In Search of Revenue: Wireless Markets in Asia-Pacific

By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

March 2003

Asia-Pacific became the epicentre of the telecommunications industry in 2001 when the region emerged as the world's largest telecommunications marketplace. Today, the region is home to more than one third of all telephone subscribers and is the only region to have grown significantly in the last decade – adding more than one new telephone user every second. According to research analysts, International Data Corporation (IDC), Asia-Pacific's telecommunications services market (excluding Japan) will be valued at US$137 billion by the end of 2003. Growth in the telecommunications market will be driven by the increasing use of mobile-data and wireless services across the region, as telecommunications operators seek to promote these services to make up for increasingly flat fixed-line services revenues.

By 2004, IDC estimates that the region will have 550 million wireless subscribers generating US$200 million in operator revenues. Asia-Pacific already leads the world in advanced Internet technologies – such as broadband-access and mobile-data services – with South Korea and Hong Kong boasting the world's highest broadband Internet penetration rates, whilst South Korea leads the pack in commercial 3G cellular networks and mobile Internet service offerings. IDC forecasts that regional Wireless Local Area Network (WLAN) revenue (excluding Japan) will grow at a compound annual growth rate of 20% from 2002-2007 to reach US$370 million in 2007. By then, China is expected to dominate the region representing 45% of the market, followed by South Korea (21%), Australia (8%) and Taiwan (7%).

Across the region, telecommunications operators are gearing up to expand WLAN or hotspots as strong revenue generators. IDC estimates that regional revenues from WLAN hotspots will reach US$800 million by 2007. In this area, South Korea will continue to lead, followed by Australia, Taiwan and Hong Kong. IDC also believes that WLAN and high-speed mobile-data services will complement each other, with cellular operators being particularly aggressive to push the use of 2.5/2.75G services to their subscriber bases.

Though the mobile-data services offered today are primarily consumer-focused, international research firm, Gartner Dataquest, suggests enterprise customers – businesses, governments and other organisations – may be the real drivers behind the future growth of mobile-data services. The greatest potential market for these services is organisations with geographically dispersed workforces needing access to critical information to make decisions, or provide real-time customer service, in the field. Mobile customer-relationship-management (mCRM) solutions are being delivered via wireless-enabled mobile devices already. Early adopters of these solutions include the telecommunications, fast-moving consumer goods and insurance sectors, where mobile-data services are being employed to improve business processes, reduce costs and increase revenues. Though wireless-enabled CRM applications are still in their infancy, growth is expected with the advent of Bluetooth/GPRS enablement, increased PDA capabilities, and the decreasing cost of wireless LAN products. Gartner predicts that regional enterprise WLAN spending will more than double between 2001 and 2005 to reach US$625 million.

IDC estimates that Asia-Pacific mobile-commerce revenues will grow from US$400 million in 2001 to reach US$7.5 billion in 2004. For telecommunications operators, the opportunities in the m-commerce sector are endless; but, the onus will be on them to morph their existing business structures to take advantage of these emerging technologies and services. In the wireless world, operators own the most important asset – the relationship with the customer. In order for operators to maximise their share of the m-commerce pie, they will need to offer products and services that encourage enterprises and customers to use more bandwidth. However, selling bandwidth alone will not be enough, so next-generation telecommunications operators will increasingly need to rely on specialist service providers to develop value-added applications, devices and content. Within Asia-Pacific, operators such as Telstra and SK Telecom were amongst the first to partner with service providers, offering compelling services to drive revenue. IDC believes that operators, juggling multiple partnerships to maximise revenue, will drive the regional sales of billing solutions and services – a segment expected to reach US$527 million by the end of 2003 – with wireless billing being the key driver of this growth.

Location-based wireless services will also be a core driver of operator revenue. According to industry analyst, Strategis Group, the worldwide location-based wireless services market will exceed US$4 billion by 2004, with as many as 1 billion Internet-enabled handsets in use. In November 2002, Japan's NTT DoCoMo was the first Asia-Pacific carrier to launch location-based wireless services – providing location data to mobile users for navigational purposes. Other carriers in the region are not far behind, trying to take advantage of the confluence of wireless and GPS technologies. Not only can operators now sell bandwidth, but location-based wireless services may offer customers a compelling reason to upgrade to the next-generation of mobile networks.

Whilst the mobile lifestyle being promoted by operators and service providers is alluring, mass adoption of wireless services will only happen once operators, services providers and governments in the region address key issues – including security, equipment reliability, and the frequencies used to conduct wireless transactions and m-commerce. As with any new medium of communication and commerce, the wireless industry is at odds with itself – promoting competing communication standards, security standards, protocols, and bandwidths. In order to deliver sophisticated, high-value services and increase their revenue, operators, service providers and Asia-Pacific governments will have to form a mobile ecosystem where their ultimate goals are uniform, intellectual property rights are respected and the rule of law – as laid down by the governments – is clearly understood and adhered to by all.