RESEARCH FORECAST REPORT COMMUNICATION SERVICES IN DEVELOPED ASIA PACIFIC: TRENDS AND FORECASTS 2016 2021 STEPHEN SALE AND HARSH UPADHYAY analysysmason.com
About this report This report provides an outlook on the mobile communication services market in the developed Asia Pacific (DVAP) region. It provides forecasts for voice and messaging services provided by both mobile network operators and OTT 1 providers. A complete set of forecast results is provided in the accompanying Excel data annex. The forecast is based on several sources: Analysys Mason s internal research, including our regional forecasts, Connected Consumer surveys and various trackers in the Future Comms and Media research programme interviews with stakeholders in the communications market around the world. WHO SHOULD READ THIS REPORT Strategy and planning executives who are responsible for mobile operators communication services strategies and partnerships with OTT players. Executives in mobile operators technology and innovations teams who are responsible for developing communication services. Marketing executives at vendors of communication services equipment and software, as it will help them understand the needs of their operator customers and size the addressable market for their products. 1 The term over-the-top is used throughout this report to refer to services that are made available to the general public via the public Internet. The term is defined from the perspective of network operators and is somewhat controversial for this reason, but is nevertheless widely understood. GEOGRAPHICAL COVERAGE Regions covered in this report: Worldwide DVAP region Hong Kong Japan South Korea Taiwan Forecast results provided in the data annex: Worldwide DVAP region Hong Kong Japan Singapore South Korea Taiwan Rest of DVAP region KEY METRICS Non-operator/OTT services Voice and messaging Active users by device type Outgoing traffic by device type Operator traditional services Handsets Circuit-switched (CS) voice and SMS Outgoing traffic Operator IP-based services Active users by service type VoLTE, Wi-Fi calling, IP messaging Outgoing traffic by service type VoLTE, Wi-Fi calling, IP messaging Retail revenue Voice and messaging Average spend per user 2
Contents 5. Executive summary 6. Executive summary 7. Worldwide trends 8. Worldwide: Messaging apps have overtaken SMS in traffic over 11 trillion messages were sent through apps in 2015 9. Worldwide: OTT messaging services will be used by over 60% of the population by 2021 10. Worldwide: The platform proposition advanced by LINE and WeChat is spreading beyond core Asian markets 11. Worldwide: Smartphones will continue to be the dominant communication device 12. Worldwide: Strategic responses from operators vary markedly in different regions 13. Worldwide: Operators are migrating smartphone users to VoLTE services nearly 2.4 billion subscribers are expected by 2021 14. Worldwide: Many operators are rolling out Wi-Fi calling, principally to improve indoor coverage 15. Worldwide: Google s involvement may boost Rich Communications Services, but usage is likely to remain low 16. Regional trends 17. Developed Asia Pacific: Many operators will no longer compete for messaging and OTTs will dominate the market 18. Developed Asia Pacific: Operators are hoping that innovation in voice will limit substitution by strong OTT players 19. Country-level trends 20. Hong Kong: Operators have entered partnerships with OTT players but hope that VoLTE can support their voice revenue 21. Japan: Japanese operators are ahead of the curve and are focusing on digital innovations and OTT investments 22. South Korea: Operators are setting standards for innovation in voice, despite their lack of success in messaging 23. Taiwan: Taiwan has the highest potential for VoLTE growth in the region, due to the nascent state of the market 24. Forecast methodology and assumptions 25. Forecast outputs and definitions 26. Forecast methodology 27. About the authors and Analysys Mason 28. About the authors 29. Analysys Mason s consulting and research are uniquely positioned 3
List of figures Figure 1: Messaging traffic, Developed Asia Pacific, 2010 2021 Figure 2: Mobile voice traffic, Developed Asia Pacific, 2010 2021 Figure 3: Messages sent by message type worldwide, 2010 2015 Figure 4: Messages sent by message type and number of OTT messaging active users worldwide, 2010 2021 Figure 5: OTT messaging users by device worldwide, 2010 2021 Figure 6: OTT voice users by device worldwide, 2010 2021 Figure 7: Retail revenue for operator mobile voice services worldwide, 2015 2021 Figure 8: Retail revenue for SMS services worldwide, 2015 2021 Figure 9: Active users of VoLTE services by region, 2015 2021 Figure 10: Wi-Fi calling service users and traffic worldwide, 2015 2021 Figure 11: Traffic for all mobile operator messaging services and number of operator-provided IP messaging service users worldwide, 2015 2021 Figure 12: Messaging traffic, Developed Asia Pacific, 2010 2021 Figure 13: Mobile voice traffic, Developed Asia Pacific, 2010 2021 Figure 14: Messaging traffic by message type, Hong Kong, 2010 2021 Figure 15: Messaging traffic by message type, Japan, 2010 2021 Figure 16: Messaging traffic by message type, South Korea, 2010 2021 Figure 17: Messaging traffic by message type, Taiwan, 2010 2021 Figure 18: Overview of the main forecast outputs Figure 19: Overview of the forecast methodology used in this report 4
Messages sent (billion) Communication services in developed Asia Pacific: trends and forecasts 2016 2021 Worldwide: Messaging apps have overtaken SMS in traffic over 11 trillion messages were sent through apps in 2015 Several messaging apps have user bases in the hundreds of millions. High usage levels have resulted in these apps rapidly overtaking SMS in volume of messages sent. WhatsApp is the largest messaging service in the world it reached a billion active users in February 2016. Several other services have huge user bases: for example, Facebook Messenger had 900 million active users at the end of April 2016 and WeChat had 597 million at the end of 2015. Figure 3: Messages sent by message type worldwide, 2010 2015 14 000 User base in 2015 2.3 billion individual app users 12 000 6.6 billion handsets 10 000 11 641 billion Users very often have multiple apps. We estimate a global average of 1.9 apps per person in 2015. There were around 2.3 billion individual users of messaging services worldwide at the end of 2015, with nearly 2 billion of them on smartphones. These applications have driven high levels of usage by offering a strong user experience, typically with no charge. WhatsApp reported a peak of 42 billion messages sent over a 24-hour period in February 2016. We estimate average app usage to be much lower, but still over 500 messages per month. 1 Traditional operator services benefit from a larger addressable market, but have a relatively poor user experience and much lower average usage levels. The average smartphone user sent 132 SMS messages per month in 2015. 8 000 6 000 4 000 2 000 8 470 billion 2010 2011 2012 2013 2014 2015 1 There are several factors that prevent us from simply extrapolating from WhatsApp s usage (which would imply average usage of >1000 messages per month). First, WhatsApp reports peak, not average, volumes. Second, usage levels of other popular apps are typically much lower than those of WhatsApp. Finally, some traffic will be caused by spambots and application-to-person services. SMS OTT/Non-operator IP Source: Analysys Mason 8
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Messages sent (billion) Communication services in developed Asia Pacific: trends and forecasts 2016 2021 Taiwan: Taiwan has the highest potential for VoLTE growth in the region, due to the nascent state of the market Taiwan is being targeted by the major global and regional OTT apps, but LINE and WhatsApp have been particularly successful. Taiwan is one of LINE s core markets and many advanced services have been piloted here (for example, LINE s virtual bank service). Kakao Talk, Viber and WeChat are also popular. The market is fragmented and usage of multiple apps is particularly common. SMS usage is very low in Taiwan and operators have little interest in competing in messaging. Instead, they are focusing their efforts on improving native voice services on mobile handsets. Both APT and Taiwan Mobile launched VoLTE services in the first half of 2016 and the other major operators are expected to follow later in the year. Penetration of OTT voice is relatively high in Taiwan we estimate it to have reached 58% of smartphone users at the end of 2015. OTT voice services are supported by the prevalence of unlimited data packages. Operators are promoting the quality of their voice services compared to OTT alternatives. Coverage is also an area where operators can improve and we expect to see deployments of Wi-Fi calling later in 2016. Taiwan is a relatively advanced mobile market, but its operators tend to look to other countries in the region (such as Japan and South Korea) for innovation. 90% FORECAST METRICS 2021 Figure 17: Messaging traffic by message type, Taiwan, 2010 2021 200 150 100 50 0 13% 173 BILLION 79% 17 MILLION SMS OTT/Non-operator IP Operator IP messaging Source: Analysys Mason 23
CONTENTS EXECUTIVE SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS COUNTRY-LEVEL TRENDS HONG KONG JAPAN SOUTH KOREA TAIWAN FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON 27
About the authors Stephen Sale (Research Director) oversees Analysys Mason's consumer research and is also the lead analyst for the Future Comms and Media research programme. His primary areas of specialisation include next-generation communication services, OTT player strategies and mobile pricing. He also has extensive experience in analysing operator strategies and forecasting fixed and mobile service markets. Before joining Analysys Mason in 2004, Stephen worked in the industry on areas that include VoIP, next-generation service architecture and broadband access. He has a degree in economics and an interdisciplinary MRes from the University of London. Harsh Upadhyay (Analyst) contributes to Analysys Mason's Asia Pacific research programme, and is based in our Singapore office. His research focuses on market tracking, competitive assessment, data forecasting, next-generation services and consumer behaviour analysis in the Asia Pacific telecoms market. He also supports consulting projects and presents at industry events. Harsh's experience in the TMT industry is diverse, and he has a detailed understanding of the telecoms market in the region. He has previously worked with Frost & Sullivan and IDC as an analyst and consultant, and his clients have included leading ICT firms and government bodies. Harsh holds a master's and bachelor's degree in Business Management from India. 28
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