'

Broadband leads telecoms growth in AP

High-speed Internet access and mobile services are key drivers behind the region's growth, but with falling revenues per user, service providers might want to explore other market opportunities, says analyst firm Frost & Sullivan.

The Asia-Pacific telecommunications market grew by 5.7 percent in the last two years, according to a new study released by Frost & Sullivan.

Manoj Menon, partner and Southeast Asia managing director at the analyst firm, said the growth was fueled by the uptake of broadband services in the region. Speaking a conference call today, Menon added that the Asia-Pacific telecoms report covered 13 key markets including Singapore, Thailand, Philippines, China and India.

"We expect broadband revenues to increase from US$16.8 billion in 2004 to about US$42.1 billion in 2008," he said. "That represents a growth of two-and-a-half times over the next four years." Menon added that broadband penetration would reach 26 percent of households in the region by 2008.

With the upsurge of broadband in the region, Menon said, the fixed-line telecom market would decline as more consumers turn to Internet telephony services--delivered over broadband networks--as a low-cost alternative. "The strong growth in broadband immediately brings about a negative impact on the fixed-line voice business," he explained.

But rather than dismissing Internet telephony, operators should note that "there is tremendous opportunity for services providers and enterprise customers to embed voice in their business processes," he said.

"There is a significant number of people visiting eBay, but they are not completing their transactions because they can't interact instantly with buyers and sellers," he added. "By putting in the element of voice, eBay has taken away one more hurdle in their business," he said, referring to eBay's acquisition of Internet telephony software provider Skype.

Menon also noted that while eBay is not a telecoms provider, "they found it relevant to pay US$4.1 billion just to harness the technology to make their business case more compelling, and to gain a lead over its competitors."

Service providers could do well by learning from eBay's example and explore other areas of opportunities, especially since the average revenue per broadband customer has been falling consistently. The dip in revenues is driven mainly by markets such as India and Indonesia, that have been offering low-cost broadband services ranging from US$10 to US$12 per month, he said.

Menon also noted that DSL (digital subscriber line) is now the dominant broadband access technology in the Asia-Pacific region.

"A couple of years ago, it was a fairly split between DSL and cable," he said. "But service providers have been aggressive in rolling out DSL services much more than cable operators." Moreover, cable operators have been limited financially in driving more penetration in the broadband space, he added.

Fixed-lines are also being upstaged by cellular services in the Asia-Pacific region. Cellphone subscriber numbers in the region will hit 1.23 billion by 2008, with revenues crossing US$200 billion, he said.

But as cellular voice services become commoditized, operators need to look at increasing their data revenues, Menon said, noting that mobile voice revenues will only grow by 5.7 percent from 2004 to 2008.

In 2004, mobile data contributed 18.2 percent to total telecom revenues, and this is expected to increase to 28.9 percent by 2008, he said. "Markets like the Philippines have very high contributions from data revenues, driven mainly by SMS (short message service)."

He added that Japan and South Korea have been very successful in developing mobile content and applications. "Particularly on the 3G platform, we believe mobile video could be one of the killer applications that will drive data revenue growth," he said.

Menon also cautioned operators that by 2008, 2G and 2.5G networks will still make up 88 percent of cellular networks.

"There are tremendous opportunities for companies to develop applications on 2G and 2.5G networks. This is an area we should not ignore."