Telecom Outlook 2003

December 5, 2002
Rising growth rate for Asia-Pacific mobile industry

United States -- The Asia-Pacific mobile penetration will reach 19 per cent of the population by 2006 and 3G will begin to take root by 2003, says Shiv Putcha, a Wireless/Mobile Asia-Pacific analyst with the Yankee Group. According to this optimistic view, by 2006, nearly half of the mobile users will be moving to 2.5G or 3G, sharply raising the ARPU (average revenue per user) to at least $30 plus per month. China will continue to dominate and India will make a dent by 2006.

The growth of the wireless industry and the number of subscribers in the Asia Pacific region has been a tremendous success story.. Wireless subscribers have grown from 312 million to 380 million during the last 12 months and are estimated to end up to 649 million by 2006, more than double of what they were 2001. The mobile penetration was 9.6 percent in 2001 and 11.6 percent in 2002. It is expected to reach 19 percent by 2006.

China has dominated the scene so far and will continue to do so in future. In 2001, the number of wireless subscribers in China was 148 million. In 2002, China is expected to end up with 196 million. Almost one out of six Chinese will be carrying a mobile phone In China, growth is expected to peak to 366 million subscribers by 2006, that is, 62 percent of the total Asia-Pacific number.. During the same period, Japan will be having less than 100 million subscribers. However, the level of penetration will be very high. Similarly, South Korea will have 38 million subscribers by 2006 and high penetration. China, Japan and Korea will account for 74 percent of the Asian mobile subscribers. However, Hong Kong, Singapore and Taiwan will experience saturation points by 2006. India will start to make a dent by 2006. In 2001, India had a mobile penetration of only 1.8 percent. By 2006, it will have a mobile penetration of 9.5 percent, the next highest after China and Japan. (Interestingly, the Cellular Operators Association of India (COAI) projects the growth to be 50 million by 2006.)

A period of transition is expected to prevail till 2006 when analog would disappear, 2G network will decline from 97 percent to 52.99 percent and 2.5G will peak to 19.62 percent. However, 3G technologies will cross over and take the lead to 27.45 percent of the network with a combined subscriber base of the two generations together at 325 million. The expectation is that the Asian scene would see more rapid 3G deployment than elsewhere. The success of i-mode in Japan, and the terrific growths achieved in South Korea and Taiwan are indicators. Within that shift toward 2.5G and 3G, W-CDMA will continue to be dominant, though cdma2000 1x and cdma2000 1x-EV would also be catching up. TD-SCDMA will emerge as the unlikely "dark horse 3G technology" and gain some ground in 2005 and 2006.

Another trend is that the Asian subscribers would increasingly prefer prepaid as the method of settlement. By 2006, 246 million subscribers, representing 37.9per cent of the subscribers will be on prepaid against 66 million (21.2 percent) in 2001. Postpaid will decline from 78.8 percent in 2001 to 62.1 percent in 2006, though there may be a return toward postpaid from 2006 onward.

Mobile revenues in the region are expected to ascend from $107 billion to $246 billion. However, intense competition will bring down the ARPU from $31 dollars a month in 2001 to the lowest point of $26.5 by 2003. It will thereafter climb, due to the effect of new services and deployment of GPRS and 3G networks to reach a near peak of $30.8 in 2006. The voice ARPU will decline from $28 in 2001 to $21.6 in 2006 while the data ARPU will rise from $3 in 2001 to $9.2 in 2006. However, the voice revenues will rise from $97 in 2001 to $171 in 2006 and data revenues will rise from $10 in 2001 to $73 in 2006. Overall, the Asia-Pacific region will remain the high growth area for wireless.

(Shiv Putcha is Wireless/Mobile Asia-Pacific Analyst with The Yankee Group, US)