Hong Kong is one of the most competitive and mature telecoms markets in the world. Although operators in Hong Kong have traditionally received more revenues from post-paid services, prepaid is becoming increasingly important as competition increases and subscribers become more conscious of their communication spend.
Hong Kong’s mobile penetration rate is over 170% and still rising. The number of prepaid subscribers grew to more than 5.8 million as of the end of 2009. Prepaid mobile’s share of total mobile connections increased from 20% in 2002 to almost half by the end of 2009.
Prepaid will continue to grow steadily. However, considering the maturity and limited size of the market, there is limited room for new user growth other than attracting existing post-paid subscribers or providing new prepaid services such as high-speed mobile broadband. We see visitors and foreign domestic helpers (FDHs) as the main segments for prepaid business in Hong Kong.
Operators are realizing the important role of prepaid services in competitive differentiation and revenue generation as the Hong Kong market becomes more saturated and competition intensifies. This can be seen by the increasing number of prepaid offerings and market promotions, emerging prepaid price wars, and falling prepaid ARPU.
Domestic operators are also facing retail competition from operators in other countries, such as China Mobile and China Unicom from mainland China, and Smart and Globe from the Philippines. Moreover, subscribers have become more conscious of their communication spend as the Hong Kong economy has been negatively affected by the global financial crisis.
Operators need to develop more prepaid services targeted at selected segments
Although operators have begun to realize its importance, they need to improve the revenue-generating capability of their prepaid business. Prepaid ARPU is much lower and is declining faster than post-paid ARPU in Hong Kong.
For example, Hutchison’s post-paid ARPU was almost nine times larger than its prepaid ARPU at the end of 2008, and its post-paid ARPU has been relatively stable while prepaid ARPU has declined significantly in the same period.
This is a result of price pressures and product positioning. Limited prepaid service offerings and the lack of marketing effort compared to postpaid have also restricted the development of prepaid.
Some prepaid services have achieved strong take-up, such as China Mobile’s 1-Card Multi-Number prepaid service, which targets frequent travelers in Greater China, and its prepaid cards for FDHs. CSL’s prepaid HSPA+ mobile broadband service has also been successful. Hybrid plans are increasingly popular in Hong Kong, especially those with monthly prepaid charges such as SmarTone’s PayGo plan.
Operators are all offering prepaid voice & SMS cards, but there are not many prepaid voice & data cards, and even fewer prepaid high-speed data-only cards or cards that support specific content or value-added services. Operators need to develop more innovative prepaid applications and specific services for targeted segments. Well-selected channels for target segments can also help to develop prepaid business.
Ovum forecasts that the prepaid proportion of total mobile connections in Hong Kong will grow slowly to 48.1% in 2010. It will then decline slowly to 45.6% in 2014. Prepaid connections are expected to increase to almost 6.7 million in 2010.
Considering the maturity and limited size of the Hong Kong mobile market, prepaid connections will still grow but at a lower speed going forward than in 2010. More prepaid mobile broadband services will be available in the market and there will be more high-speed prepaid mobile broadband services as operators upgrade their networks. We also expect the demand for communication services from travelers in Greater China will continue to increase as the economic ties between areas grow.