The lessons learnt in African markets like South Africa could offer valuable insight into how telecommunications will pan out in Asia.
“There are many similarities between the Asian and African markets, where GSM continues to underpin the growth in mobile and the lack of fixed-line infrastructure threatens to undermine broadband, convergence, and business revenue prospects, with wireless broadband a key battleground,” says Julia Lamberth, South Africa’s Telecommunications sector lead at Ernst & Young, commenting on a new report from the organisation: "Asia Calling: The Rise of the Asian Telecommunications Industry".
“It is interesting to note that broadband rollout in Asia (where penetration in India is still only 1%) is following similar patterns as in Africa, and technologies such as WiMAX are being used to provide broadband and voice access in areas where there is no fixed infrastructure to backhaul WiFi and cellular,” she adds.
The report also found that, as Asia’s cities become saturated with mobile phones, telecommunications companies that want to maintain high growth rates must cross the ‘digital divide’ between wealthy urban consumers and poorer rural ones.
“Even though there are now more than 1-billion mobile phone subscribers across Asia, this boom has to date been a largely urban event,” says Vincent de La Bachelerie, head of Ernst & Young’s Global Telecommunications Practice.
“But most city dwellers already have mobiles. To maintain growth, protect current market valuations and realize their market forecasts, telecoms will need to attract less affluent rural consumers. This means that companies have to continue stretching their operating models to even lower cost levels and supply even cheaper handsets and services.”
The lower Average Revenue per User (Arpu) of rural consumers has discouraged large-scale roll out of mobile network infrastructure across large swathes of Asia. With the near saturation levels of mobile penetration in urban areas, future Asian telecoms growth, which is largely mobile-driven, will depend on the ability of operators to move into untapped rural areas.
Technology vendors have a significant role to play in deploying networks in these new areas, and new technologies such as WiMax, which is faster and cheaper than Third-Generation (3G) mobile networks, may offer a solution in the mid-term. WiMax would have the added benefit of being able to offer both voice and broadband internet services, in areas that currently have limited access to both.
Governments and regulators will also have a role to play. “Communications is an important driver of economic growth,” De La Bachelerie explains. "Helping to bridge the digital divide could be a worthwhile investment for many governments across the region, whether in terms of financial support or regulatory reform.”
Other key findings of the report include:
* Fierce competition has benefited customers across Asia, with call charges driven down to already low levels in many countries.
* Different regulatory regimes across the region are proving a challenge to companies trying to implement multi-market strategies.
* India and China are still the catalysts for regional growth, and still dwarf all other Asian markets.
* Mergers and acquisitions are playing an increasingly important role in the sector across markets at all levels of development. Private equity houses are looking to the region with increased interest.
* Hiring and retaining quality, experienced management-level staff is the overwhelming challenge for the industry.
“Having the people with real skills and expertise was identified by our participants in Asia as overwhelmingly the key internal challenge – something we are very familiar with here in Africa," says Lambeth.
"The emerging markets are, however, providing some of the real global growth in telecommunications today – which of course is catching the attention of significant players as well as creating value in the regional sectors. This sustained growth bodes well both for mitigating the Digital Divide, in Africa and Asia, as well as spurring economic development at all levels of the economy through dramatically enhanced communications.”