Despite heavy competition among the country's five major players, the Taiwan telecom market has continued to impress, finding new ways to grow in a saturated market with 23 million people. Mobile penetration hit an estimated 120% last year while home broadband penetration reached 80%.
After nine years of developing 3G, the operators have had mixed results in acquiring new customers and expanding revenues, due in large part to high handset subsidies and a price war among the operators. The country issued five 3G licenses in early 2002.
Four of the five operators - Chunghwa Telecom, Taiwan Mobile, FarEasTone and VIBO Telecom Inc - run W-CDMA/HSPA networks while Asia Pacific Broadband Telecom operates a CDMA2000 network.
Taiwan is still a voice-centric market, with mobile data accounting for less than 20% of the total mobile revenue, significantly lower than other developed markets in the region such as Japan, Korea and Singapore.
To grow revenue, we suggest operators play a bigger role in the mobile content market. Chunghwa Telecom, Taiwan Mobile and FarEasTone invested significantly last year in the e-book market and application stores to boost the mobile internet market. The result was higher growth in mobile value-added services despite the marginal growth in mobile connections. Chunghwa Telecom, for example, reported 31% growth in mobile VAS and a modest 2.9% growth in mobile communication revenue in 2010.
Another interesting local phenomenon was that operators offer their own branded smartphones and tablets. VIBO launched its own brand tablet, VPad, at a discounted price. It is still too early, however, to conclude whether the experiment will result in improved profitability.
Taiwan has moved ahead with Wimax despite declining support for the technology worldwide. Awarding six Wimax licenses has generated new vibrancy in Taiwan's wireless broadband landscape. Among the mobile operators, only FarEasTone and VIBO were successful in securing Wimax licenses. With strong government support, Wimax was expected to be the dominant mobile broadband technology in Taiwan. But data released by the National Communications Commission showed a rather lackluster uptake of slightly above 20,000 Wimax subscribers last year, compared to more than 18 million 3G million subscribers. Wimax is still in its nascent stages in Taiwan.
Near field communication (NFC) is an upcoming star in the market, which was one of the earliest to deploy contactless payment. After FarEasTone's early launch of "Beep 'N Go" Chunghwa Telecom and Taiwan Mobile began deploying their own mobile payment services, which enabled subscribers to make payments and download coupons. The service has also been expanded to trains and buses. Popular smartphone brands like Apple, BlackBerry and HTC are planning to release NFC embedded handsets this year, which will further boost mobile payment services.
While the telecom market in Taiwan has been liberalized, there is still limited competition in the local broadband access market, which is dominated by Chunghwa Telecom. The incumbent's plan to wire up the entire island with its FTTH project is likely to increase its dominance in the fixed broadband market. The network advantage also enabled Chunghwa Telecom to gain dominance in the IPTV market.
Despite the heavy competition from cable TV providers, Chunghwa Telecom's IPTV service Multimedia on Demand reached nearly one million subscribers last year, mainly through service differentiation and premium content expansion. Being an integrated service provider, Chunghwa Telecom is paving its way for triple play.
The Taiwan telecom market is mature and competitive in both fixed and mobile sectors, but we see opportunity for growth, notably through operators' innovative service offerings and collaboration among the players in the Taiwan ICT ecosystem. Moving forward, this market has the potential to continue to impress us through new initiatives and cross-border collaboration.
Shi Min is a senior industrial analyst for telecom at Frost & Sullivan Asia Pacific
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MORE ARTICLES ON: Asia Pacific Broadband Telecom, Chunghwa Telecom, Far EasTone, Taiwan Mobile, VIBO Telecom