In the last eighteen months the Asia Pacific region has witnessed explosive growth in mobile broadband uptake.
This growth, particularly in the 3G dongle market, has brought many mobile operators heavily into the ISP business and many countries in the region - such as the Philippines, Indonesia and now India - have more consumers accessing the Internet via a wireless connection as opposed to a fixed line.
In no market has this been more evident than Malaysia, where mobile broadband has significantly impacted the market amidst tough competition in the wireless broadband space from Celcom, Maxis, P1 Networks, Digi, UMobile and YTL.
As these five operators vied for market share in the mobile broadband space fixed-line incumbent Telekom Malaysia was largely left behind. Before the advent of wireless broadband in the market they had virtual control of the local loop, but by 2010 Telekom Malaysia’s market share of net broadband additions had fallen to only 20%. Telekom Malaysia also does not have significant exposure to the wireless market (there is some limited CDMA WLL infrastructure), making its situation even more severe than for most of the region’s fixed incumbents.
The first quarter of 2011 saw an abrupt change in the fixed vs. mobile new subscriber rate as Telekom Malaysia has fought back with its fiber optic offering. The company has been building out its fiber optic network, branded “Unifi”, which passed 855,000 premises and has 86,000 subscribers in the first quarter of 2011.
With the launch of fiber optic services, Telekom Malaysia has been able to significantly augment its product strategy. First and foremost, it now offer a minimum speed of 5 Mbps and maximum speeds of 20 Mbps, where the default speed has been 1 Mbps for their ADSL users. Fiber has also allowed more value added services for the company - such as a more-robust IPTV offering - and the company has also started to bundle other services such as DECT desktop phones and tablet WiFi connectivity.
Fixed broadband subscriptions are making a comeback in Malaysia. In the first quarter of 2011, Telekom Malaysia’s combined net additions comprised nearly 40% of the total market among the largest players, double its total from last year, and there has also been a marked slowdown from the country’s most-aggressive mobile broadband operators. Furthermore the Unifi ARPU stood at RM 199, significantly higher than the ADSL ARPU of RM 77 and interestingly the combined PSTN and ADSL ARPU of RM 100.
EXHIBIT: Malaysia Broadband Market Net Additions, 2Q 2010 – 1Q 2011
While Telekom Malaysia’s Unifi service is still in its infancy, these results reveal some key themes. The most important is that customers will pay a premium for a faster speed irrespective of the medium through which it is delivered.
These results also offer hope for fixed line countries in other ASEAN markets such as Indonesia, the Philippines, Thailand, Vietnam and India who have very limited fiber networks. While Malaysia is a middle income country in APAC, in a few years time we believe that a similar phenomenon will happen once operators such as BSNL, the TOT, VNPT, PLDT, PT Telkom and others start to get aggressive with fiber. While Next Generation Network broadband plans are starting to be discussed in these countries, more should be done to promote high speed Internet access and a combined public sector/private sector approach would be appropriate as many Asian fixed incumbents are at least partially-state owned.
Despite the turnaround that Telekom Malaysia has recently made, the mobile broadband story in the country is far from over. Malaysia’s mobile operators are set to launch LTE services within the next year or so, which will put entry-level fiber speeds on par with mobile broadband speeds yet again. While fixed line and wireless services largely complement each other in the long run, Telekom Malaysia has shown that emerging Asian market operators can indeed fight back with fiber.
Marc Einstein is Industry Manager at Frost & Sullivan. For more information go to www.frost.com/