Asia/Pacific and Japan Cellular Market: 3Q02 Review (Executive Summary) Executive Summary

Transcription

1 Asia/Pacific and Japan Cellular Market: 3Q02 Review (Executive Summary) Executive Summary Publication Date: December 6, 2002

2 Authors King-Yew Foong Nahoko Mitsuyama Kobita Desai Nick Ingelbrecht This document has been published to the following Cluster codes: TELC-WW-EX-0516 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

3 Asia/Pacific and Japan Cellular Market: 3Q02 Review (Executive Summary) Key Market Trends Market Overview The number of cellular connections in Asia/Pacific and Japan increased from million in the second quarter of 2002 to million in the third quarter of 2002, a 6.9 percent increase. The major market trends in this region for the third quarter of 2002 include: More and more operators have launched their multimedia messaging services (MMS). The service is now available in Australia, Singapore, Hong Kong, Taiwan and the Philippines. Cellular connections in China grew by 8.1 percent quarter-on-quarter, with the country capturing 54.1 percent of all net new cellular connections. Thailand, India and Indonesia continued to be growth markets, with prepaid connections and competition being key drivers. The mobile virtual network operator (MVNO) concept received setbacks in Singapore and Hong Kong as two operators folded because of highly competitive local conditions. cdma2000 1x continues to do well in South Korea and Japan and the service is now available in New Zealand. Services will come online in Australia soon, while the service is expected to commence in China and Taiwan next year. New Zealand's total cellular connection base declined, while countries such as Vietnam, Pakistan and Bangladesh experienced rapid take-up in cellular services (from a low subscriber base). Globe Telecom and Smart have launched MMS in the Philippines. For the time being, Short Message Service (SMS) is still the main driver for mobile data, with over 92 million outbound SMS messages per day in the third quarter alone. Close to 40 percent of cellular services revenue for Globe Telecom and Smart are now derived from mobile data. However, the prepaid segment has been experiencing higher churn in the first nine months of 2002 when compared to a year ago. This is attributed to an economic slowdown, which resulted in some people being unable to afford the service. As a result, Smart and Piltel have launched a "PureTxt 100" prepaid card for its prepaid users. The SMS-only card costing 100 pesos comes with 10 free SMS messages and is valid for one month. The Malaysian cellular market is undergoing a consolidation phase. Following Telekom Malaysia's foray into Celcom, Maxis is now trying to acquire TimeCel, the smallest cellular operator in the country. Maxis is conducting a due diligence exercise and it expects to pay 1.3 billion to 1.6 billion Malaysian ringgit for TimeCel. Celcom's connection base appeared to have suffered because of its management's preoccupation with Telekom Malaysia's takeover bid. Two 3G licenses were awarded in late July to Maxis and Telekom Malaysia. Time dot-com, Celcom and E-Touch were the losing bidders while DiGi.com did not submit a bid. Licensees will have to pay a 50 million Malaysian-ringgit fee Gartner, Inc. 1

4 2 Asia/Pacific and Japan Cellular Market: 3Q02 Review (Executive Summary) Hong Kong saw very slow growth in the third quarter. Hutchison, Peoples, SmarTone and New World have all followed CSL's footsteps in launching MMS services (CSL launched MMS back in the first quarter of 2002). CSL is selling MMS-enabled handsets in pairs to help spur data use while several operators are now offering Java game downloads and downloadable MMS content. Full inter-operator MMS is expected either in end-2002 or early CSL is offering inter-operator MMS to China, Taiwan, Macao, Singapore and three European countries. The level of competition remained high and Hong Kong saw the closure of an MVNO joint venture between Royal Dutch Shell and Sunday. In mid-2002, Australia's Telstra acquired full control of CSL from Pacific Century CyberWorks. Singapore, another small and mature market, grew 2.6 percent in the third quarter of Like Hong Kong, the market is competitive and Virgin Mobile (another MVNO) decided to close down its operations as it failed to attract a large following. StarHub, the smallest operator, managed to gain ground in terms of connection base at the expense of SingTel and M1. SingTel is offering free wireless local area network (WLAN) subscriptions to its postpaid cellular subscribers and it has 95 hotspots now, with a target of 150 by year's end. Operators such as StarHub have also introduced general packet radio service (GPRS) PC cards but such devices are of limited popularity. SingTel and M1 have both launched their MMS services in the third quarter of Gross cellular penetration has already exceeded 105 percent in Taiwan. MultiSIM cards and prepaid connections have been key contributing factors. TransAsia continued its impressive showing because of its focus on prepaid services. Mobile data services have yet to take-off in a significant way. KG Telecom only has 22,000 users for its I-mode service, which was partly because of limited handset models. GPRS users constituted only 0.69 percent (or 50,000 users)ofchunghwatelecom'sconnectionbasewhilefareastonewasslightly better with 1.45 percent (or 61,000 users). Competition remains intense and industry consolidation is likely in the near future. Far EasTone has been in talks with both KG Telecom and MoBiTai. In South Korea, SKT's connection market share fell marginally from 53.3 percent to 52.9 percent. LG Telecom's share rose from 13.9 percent to 14.7 percent. LG Telecom had embarked on a TV and media advertising campaign to emphasize its efforts on improving call quality. The company had also introduced a low-priced subscription package called "Mini" to gain market share. Generally, illegal handset subsidies and color-display handsets fuel connection growth. However, consumer upgrade to cdma2000 1x EV-DO is slow, as consumers do not find sufficient reasons to do so. SKT is entering the credit card business by acquiring the credit card business of Jeonbuk Bank to diversify its revenue stream and strengthen its position for m-commerce. In Japan, the decline in quarterly net new connections continued in the third quarter of KDDI au and J-Phone managed to expand their connection market shares. KDDI au's performance was because of the strong growth of cdma2000 1x. The service launched in April 2002 is doing well with 2.65 million connections as of late-september Camera-embedded handsets, backward compatibility with cdmaone and handset subsidies have contributed to its success. J-Phone's growth is slowing because other operators have also introduced camera-embedded handsets. NTT DoCoMo's Freedom of Mobile Access (FOMA) service had 135,700 connections only despite being launched a year ago. Issues such as network coverage and short battery life remain to be solved. Japan's personal handyphone system (PHS) connection base suffered a 1.1 percent decline in the third quarter of 2002, with only DDI 2002 Gartner, Inc. December 6, 2002

5 Asia/Pacific and Japan Cellular Market: 3Q02 Review (Executive Summary) 3 Pocket managing to edge up its connection base. DDI Pocket provided 128- Kbps packet-switched data service and offered favorable tariffs to data users. Approximately 3 million PHS subscribers possess PC card-type (Personal Computer Memory Card International Association [PCMCIA] and Compact Flash) terminals. Subscribers to mobile Internet over PHS will decrease continuously as PC card users become dominant in the PHS market. Japan maintained its position as the premier market for mobile Internet use. At the end of September 2002, cellular connections in Japan reached 72.1 million while mobile Internet users reached 57.1 million a 79.2 percent penetration of the cellular connection base, the highest in the region. Growth is slowing but the penetration is expected to exceed 80 percent by the end of The secondlargest market for mobile Internet is South Korea, with over 34.8 percent penetration. The sector received a stimulus in August when KTF and LG Telecom cut their wireless Internet service fees by 58.5 to 92.5 percent. However, ringtone/logo downloads and messaging still maintained enormous popularity. China's cellular connection base increased to million at the end of the third quarter of China Mobile HK's connection base increased by 38.8 percent because of its purchase of eight cellular networks from its parent, China Mobile Communications, for US$10.2 billion. China Mobile Hong Kong registered billion outbound SMS messages for the first nine months of this year (compared with 2.76 billion for the same period last year). China Unicom's cdmaone service finally got moving and it managed million connections as of the end of September This is largely because of promotions and handset subsidies. China Unicom has also been positioning its cdmaone handsets on the market as "green phones" because of their lower radio emission. China Mobile Hong Kong responded by offering benefits such as free call time and free mobile secretary services. In September 2002, Chinese cellular operators were allowed to set their own fees for SIM cards, global roaming and charges for phone number changes. This is in line with the gradual progress toward price liberalization. On a quarter-on-quarter basis, Thailand was again the fastest growing market, with 25 percent cellular connection growth. For the first nine months of this year, there was a net decrease in postpaid connections, which means that all net new additions had come from prepaid services. In addition to competitive dynamics and increased marketing efforts, strong consumer spending has also fueled cellular growth. However, there are some concerns over a possible slowdown in the near future and some operators have already started to focus on profitability and churn reduction. AIS had already slowed down promotions in September. Meanwhile, Indonesia, which is another growth market, continued to register strong growth a 21.3 percent increase in connections for the third quarter. In India, competition has been heating up. Following its service launch in Uttar Pradesh (West), Haryana and Madhya Pradesh in the second quarter, Bharti has now expanded to Tamil Nadu, Gujarat, Maharashtra and Mumbai. Hutchison Essar has commenced services in new areas such as Chennai, Andhra Pradesh and Karnataka. BSNL has also embarked on its nationwide rollout in September and it plans to cover 17 states by year's end. It plans to compete on pricing, which is a key consideration for Indian consumers. In Mumbai, intense competition has forced Hutchison Max Telecom and BPL Mobile to introduce free incoming calls (for intra-network calls only). Meanwhile, Koshika had its cellular license terminated for not paying the license fee. SMS use has been steadily growing with significant increases centered on special events and holidays Gartner, Inc. December 6, 2002

6 4 Asia/Pacific and Japan Cellular Market: 3Q02 Review (Executive Summary) In Australia, Optus is now focusing on the corporate segment of the market and is attempting to wrestle customers away from Telstra. Vodafone grew its connection base due largely to an increase in prepaid connections. Optus and Telstra launched MMS in July and August 2002 respectively. Vodafone also launched MMS in August In New Zealand, cellular connections declined in the third quarter of The churn of low-value prepaid users resulted in a decline in Telecom New Zealand's connection base. Take-up of its cdmaone service has been slow because of limited availability of low-end CDMA handsets. Its cdma2000 1x service was launched in July 2002 but it only garnered about 12,000 connections as of the end of September The company still has 542,000 analog connections at present and migration to digital services has also been slow. For the third quarter of 2002, markets in the rest of Asia continue to see strong growth, mainly in Vietnam, Bangladesh and Pakistan. For the full report, see the Gartner Dataquest Market Statistics, "Asia/Pacific and Japan Cellular Market: 3Q02 Review" (TCTI-AP-MS-0305) Gartner, Inc. December 6, 2002