No country epitomizes the vagaries of Asia better than Malaysia, where world-class road infrastructure often rubs shoulders with agrarian communities. Constantly ignored in favor of hotter emerging economies like India and Indonesia but never considered in the same breath as other developed markets like Singapore and Australia, Malaysia can be best described as a transition market that has the characteristics of both developed and developing markets.
This rings true not just as a tourism moniker but also when we compare the telecom statistics of Malaysia. Malaysia is a saturated market for mobile voice with a SIM penetration of over 117% at the end of 2010. Voice tariffs have declined by over 25% in the last two years, thus making mobile broadband the next growth frontier. Wireless broadband grew at a scorching pace of 114% in 2010, with over 1.9 million subscribers, significantly more than the 1.65 million subscribers for fixed broadband.
Right in the middle
The country's broadband market has eight key players: fixed-line incumbent TM, a reinvigorated Time Dot Com, the four 3G operators (Maxis, Celcom, Digi and Umobile) and Wimax operators P1 and YTL. The most recent entrant YTL launched late last year with some 1500 BTS and a new pay-as-you-go model aimed to attract nomadic users. The extreme competition has resulted in a tariff war even on mobile broadband with entry-level packages falling to as low as RM28 (about $9) per month.
Celcom has been the net gainer with over 43% of the wireless broadband market, followed by Maxis at over 30%. The market has seen operators employing different positioning strategies to attract users, where the bigger two operators stress their coverage and reach, while relatively smaller players like DiGi successfully employed a transparent policy about the actual speeds that customers can experience rather than the peak speeds leading to over 200,000 subscribers from just 10,000 in 2009. With over 250,000 subscribers, PacketOne has been a terrific poster child for the Wimax camp by steadily gaining subscribers with a carefully crafted strategy aimed at lucrative pockets in urban areas where TM was weak.
The impact of the growth of mobile broadband had been the most severe for TM, which has lost significant market share ?falling from 77% in 2008 to 45% by 2010.
Malaysians fondness for individual homes and its low population density make it a difficult market for fixed broadband rollouts. A public-private partnership was the only way to bridge the investment gap and improve the viability of a FTTx rollout to cover over 70% of the population of the country. TM's Unifi product has generated reasonable response in the areas launched but is still perceived to be a premium product due to its starting price of RM149 ($49). Its IPTV offering, with a relatively Spartan choice of 25 channels, is unlikely to pose a threat to the vice like grip that Astro has in the pay-TV market with over 2.7 million subscribers and over 100 channels.
Although TM hopes to attract the heavy home user with the Unifi package to stem its market share losses, the action for mobile market has shifted to the lower end of the demand spectrum where operators are jostling to capture the nomadic user and the entry-level user. With a plethora of mobile devices including tablets going to flood the market in 2011-12, we anticipate the market will become further segmented between existing users and nomadic users and wireless operators casting their net further into semi-urban areas like Terangannuand Perlis to gain further subscribers.
The outlook for Malaysia gets more interesting due to a number of factors.
- Malaysia saw its first wholesale deal when Maxis signed a 10-year agreement with TM for using its HSBB subscribers. This marks a clear shift in TM's strategy that realizes it needs to balance its investment risk.
- LTE licensing for 2.6 GHz anticipated in 2011 has raised more expectations with rumors of two licenses being issued. LTE is expected to help the top three operators add more capacity to serve the expanded base.
- Operators like Celcom and DiGi have also announced that they will focus equally on growing the small-screen users, i.e. smartphones. Smartphone penetration in Malaysia stands at 20% and is expected to grow to 60% by 2015, leading to a further growth in mobile data. The key question is how do the top three operators optimize their networks and investments without losing market share in the mobile broadband market.
- Greater network sharing by operators like DiGi and Celcom are also signs that the market saturation is accelerating the need for cost optimization.
- To improve the customer experience Celcom, the net gainer from the mobile broadband growth, is investing more in branded retail outlets to improve the sampling of data packages and enriching the value proposition.
With more than eight operators boosting supply, greater purchasing power and falling prices of computing devices, Frost & Sullivan anticipates robust growth for the Malaysia broadband market both for small-screen and large-screen broadband users. Large-screen broadband users are expected to grow from 3.6 million to 7.8 million by 2015, of which over 5.6 million subs will be mobile broadband users. We also anticipate smartphones to play a significant role in the future of small-screen users, increasing users from the current 2.2 million to 12 million users by 2015.
Jayesh Easwaramony is VP of ICT practice at Frost & Sullivan Asia Pacific. For more info go to www.frost.com or email djeremiah@frost.com or carrie.low@frost.com