013. such as Bangladesh, Pakistan and Thai- 20 Meanwhile, Japans NTT DoCoMo land, enabling them to quickly migrate has announced plans to launch comto 4G mobile technology. The value of 15 mercial LTE services in December 2010. Alcatel-Lucents contract was not disHowever, due to its concerns about the closed, but it will provide radio access, 10 anticipated lack of quality and affordpacket core, IP routing and operation able handsets by that time, the service 5 systems to the group. will initially be accessible only via The trials are expected to run for datacards and other forms of plug-ins, 0 between six and nine months. SingTel known as dongles. In the meantime, 2007 2008 2009f 2010f 2011f 2012f 2013f hopes to improve its understanding of NTT DoCoMo is working with handset how the technology works and how it f = forecast. Source: BMI makers such as Panasonic, NEC and may be best adapted to suit particular Fujitsu to ensure that LTE handsets will operating environments, which vary widely across its Asian op- be on the market from 2011. By 2012 or 2013, the company will be erations. Going further, SingTel hopes that the trials will lay the offering a fully fledged 4G offering, to be known as LTE Advanced. foundations for a regionally compatible LTE network to facilitate However, for all its talk about LTE as the future of mobile techgrowth in the field of mobile broadband. The ultimate aim is for the nology, NTT DoCoMo is concerned that few other operators in the group to offer a common set of services across its various markets, region, if not worldwide, have yet to get behind it. NTT DoCoMo a canny strategy, BMI believes, as similar exercises with 2G/2.5G believes that, for LTE to become the success on a par with GSM, services have reaped dividends in the past. more networks need to be built. Perhaps the company can now look In Australia, SingTels Optus division will effectively become to LTE with more confidence now that a pan-Asian powerhouse like the first to market with LTE. Vodafone which owns US-based LTE SingTel is also on board.

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NEZUELA AUSTrALIA/TAIwAN
DAILy ALErT

Asia Pacific

Telecommunications

Telstra USD1.1bn Separation To Impact On Broadband

Shareholders in Telstra Corporation, the incumbent fixed-line, ground next year and is pressing for a voluntary agreement from broadband and mobile operator in Australia, are pressing for the Telstra by the end of 2009. If the company resists, the state may company to vigorously resist government plans to enforce structural well make good on its threats to rescind Telstras ability to bid for separation reforms aimed at improving competition and assisting additional wireless spectrum used by its mobile telephony and wirerival consumer and business service providers in addressing their less broadband operations. However, BMI believes that the break-up would be good customer bases. Nevertheless, while Telstra believes the reforms as news for Telstras rivals, proposed are uneconomical, Telstras Top Position Yields Greatest Exposure who currently each have it does see a need to reach a Australian Broadband Market Shares by Operator, June 2009 versus June 2008 to establish separate incompromise. No. of Market No. of Market % chge terconnection agreements Telstra argues that breakSubscribers, Share, Subscribers, Share, (Jun-08/ Jun-08 (mn) Jun-08 Jun-09 (mn) Jun-09 Jun-09) with each other and with ing itself up into manageri(%) (%) Telstra in order to reach ally separate wholesale and Telstra - Retail 2,254 37.6 2,274 31.0 0.9 their customers. Using a retail divisions would cost single access platform via AUD1.2bn (USD1.1bn) Telstra - Wholesale 1,708 na 1,691 na -1.0 the NBN would allow them and take up to five years to Optus - On-net 753 12.6 880 12.0 16.9 to significantly reduce their implement. The argument is Optus - Off-net 164 2.7 86 1.2 -47.6 costs and permit them to that it would prove too comOthers 2,827 47.1 4,091 55.8 44.7 compete more aggressively plex and costly to separate Total 5,998 100.0 7,331 100.0 22.2 via pricing. The NBN is all of its tightly integrated also expected to offer a IT networks and functions. Source: BMI, Telstra universal standard of transHowever, BMI sees that mission speeds and quality. Telstras real concerns are Telstra dominates the Australian broadband market, serving more closely linked to the planned government-backed national broadband network (NBN) initiative, which would require many 2.274mn retail and 1.691mn wholesale subscribers at the end of of the countrys leading operators to share infrastructure and ac- June 2009 (latest data). By comparison, rival Optus can muster only cess via a common platform. It would also be necessary to move 967,000 broadband customers. BMI data show that, collectively, all of Telstras fixed-line and broadband subscribers to the NBN, other providers served 4.091mn subscribers as of June 2009, acpotentially giving them greater freedom to take services from counting for 55.8% of the market. However, it should be noted that these organisations accounted for the bulk of year-on-year growth other operators. The government is keen to get the much-delayed project off the in the market.

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coMPANy NEwS ALErT

Vodafone, Chunghwa Telecom Partner On Mobile

Vodafone Group, the UK-based multinational mobile network operator, has signed a non-equity Partner Market agreement with Chunghwa Telecom, the incumbent telecommunications operator in Taiwan. Through this agreement, Chunghwa gains exclusive access to a range of products, services and devices from Vodafone in Taiwan. Chunghwa will also be able to leverage Vodafones experience in technology development and in marketing integrated services packages to enterprise customers. BMI believes that the addition of Taiwan as an affiliate market should prove to be hugely beneficial to Vodafone, which is currently seeking to expand its customer base in rapidly growing Asian markets as well as in emerging markets in Africa, the Middle East and Far East Asia. This, it hopes, will offset faltering demand for and usage of its networks and services in more mature markets, such as those in Western Europe. That said, Vodafones own operations in the region other than those in India have been recording only nominal growth in recent quarters, possibly due to increased pricing competition as well as customer reticence to subscribe to new services under the current volatile economic conditions. Vodafones improved coverage of key Asian markets is considered to be vital to its future growth strategy, as it recognises that it needs to address the needs of untapped low-income users in emerging markets with a comprehensive suite of basic and value-added services, coupled with an extensive family of affordable devices. The company is reluctant to invest directly in such markets, bearing in mind that returns on such investments are often quite low. Consequently, it is now emphasising its partnering strategy as a key route to growth. Vodafone has similar Partner Market agreements with China Mobile, SmarTone Vodafone in Hong Kong, M1 in Singapore, Celcom in Malaysia, Dialog Telekom in Sri Lanka, DTAC in Thailand, SoftBank Mobile in Japan and Vodafone Fiji. These operations complement Vodafones investments in India, Australia and New Zealand. Encompassing the Americas, Asia, Western and Eastern Europe, Africa and the Middle East, Vodafones 42 partner companies served 35.77mn subscribers at the end of September 2009, up by 2.9% quarter-on-quarter and by 154% year-on-year. Such subscribers accounted for 11.1% of the consolidated Vodafone customer base as of September 2009 (10.7% a year earlier).

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500mn Subscribers In India, One Year Early

The Telecom Regulatory Authority of India (TRAI) reports that domestic calls on mobile and fixed lines by a third, to help stimulate 15.23mn new wireless and wireline subscribers were added in further demand for and consumption of telephony services. Further cuts September 2009, taking overall subscriber numbers to a staggering are expected to be introduced in 2010. BMI believes that it will become 509.03mn and penetration of basic services to 43.5%. Most signifi- increasingly difficult for operators to grow revenues and profits. Thus, cant, however, is the crossing of the 500mn subscriber mark. This while we are encouraged to see service providers move to per second billing giving credit-conscious customhad been the ambitious goal set by the Wireless Growth Undimmed Despite Market ers greater insight into and control over the government for the end of 2010. The Changes way in which they use services players fact that it has been surpassed 15 months Wireless Subscriber Net Additions by Operator, September 2009 Others will need to place less emphasis on basic ahead of schedule speaks volumes about Vodafone BSNL 2.16% 13.16% revenue growth and encourage greater the pace of growth seen in the countrys 9.69% consumption of value-added services. mobile sector in recent years, while Aircel TRAI reports that Indias overall demand for fixed lines continues to fall. 8.76% wireless subscriber base (which includes As has been borne out by recent those connected via traditional GSM/ financial reports from the countrys GPRS-based cellular networks, fixedleading operators, it is becoming inTata Reliance wireless CDMA networks and the growcreasingly difficult to turn a profit from 26.74% 13.38% ing number of 3G systems) increased by even the most popular services such as 14.98mn to 471.73mn during September mobile telephony and broadband serv2009, a quarter-on-quarter rise of 3.3%. ices. BMIs view is that profitability This had the effect of raising wireless will become evermore elusive as the Bharti IDEA penetration to 40.3%. market for customers with significant 16.78% 9.32% NTT-backed Tata TeleServices Ltd disposable income becomes saturated, Source: TRAI (TTSL) recorded the strongest rate of forcing operators to lower prices further growth in September 2009, adding just still in a bid to capture at least a portion of the underserved low-income strata of Indian society. At the same over 4mn new subscribers, or 26.7% of all new net additions. Nevertime, a number of new players have entered or are poised to enter theless, its 46.77mn (mainly CDMA) subscribers accounted for just the wireless market as the government auctions spare GSM frequen- 9.9% of the overall Indian wireless subscriber base of 471.73mn as cies and prepares to sell eagerly needed 3G and WiMAX spectrum. of September 2009, demonstrating that it still has a very long way Other problems include state-mandated reductions in termination to go in achieving the same kind of reach as rivals such as Reliance charges. In March, the TRAI reduced call termination charges for all Communications, Bharti Airtel and Vodafone.

coMPANy NEwS ALErT

Uninor Plans 8-Circle Launch by YE09

Norway-based Telenor has announced detailed plans regarding the launch and development of GSM-based mobile telephony services in India, where it will operate through the Uninor joint venture in partnership with real estate company Unitech. The business will initiate services in eight of Indias 22 telecoms circles before the end of December 2009, before embarking on an India-wide expansion programme. The operator says it will now spend approximately US$760mn less on the five-year roll-out programme than the US$3.4bn originally envisaged. This, it says, is because a more focused deployment strategy has been devised: it has reached agreements with approximately 1,000 distributors and 300,000 points of sale. Also, it will not pursue a pan-India 3G licence. In addition, Telenor has managed to agree better supply terms with key hardware suppliers, although the company has yet to discuss these terms in any detail. BMI expects that India will quickly become a key component of Telenors Asian growth strategy over the next decade. The company itself expects that the region will account for 30% of its consolidated revenues within the next five years, up from around 26% at present through operations in Pakistan, Thailand, Malaysia and Bangladesh. BMI believes that this will be highly contingent on Uninor reaching financial break-even levels within three years, a feat that can only be achieved through aggressive marketing and competitive pricing. Uninor aims to have a market share of 8% by 2018. Uninor will launch services in the four populous southern states of Andhra Pradesh, Kerala, Karnataka, and Tamil Nadu, as well as in the metro circle of Chennai. In eastern India, services will launch in Bihar and Orissa, as well as in Uttar Pradesh East and West. Its principal rivals will include giants such as Bharti Airtel, BSNL and Reliance Communications. So far, 12,000 base stations have been installed and are ready to go into service. Uninor will offer 250 minutes of free talk time and full talk time on special prepaid recharge packs of INR400. Uninor will offer long-term prepaid connections at INR49, with free talk time for INR5 and free incoming calls on its network. INR1 will be charged for local calls and INR1.50 for long-distance calls. Although Telenor has previously said that it will not compete aggressively on pricing, it may have no choice but to do so if it is to gain traction. This does mean that ARPUs will be low, potentially impacting on its plans to break even in the near term. BMI believes there will be nearly 520mn mobile subscribers in India by end-2009, representing 43.7% penetration. With new operators entering the market with both GSM and 3G offerings, and as handsets and service tariffs become ever cheaper as operators increasingly target lowincome users, the user base is projected to rise to almost 1.l6bn by 2012 and to 1.38bn by 2013. By then, mobile penetration will reach 110%.

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India 3G, Wireless Broadband Auctions Delayed Again

The long-awaited auction of 3G and wireless broadband spectrum operators bid high for the 3G spectrum and spend equally vast sums and licences in India, currently scheduled to begin in mid-January, on deploying infrastructure, it will be very difficult for any of them could now be pushed back to February or later, according to a report to make an acceptable return on their investment. published by the Economic Times. It seems that the Department In Utero of Telecommunications (DoT) and the In India, value-added service consumpMinistry of Defence require more time New Players Target Mobile Broadband Market 3G Market Growth, 2007-2013 tion is still in its infancy, with voice and to establish how they will assign to comSMS services accounting for the bulk of 3.0 mercial users the 3G spectrum currently 40,000 No. of 3G Mobile Telephone Subscribers ('000) LHS usage. Few subscribers in the country used by the armed forces. The Economic 35,000 3G Market as % of entire mobile market RHS 2.5 are on contracts, and many utilise very Times suggests that it could take several cheap prepaid services. Combined with weeks to complete this process. This 30,000 2.0 recent efforts to lower SMS tariffs and would have a knock-on effect on the auc- 25,000 moves by operators to introduce per sections of 800MHz and 2.3GHz wireless 20,000 1.5 ond billing and mobile number portabilbroadband spectrum, expected to take ity (MNP), the outlook for operators is 15,000 place after the 3G auction. 1.0 one of falling core revenues and tighter 10,000 squeezes on profit margins. Already, DoT Under Pressure 0.5 5,000 these pressures are conspiring to keep The DoT is under pressure from the basic blended ARPUs low. Indian government as well as market 0 0.0 2007 2008 2009f 2010f 2011f 2012f 2013f Data from TRAI show that average players to complete the much-delayed ARPU from both CDMA and GSM 3G licensing process before the end of f = forecast. Source: BMI mobile services fell from INR256 in the current financial year in March 2010. 2006 to INR219 in 2007 and to INR166 The state budget is already geared up for the income expected to be generated by the auction process. The in 2008. By the end of 2009, BMI expects that the figure will have interest expressed by existing operators such as Bharti Airtel, Reli- fallen to around INR130. By 2011, ARPU will have fallen below ance Communications and Vodafone Essar, among others, ought the INR100 mark and will be as low as INR90 by 2014. Dragging to ensure that the auction will net billions of dollars. It is also hoped these averages down will be contributions from CDMA services, that the auction will allow new players into the still-consolidating which are often marketed to users on low incomes and support cheaper handsets than GSM offerings. Indian mobile market. However, the DoT has other pres- Mobile ARPUs Falling, Can 3G Make A Difference? However, it is clear that it will become increasingly difficult to make money sures bearing down on it, including India Mobile ARPU Forecasts (INR), 2006-2013 from mobile services in India, and, demands from existing players to wait 350 GSM Blended ARPU therefore, operators ought to consider for the Telecom Regulatory Authority CDMA Blended ARPU paying realistic prices for 3G spectrum of India (TRAI) to formulate policy 300 Average ARPU rather than engaging in a bidding frenzy, regarding the future allocation of vacant 250 as has been seen in other markets where 2G spectrum. As many of the countrys 3G has been keenly awaited. existing operators are still in the process 200 of rolling out GSM/GPRS and CDMA150 Taking It Slow based 2G networks, particularly in rural Bearing all these issues in mind, and and sparsely populated areas, while 100 given the possibility that the 3G auction also encountering capacity problems in 50 could be subject to further delays beyond areas where traffic density is very high, those suggested by the Indian media, there is keen interest in the remaining 0 BMI remains cautious when forecast2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2G spectrum. If priced attractively and ing growth for the Indian 3G market. offered with few technical restrictions, f = forecast. Source: BMI We believe that there will be 2.3mn operators could decide to wait for 2G subscribers in the country by the end of spectrum. However, there is no clear timetable for TRAIs decision-making process, and operators may 2009, most of whom will be connected to the networks of BSNL have to bid for 3G licences with no clear idea of how the 2G issue and MTNL. This will account for just 0.4% of the overall mobile subscriber base in India. By 2013, we anticipate there being 30.7mn will be tackled. 3G subscribers, or 2.2% of the overall mobile user base at that time. Under the DoTs current 3G licensing plans, up to 20MHz of 3G Facing Difficulties Cost is another issue facing putative 3G licences. 3G services and paired spectrum in the 2.1GHz band will be offered in circles where handsets are likely to be unaffordable for the majority of Indians 25MHz or more of paired spectrum is available. Where possible, for many years indeed, the countrys two existing 3G operators, four blocks of 2x5MHz will be auctioned in addition to one block state-owned incumbents BSNL and MTNL, have found it more being reserved for BSNL or MTNL. Where less than 25MHz paired difficult than expected to attract subscribers to their services. If Continued on next page...

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spectrum is available, whatever capacity is available will be allocated; again, however, one block will be reserved for the incumbent.

Let The Bids Begin

Existing mobile operators, as well as established players holding unified access service (UAS) licences for fixed and mobile services, can bid for 3G licences. Foreign operators can also bid, though their spectrum and licences will have to be owned by an Indian subsidiary. The DoT and TRAI have yet to clarify how much financial and managerial control foreign investors can exert over their Indian 3G subsidiaries, and this has caused a number of potential new overseas investors from refraining from committing to the auction until such time as greater detail can be provided. This is an issue to be considered by the Foreign Investment Promotion Board (FIPB). Bidders will be expected to pay an earnest monetary deposit (EMD) in the 3G auction. In the populous and more economically

active circles of Mumbai, Delhi and category A areas, the EMD will be INR400mn (US$8.6mn). In Kolkata and Category B circles, the EMD requirement is INR200mn (US$4.3mn). In the rural and sparsely populated Category C circles, the EMD will be INR75mn (US$1.6mn). In order to bid across all 22 3G circles in the first round of the auction, an EMD of INR5,050mn (US$108mn) will be required. Twenty-five percent of the final bid will be payable within five days from the close of the auction. The balance will be payable within the following 10 days. Only then will the spectrum and licence be issued to the successful bidder. This tight deadline could prove a major hurdle as foreign investors in particular will need to have properly established their locally domiciled operations in full and assigned finance accordingly. BMI recalls the original GSM licence auctions of the 1990s when many foreign and local investors fell afoul of last-minute changes to the terms and conditions of the auction. It is to be hoped that similar problems do not occur this time round.

coMPANy fINANcE ALErT

US$3.5bn Investment Planned By Sistema Shyam

Sistema Shyam TeleServices has announced plans to invest may pursue an ISP licence in the future, should it become necessary up to US$3.5bn in extending its mobile telephone networks and to build its own IP infrastructure. However, as MTS currently serves services across India over the next four to five years. The com- 2.5mn subscribers, BMI believes it will be some time before extra pany, which trades under the MTS brand name, currently offers capacity is required, even after the planned launch in Mumbai and mobile services via CDMA networks serving just eight of Indias Haryana by the end of this year. The increased investment could come from the sale of the 22 telecoms circles, although it has licences to cover the whole companys shares on local bourses, country. The investment will also foproviding it receives approval to do cus on acquiring network capacity and Healthy Competition Boosts Numbers so. MTS has been given authorisation bandwidth to ensure that its customers India Mobile Historical Data & Forecasts from the Department of Telecommunihave access to high-quality wireless 1,600,000 4,500 cations (DoT) to raise its share capital, broadband services. 4,000 1,400,000 under which it will offer US$680mn The company, which has just 3,500 1,200,000 worth of shares to its Russia-based launched a prepaid mobile broadband 3,000 shareholder, Sistema JSFC. The Rusoffering, dubbed MBlaze, believes that 1,000,000 2,500 sian group already owns 73.71% of the it needs to offer a combined voice and 800,000 2,000 business while a further 23.79% is held data service in order to see ARPUs 600,000 1,500 by the Shyam Group. Sistema would grow above the national average. One 400,000 1,000 not increase its stake as a result of the way of encouraging increased usage 200,000 500 offering; rather, it will fall to 54%. of mobile data services, it believes, is 0 0 Shyam Groups ownership would not to offer a comprehensive portfolio of 2006 2007 2008 2009f 2010f 2011f 2012f 2013f be affected. smartphones. MTS already sells handNo of Mobile Phone Subscribers ('000) LHS No of Mobile Phone Subscribers/100 Inhabitants RHS sets from Samsung, Haier, Huawei No of Mobile Phone Subscribers/100 Fixed Line Subscribers RHS 3G Rising Technologies and ZTE, but it is seeking f = forecast. Source: BMI, TRAI BMI believes there had been approxito add the BlackBerry family to its roster mately 0.5mn 3G subscribers in India and is reportedly set to engage Huawei and ZTE to build handsets to its specifications and labelled with the at the end of 2008, all of whom were connected to the initial MTS brand. These handsets will be entry-level devices, however, networks of incumbent BSNL, the first operator to launch 3G and will be affordable for many customers in the markets in which services in the country. This represented just 0.1% of all mobile subscribers in the country. By the end of 2009, and despite the it operates. lack of progress made in extending formal 3G licences to alternative operators, we believe the market will be supporting 2.3mn Getting On The Bandwidth Bandwidth is also an issue, and the company has bought capacity 3G subscribers, or 0.4% of the overall mobile user base. By 2013, on the pan-Indian fibre backbones of Tata Indicom, RailTel and there will be 30.7mn 3G subscribers, accounting for 2.2% of all Reliance Communications. The company has also indicated that it mobile users at that time.

Analyst: Andrew Kitson Sub-editor: Savika Voratanitkitkul Editor: Rosalind Craven Subscriptions Manager: Dan Xue Marketing Manager: Leila Scott Production: Jonathan Robson/Gavin Whenman Publishers: Richard Londesborough/Jonathan Feroze

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