2006 South East Asia Vertical Market Report Pack: Industry Report

2006 South East Asia Vertical Market Report Pack

Product Type: Market Research Report
Published by: Paul Budde Communication Pty Ltd
Published: May 2006
Product Code: R170-780

Description

This Asia market report covers 11 countries in the South East Asia sub-region. It takes an overall look at the various telecoms markets, together with a particular look at the broadband Internet and mobile segments in each of the countries. The markets covered include:

Brunei as small wealthy nation in South East Asia, made early moves to ensure that it was delivering up to date telecommunications services to its population. The target of 100% digitalisation was achieved in 1995. Telecommunications throughout Brunei are of a high standard and the country ranks well in Asia in terms of penetration and infrastructure.

With the level of encouragement from the government, it is not surprising then that the citizens of Brunei are strong consumers of telecommunications services. Despite this, if the country is to continue to maintain the pace required to be globally competitive, it must further restructure and generally liberalise the local telecom industry. For the moment things appear to have seriously stalled in this regard. Much more is required in the area of sector reform. The local market continues to be dominated by Jabatan Telekom Brunei (JTB), the incumbent telco that is still a division within the Ministry of Communications.

Cambodia's efforts are directed towards building up its telecommunications infrastructure. The country continues to struggle with the legacy resulting from years of civil war and instability. Ongoing political problems in the period since the end of the war have made it hard to put the necessary administrative institutions in place. This has had a major impact on the telecom sector which remains in need of serious regulatory reform and a general strengthening of the regulatory role. For a period, the absence of a properly functioning government saw all infrastructure projects involving international aid suspended and government funded projects were also constrained, with a corresponding impact on foreign investor confidence. This had a negative effect on the telecom sector. Fixed-lines were languishing at around 40,000 subscribers.

East Timor The tiny fledgling nation of East Timor experienced further political instability and outbreaks of violence in the first half of 2006. To the observer, the country had appeared to have got off to a solid start in rebuilding its entire infrastructure following the turbulence that ensued after the referendum of 1999. However, it remains difficult to assess the long term impact of the events of 2006 on such things as infrastructure building. Following the 1999 crisis, the United Nations Transitional Administration in East Timor (UNTAET) provided overall administrative and financial assistance during the period up until elections were held in April 2002. The United Nations finally completed its role in early 2005. The new government was looking to gain ongoing assistance from the international community in putting strong systems in place. Telecommunications remains an important priority under a newly established Ministry of Transport, Communication & Public Works. In July 2002, the East Timor government selected Portugal Telecom to be the lead partner in a consortium to operate Timor Telecom. The new operator replaced Telstra in March 2003 and set about expanding the countries telecom facilities.

Note: East Timor (also known as Timor Leste) is yet to be listed as a member of the International Telecommunication Union (ITU). This makes it difficult to obtain official statistics on the country’s telecom sector.

Indonesia, a country of more than 220 million people, continues to see its telecom sector grow in a busy fashion despite the occasional setback. The country has some particularly big challenges to confront in building the necessary telecommunications infrastructure to cover its uniquely complex geography. It must also deal with a range of social, political and economic issues. Having rebounded reasonably well from the Asian economic crisis of the late 1990s, the government has been gradually reshaping the telecom industry. The country is now seeing healthier growth in both subscriber numbers and in revenues. Whilst Indonesia’s fixed-line teledensity has remained disconcertingly low (less than 6% in early 2006), a move by incumbent Telkom to rapidly roll out Wireless Local Loop (WLL) services to provide for unserved communities is looking promising and should boost teledensity.

In a reminder of the events of the late 1990s, the rupiah slid to a more than four-year low against the US dollar in August 2005. This sort of event can be a problem for the operators, the bulk of whose revenue is in rupiah, while investment costs are mostly in US dollars. A weaker rupiah could see operators suffering foreign exchange losses, depending on their gearing arrangements. The country has continued to struggle to attract foreign investment in recent years, with potential investors expressing concerns over the twin issues of corruption and government red tape. This naturally has had an impact on the telecom sector, which desperately needs foreign investment to help build infrastructure. Foreign direct investment into Indonesia fell 26% year on year in 2004 to US$10.3 billion. Ironically, the weakening rupiah in 2005, together with evidence of a more stable government, increased the country’s investment prospects and actually saw foreign investment jump 74% in the first half of the year.

Laos - After years of struggling to build up its economic base, Laos has finally found some good news in the form of the giant Nam Theun 2 hydro project, the Oxiana gold and copper mine at Sepon and a number of other mining ventures. The challenge now is for Laos find some economic equilibrium, allowing it to focus more attention on building its national infrastructure, including telecommunications. With a low fixed line teledensity of less than three telephones per 100 people by early 2006, the country has been looking for more foreign investment to boost the telecoms sector. The Lao Telecom joint venture formed by the government with the Thai company, Shinawatra, in 1996 was not initially a success. Lao Telecom wasted the five year period of market exclusivity and the real impact occurred when the market was opened up to competition in 2002. Foreign capital started to flow into the sector, although not as much as the government would have liked.

The Lao telecom sector still has many issues to address. Despite the recent rapid opening up of the market, the regulatory progress continues to lag behind market development and has the potential to derail the progress already made if reform is not speeded up.

Malaysia has been quietly working away in recent years at positioning itself as a technologically progressive economy. To this end it has built one of the more advanced telecom networks in the developing world. Whilst still in the process of expanding, the country’s telecom sector has undergone a period of consolidation with telecom companies doing battle in an increasingly competitive and changing market. Despite the slowdown that followed the economic crisis of the late 1990s, the last decade has seen positive growth in the Malaysia’s telecom sector.

Fixed-line services moved rapidly from around 2 million in 1990 to 4.7 million in 2002 (penetration approaching 20% at the time), then fixed-line subscriber numbers dipped to 4.6 million by end-2003 and were sitting at 4.3 million by the start of 2006.

Myanmar's Operating in an economy where change is very slow, Myanmar’s telecommunications sector continues to be dominated by the state-owned monopoly telephone service provider, Myanmar Posts and Telecommunications (MPT). The country is battling both grave economic problems and a troubled political climate. Soaring inflation continues to be a major problem. Reaching a rate of 60% in 2002, inflation had settled back to about 25% in 2005.

The country’s centrally planned economy is plagued by weak fiscal and monetary management, resulting in major economic imbalances, which will not be easily or quickly resolved. These problems, combined with an overarching lack of transparency, have naturally frightened off foreign investment. The government has simply been unable to help the struggling MPT to generate any serious level of capital investment in telecoms infrastructure. In the meantime, the country’s telecommunications is characterised by what can only be described as stunted development. The telecom sector is indicative of the overall state of the national economy. Myanmar’s official economic data is not considered reliable, making actual growth rates difficult to ascertain. However, it is reasonably evident that fixed telephone line penetration remains a lowly 1%.

The Philippines Over the last decade or so, there has been a concerted effort by the government in the Philippines, working with the country’s telecom operators, to expand the national fixed network. Despite a lot of effort and the best of intentions, the country has been finding it difficult to extend its basic telephone network to reach the wider population. Despite this effort fixed-line teledensity stands at less than 5% and only a little more than half of all Philippine towns and cities have a telephone service. In fact, a fixed-line teledensity of 12% by 2002 was the target set for the government’s Service Area Scheme. The plan fell well short of target, achieving a teledensity of just over 4% by that time. Fixed-line penetration has not increased much since.

There appears to be considerable ongoing optimism in the Philippine telecom market as the sector has been contributing over 10% to the country’s GDP, boosted considerably by its mobile segment.

Singapore - continues to maintain its status as a world leader in telecommunications and certainly has a positive outlook for its local telecommunications sector. The country has built a high quality and extremely progressive regulatory telecommunications environment that has, in turn, generated a highly competitive market. All restrictions on direct and indirect foreign ownership within the country’s telecom sector have been lifted. In such a progressive market, over 98% of homes have fixed-line telephone connections and about 20% of the population have two telephones at home. Singapore was one of the first countries in the world to have a fully digital telephone network.

Although incumbent Singapore Telecommunications (SingTel) continues to play a major role in the Singapore telecom sector, liberalisation has seen a host of new operators entering the market, helping exploit the competitive situation. In fact, in the lead up to liberalisation, the government had issued five facilities-based and 29 service-based licences. Interestingly, with strong competition in its domestic market, SingTel took the decision to expand offshore and has now successfully established a considerable presence in regional markets, including the ownership of Optus, the second ranked mobile operator in Australia.

Thailand telecom sector has been exhibiting a lot of energy, despite some economic uncertainty and questions about the government’s progress on a range of national projects. Over the last four or five years, the country’s mobile telephone market in particular recorded particularly strong annual growth rates. By early 2006, mobile penetration was approaching 50%, but the annual subscriber growth rate had slowed to less than 10%. Subscriber levels reached represented an eight-fold increase since 2000. The country has certainly been seeing the benefits of a liberalised market.

However, a feature of the government’s telecom reform efforts over the last five years has been a general tardiness in implementing key changes. Of special note has been the slowness in establishing the country’s new regulator, the National Telecommunications Commission (NTC), which finally came into being in late in 2004 - a long time after the enabling Telecommunications Act was adopted as law in 2000. Having now become operational, the NTC was concentrating on getting up to speed and was unlikely to have an immediate impact on the market in the short term, although there were promising signs observed about the medium term prospects. Delays have also occurred in the restructuring and ultimate privatisation of the state-owned telco giants, TOT and CAT.

There was a new round of political uncertainty in Thailand starting in early 2006 that was threatening to cause national growth to stall. The Prime Minister Thaksin Shinawatra had been installed in a caretaker role in the lead up to an election expected in October 2006.

Vietnam Reflecting the self-conscious style of a centrally-planned economy, Vietnam set itself some ambitious targets for the expansion of its telecommunications infrastructure. Initial efforts to fast-track the expansion of the national network had their shortcomings. But the introduction of a limited level of competition into the telecoms market, combined with a generally improved economic climate, has seen some vigorous growth in the sector. The expectation that Vietnam will win accession to the World Trade Organization (WTO) in 2006 has also created a positive climate for the telecom sector to expand.

Increased foreign investment remains the key to expansion. The continuing strong government involvement in the telecom sector, however, still raises major questions about its commitment to deregulation and liberalisation. Again, the WTO commitments will be important in this regard.

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