Malaysia: transiton market or truly Asia?

Jayesh Easwaramony, Frost & Sullivan
15 Feb 2011

No country epitomizes the vagaries of Asia better than Malaysia, where world-class road infrastructure often rubs shoulders with agrarian communities. Constantly ignored in favor of hotter emerging economies like India and Indonesia but never considered in the same breath as other developed markets like Singapore and Australia, Malaysia can be best described as a transition market that has the characteristics of both developed and developing markets.

This rings true not just as a tourism moniker but also when we compare the telecom statistics of Malaysia. Malaysia is a saturated market for mobile voice with a SIM penetration of over 117% at the end of 2010. Voice tariffs have declined by over 25% in the last two years, thus making mobile broadband the next growth frontier. Wireless broadband grew at a scorching pace of 114% in 2010, with over 1.9 million subscribers, significantly more than the 1.65 million subscribers for fixed broadband.

Right in the middle

The country's broadband market has eight key players: fixed-line incumbent TM, a reinvigorated Time Dot Com, the four 3G operators (Maxis, Celcom, Digi and Umobile) and Wimax operators P1 and YTL. The most recent entrant YTL launched late last year with some 1500 BTS and a new pay-as-you-go model aimed to attract nomadic users. The extreme competition has resulted in a tariff war even on mobile broadband with entry-level packages falling to as low as RM28 (about $9) per month.

Celcom has been the net gainer with over 43% of the wireless broadband market, followed by Maxis at over 30%. The market has seen operators employing different positioning strategies to attract users, where the bigger two operators stress their coverage and reach, while relatively smaller players like DiGi successfully employed a transparent policy about the actual speeds that customers can experience rather than the peak speeds leading to over 200,000 subscribers from just 10,000 in 2009. With over 250,000 subscribers, PacketOne has been a terrific poster child for the Wimax camp by steadily gaining subscribers with a carefully crafted strategy aimed at lucrative pockets in urban areas where TM was weak.

The impact of the growth of mobile broadband had been the most severe for TM, which has lost significant market share ?falling from 77% in 2008 to 45% by 2010.

Malaysians fondness for individual homes and its low population density make it a difficult market for fixed broadband rollouts. A public-private partnership was the only way to bridge the investment gap and improve the viability of a FTTx rollout to cover over 70% of the population of the country. TM's Unifi product has generated reasonable response in the areas launched but is still perceived to be a premium product due to its starting price of RM149 ($49). Its IPTV offering, with a relatively Spartan choice of 25 channels, is unlikely to pose a threat to the vice like grip that Astro has in the pay-TV market with over 2.7 million subscribers and over 100 channels.


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