Mobile broadband: still growing but realism sinks in

Mobile broadband has been a telecom growth story for the past two years. Connections and traffic have continued to expand, as has associated revenues, although not at the same rate.

Just look at the growth in prepaid mobile broadband users in Asia Pacific. The segment - defined as PC-based internet connectivity using a USB modem supporting download speeds at least 384 KB - is expected to increase tenfold to 160 million over the next three years, with the APAC region leading the world by subscriber additions.

A report from Tariff Consultancy found that in many countries the majority of mobile broadband users are prepaid subscribers.

The results of a joint Telecom Asia-Ovum Asia-Pacific mobile broadband survey show that although respondents still believe mobile broadband is good news for the industry, they are now more realistic about its benefits compared to the wide-eyed enthusiasm of last year.

The survey found a more mature mobile broadband market, where expectations on margins are more realistic (although still overly optimistic), new charging methods are being explored (with unlimited flat-rates unsustainable) and the real threat to fixed broadband is better understood (as more of a direct competitor).

Better margins?

The majority of the telecom executives surveyed continue to see mobile broadband adoption as a significant boon to the industry, with 44% expecting mobile broadband to be a higher-margin business than mobile voice. That's down from 52% a year ago, but still widely optimistic based on the revenue generated compared with the required spending on capacity.

The number pf respondents thinking margins will be lower increased from 24% last year to 32%. (See chart 1)

Nathan Burley, an analyst in Ovum's Asia-Pacific research team, says more realism has set in, "yet this is still a very optimistic view of the industry's future." Another 13% said they don't know if they will increase or fall.

Responses to this question also varied more than any other between different markets. Industry participants doing business mostly in emerging markets were more likely to see mobile broadband as a higher margin service (52% vs only 36% in developed markets). Those in developed markets, further along in the adoption of mobile broadband, think that "the same" or "lower'" margins are more likely (42% of respondents answered lower vs only 22% in emerging markets).