Sector set to see more mergers and acquisitions in the future
KUCHING: The telecommunications sector will play a pivotal role in Malaysia’s information and communications technology (ICT) transformation, with rapid developments in technology and connectivity being the key driving growth.
According to statistics from International Investors, the juxtaposition of global ICT trends with the unique position of the Malaysian ICT industry is creating distinct opportunities in this industry for players.
“Malaysia’s unique position is arguably assisting the country to unleash creative disruptions in various fields in the ICT sector,” said Cory D’Arbeo, International Investors country publisher.
“It is an unequivocal point that great opportunities exist in this sector, which is characterised by a high degree of disruption.
“The Malaysian ICT industry in 2010 comprised some RM69.3 billion in revenues, with telecommunications forming the contribution,” he added.
“It is expected that the total ICT sector in 2015 will reach RM110 billion in revenue size, thus growing a cumulative annual growth rate (CAGR) of 10 per cent over the next five years,” he anticipated.
In Malaysia, the telecommunications segment is characterised by the presence of Telekom Malaysia Bhd (TM) as the incumbent fixed line and the largest broadband and enterprise services player.
Frost & Sullivan’s Asia Pacific ICT Practice industry analyst (Mobile and Wireless), Vikas Chanani affirmed the presence of other players which kept the industry highly competitive.
“Currently there are four cellular operators in Malaysia namely Maxis Bhd (Maxis), Celcom Axiata Bhd (Celcom), DiGi.com Bhd (DiGi) and U Mobile Sdn Bhd (U Mobile). Apart from these cellular operators, there are four WiMax operators,” he told BizHive Weekly.
“The story does not end there, as there are about seven mobile virtual network operators (MVNOs) in this region.
“With the existing number of players, Malaysia is a highly competitive telecommunications market. It is believed that no more players will come into the telco mix in Malaysia,” he opined.
He also believed that the telecommunications sector would continue to evolve based on its dynamic and competitive nature.
“Telecommunication marketplace in Asia Pacific is very dynamic and highly competitive with increasing number of players and evolving landscape,” he said. “Operators are struggling to find growth in core business. Revenue from traditional businesses like voice and short message services (SMS) continues to decline.
“Thus, the decline in core revenue has led operators to explore and invest more in broadband and data services. The key strategy for the operators is to monetise the data effectively.”
When asked for his opinion on the progress for penetration for fixed line services as well as mobile services (both prepaid and postpaid) in Malaysia, Chanani believed there was still room for growth despite being a matured market.
“Over the years, telecommunications sector in Malaysia has evolved exponentially and reached a mobile penetration of 128 per cent in 2011 from 85.9 per cent in 2007.
“In terms of mobile subscriber growth, Malaysia is a matured market, but there is still room for growth in data segment for the operators, as smartphone penetration is only about 21 per cent at the end of 2011.
“There is a shift in consumer usage behaviour from voice to data and this will benefit operators as more mobile phone users switch to smartphones.”
The broadband segment in Malaysia has been the fastest growing segment in the country in 2010, in terms of percentage subscriber growth. The country has more than 3.6 million broadband subscribers by the end of 2010, which creates a critical mass of homes/lines with broadband connectivity here.
Interestingly, more than half of the broadband lines in Malaysia are using wireless technology as an access mechanism.
Meanwhile, the high speed broadband (HSBB) rollout being carried out by TM has also been progressing rapidly, with the provision that the HSBB network could be used by other service providers to offer retail services to Malaysian customers.
Frost & Sullivan’s Chanani noted that household broadband penetration in Malaysia increased to about 62 per cent in 2011, rising steadily from 15 per cent in 2007.
“Wireless broadband has outpaced fixed broadband growth. Data, data and more data is the need of the industry today,” he affirmed.
Looking at the future outlook for Malaysia, he cited the possibility for cooperative competition with operators engaging in network sharing models and so forth.
D’Arbeo said the increased broadband usage has led to an exponential increase in data traffic on the networks.
“For mobile players especially, this has created a situation whereby the cost of data traffic carriage has the potential to exceed the revenues from the service,” he added.
“It is therefore becoming imperative to either drive additional services on the underlying broadband connectivity or to reduce the cost of data carriage.”
On the lines of higher data speed, Chanani touched on the nine licences being awarded for long term evolution (LTE) whereby Malaysian operators are expected to have LTE launch by end of 2012.
“Giving nine licences is definitely big as per industry standards. However, this will force players to collaborate given the size of the spectrums allocated to each operator. Operators in the region will need to sign network sharing agreements and engage in ‘co-opetition’ (cooperative competition),” he said.
“Future network investments such as 4G LTE deployments, each company will retain control of its core networks, individual spectrum but they will compete openly on products and services each offers.”