The Asia-Pacific Telecommunications Marketplace

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

January 2003

According to the International Telecommunications Union (ITU), in 2001, Asia-Pacific emerged as the largest telecommunications marketplace in the world. Between 1991 and 2001, the number of telecommunications subscribers in Asia-Pacific increased from 122 million to 712 million, representing 36% of the world's total. And unlike telecommunications markets in the rest of the world, the Asia-Pacific telecommunications market shows no signs of the malaise that has afflicted other more-developed telecommunications markets. According to recently released research from international research firm, International Data Corporation (IDC), the telecommunications services marketplace in Asia-Pacific (excluding Japan) will be valued at US$137 billion by the end of 2003. Growth will be driven by deregulation and pent-up demand for telecommunications services from less-developed countries throughout the region, especially in the up-and-coming economic powerhouses of China and India.

The U.S. Department of Commerce reports that China is now the world's largest telecommunications marketplace, both in terms of network capacity, as well as the number of subscribers. By the end of 2001, Chinese telecommunications carriers had made an aggregated investment of US$32 billion in telecommunications infrastructure, an increase of 15.3% over 2000. This investment helped generate subscribers, whilst the revenue from related services totalled US$43.2 billion in 2001. By May 2002, China had 220 million fixed-lines, of which only 29% were subscribed; and 240 million mobile networks, of which only 13% were used. So China still has ample capacity to fulfil its unabated consumer demand.

ITU confirms that China leads the world in mobile users and is second only to the U.S. in fixed-line penetration. Providers of fixed-line services include China Telecom, China Mobile, China Unicom, China Netcom, Jitong, China Railways Corporation and ChinaSat. Of these, only China Mobile and China Unicom are licenced to provide mobile services. China Telecom is by far the dominant carrier – in 2000, it had a turnover of US$10.4 billion, boasting 53% of China's telecommunications-industry revenue.

China plans to make the 2008 Beijing Olympics a showcase for the country's IT and telecommunications infrastructure. To that end, it is investing heavily in 16 major information communication and technology (ICT) projects to ensure visitors receive a rich and personalised experience during the Games, with minimised language barriers. Major projects include:

The provision of key digital and data centres
Wireless networking and systems management
Optical networks
2G/2.5G/3G-compatible mobile systems
A fully commercial CDMA network (at the moment China's dominant networks are GSM-only)

India's population exceeds 1 billion people and, according to IDC, its 37 million fixed-line telephone network is the one of the largest in the world. However, fixed-line penetration in the subcontinent remains remarkably low – at only 3.7%. India opened its market to private competition in the early 1990's, but the incumbent carrier, Bharat Sanchar Nigam Ltd (BSNL), still remains the dominant carrier, owning over 32 million lines, with an annual growth rate of 23-24%. Other players in the fixed-line market include MTNL, Tata, Bharti and Hughes. In the mobile marketplace, competition has resulted in price wars that have significantly damaged the market. In 2000, India had 17 mobile operators with 42 networks; however, after a series of mergers and acquisitions, only 16 players remain – with the dominant players being the BPL-Bhirla-AT&T-Tata alliance, Bharti-Singtel, Hutchinson and Reliance.

By 2010, India plans to ensure that fixed-line telephone penetration will increase to 15%. To meet this goal, India will have to invest in its telecommunications infrastructure to the tune of an estimated US$106 billion. According to the National Association of Software and Service Companies (NASSCOM), this investment will include a wide range of communications services like cellular, Internet, radio trunking, global mobile personal communication by satellite (GMPCS) and other value-added services.

Over the last five years, there has been mounting concern that developing countries, which lack the resources to benefit economically from ICT, will be further marginalised by the Internet revolution. In India, this is a major issue – with NASSCOM reporting that the country's US$13.5 billion IT industry is highly dependent on the outsourcing of IT functions from U.S.- and European-based enterprises. Infrastructure bottlenecks – such as lack of bandwidth, low-speed leased lines and slow servicing – are threatening India's IT growth. NASSCOM has warned that if India does not make these planned infrastructure improvements, it could lose at least 30% of its target IT export market in the coming years.

Part of the reason behind the steady growth of Asia-Pacific's telecommunications market is that most of the markets are manufacturing-based, export-oriented economies. The global move towards using electronic Supply Chain Management (e-SCM) technologies to reduce inventory cost and decrease time to market is forcing Asia-Pacific to invest in upgrading the IT and telecommunications infrastructure across the region to ensure regional competitiveness in the global economy.

According to ITU, Asia-Pacific carriers have remained viable and profitable largely because they have avoided the crippling debt that European operators assumed, whilst vying for third-generation (3G) mobile licences in a painfully competitive bidding process. In addition, the strategic importance of the ICT industry to the region's well-being has meant that governments have frequently kept their stakes in the incumbent telecommunications operators – either through partial or full ownership – thus ensuring the focus remains on development, rather than on shareholder value or short-term profit.

IDC reported in October 2002 that within the traditional data-networks-services marketplace, leased circuit, frame relay, DDN (only in the Peoples Republic of China), ATM, x2.5 and ISDN technologies reign supreme. Leased circuits will continue to dominate, followed by DDN (due to the sheer size of China's telecommunications market) and frame relay. The data services market has traditionally been an area of consistent revenue for service providers in the region and IDC projected it to be valued close to US$10 billion at the end of 2002, an expected year-on-year growth of 5%. However, new technologies including wireless, PSTN, VoIP, IP-VPN and broadband infrastructure and related services are expected to drive growth going forward. Broadband services alone grew 146% in 2001, leading to the emergence of Metro Ethernet Internet access and the provision of managed-wireless-LAN services throughout urban areas across the region. As broadband-penetration rates increase and users grow more dependent on wireless devices, both IDC and ITU believe there will be a definite trend away from fixed-line, towards mobile communications – especially in the less-developed countries where fixed-line infrastructure cannot accommodate demand.