BMI Asia Pacific Telecommunications Insight June 2015

IMPORTANT NOTICE:
The information in this PDF file is subject to Business Monitor International Ltds full copyright
and entitlements as defined and protected by international law. The contents of the file are for
the sole use of the addressee. All content in this file is owned and operated by Business
Monitor International Ltd, and the copying or distribution of this file, internally or externally, is
strictly prohibited without the prior written permission and consent of Business Monitor
International Ltd. If you wish to distribute the file, please email the Subscriptions Department at
subs@bmiresearch.com, providing details of your subscription and the number of recipients
you wish to forward or distribute this information to.
DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed
to be accurate and reliable at the time of publishing. However, in view of the natural scope for human
and/or mechanical error, either at source or during production, Business Monitor International Ltd
accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions
affecting any part of the publication. All information is provided without warranty, and Business Monitor
International Ltd makes no representation of warranty of any kind as to the accuracy or completeness
of any information hereto contained.
June 2015
Issue 109
Asia Pacific
Telecommunications
BMIs monthly market intelligence, trend analysis and forecasts for the telecommunications industry across Asia Pacific
Asia
Asia Pacific Risk/Reward Index

Q3 2015
Minor improvements to the average Country Rewards and Country
Risks scores for the 28 countries surveyed as part of BMI's Telecoms
Industry Risks/Rewards Index are recorded this quarter. A number of
countries moved up or down the ranking table according to their changing economic, political and demographic fortunes, but those movements
are generally fairly limited. The most remarkable changes see China fall
four places to ninth position, while New Zealand climbs three places to
fifth place. Amended Industry Rewards scores were also recorded by
several countries this quarter as a result of market consolidation reducing
the number of effective players and heightened price competition that
continues to drive down revenues and profit margins.
Industry Rewards
The regional average score for Industry Rewards declined by 0.5 points
this quarter, to 43.7. Countries' Industry Rewards scores consider factors such as recent and forecast subscription and revenue growth in the
mobile and wireline voice and data markets, with ARPUs also used as a
guide for market headwinds. Eight countries had their Industry Rewards
scores downgraded this quarter as market saturation led to flat or negative mobile subscription growth while ARPUs were impacted by price
competition and/or the dilutive effects of bundling multiple low-value
products alongside higher value offerings.
China fared poorly in our latest assessments as certain operators
proved reluctant to disclose ARPUs for various reasons including, but
not limited to, the migration of customers to new 4G networks. Less
transparency in the reporting of key revenue streams, including mobile
data usage, also weighed on our view of the Chinese market. Operators'
profitability was also impacted by the high cost of building the new 4G
networks.
Neighbouring Mongolia lost five points this quarter, as mobile subscription growth was found to have stalled in 2014 and the expansion of
the wireline broadband market underperformed expectations. Few data
are available regarding the financial performance of Mongolia's telecoms
companies, but information disclosed by the regulator implies that price
competition caused ARPUs to decline last year.
Australia, which is the fourth most attractive Asian market overall,
also saw its Industry Rewards score decline, by 5.5 points, to 52.3. With
a mobile penetration rate of close to 132%, market saturation is expected
to weigh on growth momentum over the next five years. That said, the
mobile market demonstrated better than expected subscriptions growth
in 2014 as a whole, aided by consolidation amongst the smaller alternative wireline carriers, many of whom act as mobile service resellers
or virtual operators. The emergence of larger, more potent alternative
players creates more opportunities to sell mobile to a wider audience.
ISSN: 1750-7723
Contents
Asia
Asia Pacific Risk/Reward Index Q3 2015............................................................... 1
Global
Limited Impact On ICT From Trans-Pacific Partnership............................................. 4
Google's Project Fi Opens Up New Battleground...................................................... 6
Asia
Asia Will Be Nokia-Alcatel's Key Battleground........................................................... 8
Asia Fibre Market Differing Speeds Of Light.......................................................... 9
Bangladesh
Wireless Broadband Behind New Towers Paradigm.................................................12
India
Sponsored Data Insufficient To Drive Demand........................................................13
Spectrum Monetisation Pressure Weighs On Minor Players......................................14
Kiribati
Small Market Seeks Large Investor........................................................................14
Malaysia
Investments Unlock Malaysia's Data Centre Hub Potential.......................................15
New Zealand
CallPlus Deal Broadens M2's M&A Appeal...............................................................15
Singapore
SMRT Lends Weight To Fourth Mobile Licensee.......................................................16
Cybersecurity An Important Segment For Diversification..........................................17
Thailand
NTT Com Regional Expansion Goes Mobile.............................................................17
Sinoze Investment Fits AIS's Game Plan.................................................................18
Vietnam
Viettel Expansion Benefits Underperforming Markets...............................................19
Editorial Office:
85 Queen Victoria Street,
London EC4V 4AB, UK
Tel: +44 (0)20 7246 5126
Fax: +44 (0)20 7248 0467
www.bmiresearch.com
www.telecomsinsight.com
Asia
Asia
Of the four markets that recorded improvements to their Industry

Rewards scores, the most notable are Myanmar and Vietnam. We
now have two quarters of data to analyse for Myanmar's two new
mobile operators and uptake rates are within the ranges we had been
expecting for a frontier market being exposed to very cheap services
for the first time. With actual ARPU figures now incorporated into
our analysis and forecasting models, our outlook for Myanmar is
much brighter than before. Its Industry Rewards score increases by
7.5 points to 52.5, well above the regional average, and indicative
of Myanmar's long-term appeal as an investment destination.
Vietnam's score improves by 2.8 points to 52.3, also above the
regional average. Further consolidation in the mobile market diminishes consumer choice, but the winnowing-out of underperforming
players, particularly those that base their business models around
unsustainably cheap voice and data services, is to be welcomed.
Clearer market data from the regulator show that mobile and broadband subscription growth improved in 2014 versus 2013, allowing
us to upgrade Vietnam's score. However, the country is still a long
way off from fulfilling its potential and there are still many risks and
Telecommunications
outright impediments to foreign investors working in the country,

not least of which is the deep influence the state wields over mass
media services, including telecommunications. As a member of
the Trans-Pacific Partnership (TPP), Vietnam's government must
take a less central role in the business sector; whether it will do so
remains to be seen (see 'Limited Impact On ICT From Trans-Pacific
Partnership', April 13).
Country Rewards
The regional average score for Country Rewards improves by 1.1
point to 51.3 this quarter, with 12 countries seeing amended scores
in this category. Improvements were recorded by six countries,
with the most dramatic improvement being the nine-point increase
applied to Malaysia, raising its score to 54.0. New demographic
data including new information on population distribution, access
to power, age ranges and consumers' disposable incomes have
been incorporated into our forecasting model, yielding a much
more positive view of the country's potential with regards to adoption of advanced telecoms services. Although mobile and wireline
Asia-Pacific Telecoms Risk/Reward Index, Q315
Country
Rewards
Risks
Industry Rewards
Country Rewards
Industry Risks
Country Risks
Telecoms Score
Rank
Previous Rank
Japan
65.0
70.0
80.0
69.2
69.1
Singapore
47.5
80.0
90.0
79.1
66.6
Hong Kong
45.0
76.7
90.0
70.9
63.4
Australia
52.3
80.0
70.0
62.6
63.3
New Zealand
47.5
72.0
90.0
68.8
63.1
South Korea
52.5
63.0
80.0
70.8
61.9
Macau
42.5
80.0
70.0
75.9
60.8
Taiwan
50.0
60.0
80.0
74.1
60.6
China
63.3
33.3
70.0
81.8
59.7
Malaysia
50.0
54.0
70.0
67.9
56.7
10
10
Indonesia
55.0
42.7
60.0
60.2
53.5
11
11
India
52.5
32.1
65.0
68.7
51.8
12
12
Philippines
45.0
46.7
60.0
65.1
50.7
13
13
Pakistan
47.3
42.0
60.0
50.1
48.3
14
14
Afghanistan
35.0
66.7
45.0
57.0
47.6
15
17
Mongolia
32.5
51.0
65.0
65.2
46.8
16
15
Brunei
20.0
80.0
65.0
52.7
46.4
17
16
Thailand
49.5
29.3
50.0
58.0
45.9
=18
18
Vietnam
52.3
30.0
30.0
68.3
45.9
=18
19
Fiji
35.0
53.3
65.0
38.9
44.6
20
23
East Timor
25.0
46.7
80.0
64.7
44.5
21
20
Myanmar
52.5
32.7
30.0
50.4
44.0
22
24
Bangladesh
47.5
36.7
60.0
21.9
42.9
23
21
Nepal
37.5
33.3
60.0
52.3
42.1
24
22
Bhutan
24.8
36.0
80.0
46.0
39.0
25
26
Cambodia
35.0
38.3
40.0
50.7
38.9
26
25
Sri Lanka
35.0
30.0
60.0
27.1
36.3
27
27
Laos
27.5
39.0
40.0
50.7
35.7
28
28
Average
43.7
51.3
64.5
59.6
51.1
Note: Scores are weighted as follows. 'Rewards': 70%, of which Industry Rewards 65% and Country Rewards 35%; 'Risks': 30%, of which Industry Risks 40% and Country Risks
60%. The 'Rewards' score evaluates the size and growth potential of a telecoms market in any given state, and country's broader socio-demographic characteristics that impact
the industry's development; the 'Risks' score evaluates industry-specific dangers and those emanating from the state's political/economic profile, based on BMI's proprietary
Country Risk Index that could affect the realisation of anticipated returns. Source: BMI
Asia
growth trends continue within expectations, consumption of mobile

non-voice, non-messaging services and utilisation of broadband
accesses for more than Internet browsing led to higher incomes
from value-added services, justifying operators' investments in 4G
and fibre-optic technology. On a related note, strong growth in data
centre and the provision of cloud computing services shows that
more businesses are leveraging the increased power of the country's
telecoms infrastructure.
Australia sees a 10-point increase to its score, taking it to 80
points, putting it on a par with Singapore and Macau. The country's robust economic performance led to an appreciable increase
in disposable incomes while the rollout of the National Broadband
Network (NBN) to rural areas and the consolidation of minor alternative wireline players brings advanced infrastructure and services
to more Australians, rural and urban alike.
Indonesia, meanwhile, recorded a 3.3 point reduction to its score,
putting it well below the regional average, at 42.7 points. There
has been an easing-off of economic growth in recent months and
consumers' disposable incomes have been hit. New data show that
GDP per capita has declined while the average age of the population has increased; this can make it difficult to sell advanced new
products and services. This should concern operators investing
heavily in advanced fibre-optic backbones and 4G mobile broadband
platforms alike.
Mongolia's score declined by three points this quarter while that
of Vietnam fell by 3.3 points. In both cases, new economic data
showed that disposable incomes were now lower than before and,
as operators are striving to encourage subscribers to make greater
use of value-added services, this poses a moderate downside risk
that must be considered when planning infrastructure or service-led
investments in these markets.
Industry Risks
The regional average score for Industry Risks which focuses on
regulators, the extent of their powers, their inclination towards passivity or proactivity when encouraging investment or the development of new networks and services, as well as the degree to which
they are free of government interference remains at 64.5 points
this quarter. No changes were recorded for any of the 28 markets
in our survey owing to the well-established regulatory regimes in
developed markets, the continued enhancement of industry policies
in middle-tier markets and progress in transforming the regulatory
regimes in frontier markets such as Myanmar.
The highest scoring countries continue to be Singapore, Hong
Kong and New Zealand, each recording 90 points. The Commerce
Commission of New Zealand continues to amend pricing for physical
infrastructure access in favour of the country's service providers;
this weighs on infrastructure owner Chorus ' ability to invest in
advanced fibre-optic infrastructure as it is required to maintain its
legacy copper access network in the interim. It could be argued that
the Commerce Commission is being over-zealous in its treatment
of Chorus while it pursues diversity in the retail services arena. As
a result, it may be necessary to mark down New Zealand's Industry
Risks score in the near future.
Country Risks
The average Country Risks score for the Asia Pacific region fell by
0.1 point this quarter, to 59.6 points. This masks the fact that 16
markets had their scores revised, of which seven were downwards
in nature. Perhaps the most notable of the downgrades were those
applied to Malaysia and Pakistan. The former recorded a 4.3 point
Asia
Telecommunications
reduction while the latter saw 10.8 points wiped off its score.
As already noted, Malaysia's demographics are in good shape.
Over the next decade the active population is projected to grow by
1.6%, which is among the highest in the region. This will provide a
natural tailwind to the economy, particularly when compared with
Thailand, whose active population is projected to stagnate over the
next decade. That said, when we compare active population growth
over the next decade with that of the past decade, Malaysia performs
relatively poorly. Holding all other factors constant, this should
result in slower real GDP growth over the coming decade (although
it should be noted that Taiwan, China, Vietnam and Singapore are
in a worse position in this regard).
In line with consensus expectations, Malaysia's real GDP grew
at a slower rate of 5.6% year-on-year (y-o-y) in Q314 compared
to the previous quarter's 6.4% y-o-y. We believe that the slowing
money supply growth and weaker export demand suggest a further
deceleration in Q414 and forecast real GDP growth to come in at
5.8% for the full year. We are less sanguine on Malaysia's growth
outlook in 2015, noting that government measures, such as the implementation of new taxes and reduction of subsidies, will lead to a
reduction in disposable income. Persistent weaknesses in Malaysia's
main trading partners will also weigh on growth. Accordingly, we
forecast real GDP to grow by 4.2% y-o-y in 2015.
Pakistan's fiscal position continues to improve. The government
ran a fiscal deficit of 5.5% of GDP in the 2013/14 fiscal year, marking
a strong improvement on the 8.0% of GDP deficit seen in FY2012/13.
Total revenues surged by 22.0%, while expenditure grew by just
4.7%. This was the largest percentage point gap between revenues
and expenditure growth on record, and is a clear sign that reform
measures are bearing fruit. We are forecasting further progress in
FY2014/15 as reform and privatisation measures roll on, which
should take the fiscal deficit to 5.1% of GDP. This compares with
the IMF's estimate of 4.8% of GDP, as we expect military spending to increase in the wake of increased counter-terrorism efforts.
Two countries that saw significant improvements to their Country Risks scores this quarter were Nepal and Laos, both of which
nevertheless remain at the lower end of the overall ranking table.
Being located in close proximity to both China and India, Nepal
will be able to reap substantial benefits from the improving economic
growth prospects in India as well as the ongoing power struggle
between Beijing and New Delhi for dominance of South Asia. We
expect these economic gains to come mainly in the form of greater
trade and inward investment flows from China and India over the
coming years. Meanwhile, strong remittance inflows will remain
supportive of private consumption growth (which accounts for about
80% of nominal GDP). As a result, we have raised our FY2014/15
(July 16 2014-July 15 2015) real GDP growth forecast for Nepal
to 4.0%, from 3.5% previously. That said, we note that domestic
political challenges and continued business environment weakness
will continue to weigh on the pace of Nepal's economic development.
We believe stronger real GDP expansion in India (we forecast
an acceleration of India's real GDP growth to 5.6% in FY2014/15
[April 2014-March 2015] and 6.3% in FY2015/16 from 4.7% in
FY2013/14) will yield a positive impact on the Nepalese economy
over the coming years, given the extensive economic linkages between the two countries. Indeed, India is a key source of remittances
for the Nepalese economy, accounting for about 33% of total inflows
in 2012 according to data from the World Bank.
Ongoing efforts by the Laotian government to develop the hydropower and tourism sectors, and attract Japanese manufacturing
companies, should help Laos to garner greater foreign investor inter-
Global
Asia
est over the coming years. Ongoing Association of Southeast Asian

Nations (ASEAN) economic integration, which will generate more
trade and investment opportunities in the region, will also help to
bring more foreign direct investment (FDI) inflows to Laos. Larger
FDI inflows will improve Laos' economic growth prospects, bolstering our view that the economy will be able to sustain its current
strong growth momentum over the medium term despite potential
headwinds stemming from slowing mining sector growth and the
country's poor fiscal health. We maintain our largely positive growth
outlook for the Laotian economy, and are forecasting real GDP
growth to increase from an estimated 7.4% in 2014 to 7.6% in 2015.
ted electronically (as a result of nationality or territory in

which the product is produced);
Requirements that support a single, global Internet, including ensuring cross-border data flows, consistent with
governments' legitimate interest in regulating for purposes
of privacy protection;
Rules against localisation requirements that force businesses to place computer infrastructure in each market in
which they seek to operate;
Commitments to provide reasonable network access for
telecommunications suppliers through interconnection and
access to physical facilities; and,
Provisions promoting choice of technology and competitive alternatives to address the high cost of international
mobile roaming.
Global
Limited Impact On ICT From

Trans-Pacific Partnership
BMI View: The introduction of the TPP is being hailed as a gamechanger for a number of different industries. For the ICT sector,
however, we see the agreement as having limited impact across the
board, as most markets involved in the TPP are already undergoing
widespread development. However, we note a few instances where
the TPP could have a tangible effect, provided governments such
as Vietnam are willing to accept these changes.
Telecoms, IT and e-commerce have been identified by the TransPacific Partnership (TPP) as areas of focus for the 12 member
states, as they look to encourage comprehensive market access
and open trade to promote economic growth.These three segments
play a role in the TPP through the proliferation of a free, open and
competitive internet boosting the global economy. Reducing trade
barriers between countries, ensuring fair competition, reducing
the influence of state-owned enterprises and improved intellectual
property (IP) procedures are all on the agenda for these sectors in
the member states.
More specifically, some of the telecoms-related TPP provisions
outlined by the Office of the US Trade Representative include:

Commitments not to impose customs duties on digital

products (eg, software, music, video, e-books);
Non-discriminatory treatment of digital products transmit-
Telecommunications
Limited Telecoms Impact Among Developed

Markets
Mobile Penetration (%), 2014
Source: National sources, BMI
Vietnam The Outlier In Local Data Storage

The TPP has a wide range of countries as member states and among
them are some of the most advanced telecoms and IT markets in
the world; the US, Canada, New Zealand, Singapore, Japan and
Australia account for six of the 12 TPP members. In terms of the
issues outlined above, these states already subscribe to these views
Vietnam The Laggard

Country
Industry Risks
Australia
70
Brunei Darussalam
65
Canada
90
Chile
90
Japan
80
Mexico
65
Malaysia
70
New Zealand
90
Peru
60
Singapore
90
United States
90
Vietnam
30
Note: Scores out of 100, with 100 highest. The 'Industry Risks' score evaluates industry-specific dangers and those emanating from the state's political profile. Source: BMI
Global
Asia
and are committed to a global Internet, with multiple interconnection, roaming and digital trade agreements already in place. The
same is largely true of the other six, less developed markets. Chile,
for example, stands out among these as one of the most forwardlooking telecoms and IT markets in the world. It was the first to
enshrine the principles of net neutrality and is therefore ahead of
the curve in these telecoms principles.
Mexico And Peru Internet User Growth Drives
E-Commerce
5-Year Internet User CAGR (%), 2014-2019
Japan
Singapore
Canada
Vietnam
New Zealand
Australia
United States
Chile
Malaysia
Brunei Darussalam
Mexico
Peru
0%
2%
4%
6%
8%
10%
Telecommunications
Telecoms State-Owned Enterprises A Minor

Concern
The TPP will also have an impact on competition policy and stateowned enterprises (SOEs) in telecoms sectors. In particular, the
TPP seeks to prohibit anticompetitive business conduct, as well as
ensuring that the private sector is able compete on fair terms with
SOEs, especially when governments show clear favouritism or
protectionism towards SOEs.These basic rules are applicable to a
handful of states involved in the TPP, as most have fully liberalised and privatised telecoms sectors, with healthy competition and
minimal government interference. Vietnam in particular is one of
the markets where the government has an overwhelming presence
through ownership of stakes in VinaPhone, MobiFone, Viettel
and Vietnam Posts and Telecommunications (VNPT). Moves
are underway to privatise VinaPhone but there will remain a strong
government presence in the sector and similar to laws on local data
storage, we expect this to be a point of contention in progressing
further TPP plans. Vietnam scores the lowest by far of the 12 TPP
member states independence of the regulator and overall government involvement category, scoring at just 30 out of 100 in BMI's
Telecoms Industry Risk Index.
China Threatening International Patent Standards
Total Patents Filed By Country, 2003-2013
Source: BMI
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
China
Japan
USA
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
2003
Vietnam is the major outlier here, which passed Decree 72 in

July 2013,prohibiting discussion of current affairs, online publication of material that 'opposes' the Vietnamese government or
'harms national security'.More importantly, the law also requires
foreign internet companies to keep their local servers and customer
information inside Vietnam, allowing the Vietnamese government
to request data from Facebook, Google and Twitter on bloggers
and writers to enforce censorship of material to store customer
information within the country.
This directly opposes one of the provisions of the TPP and is
a concerning trend that other countries around the world such as
Russia and Turkey have previously discussed as a response to the
revelations from the NSA PRISM scandal. While keeping their
citizens' data out of the hands of US government agencies is a
motivation behind local data storage, our view is that these countries want more control over anti-government material online and
these measures allow them to put pressure on internet companies
based abroad.
Allegedly, the aim is to force Facebook, Google and Twitter to store customer information within Vietnam, allowing the
Vietnamese government to request data on bloggers and writers
to enforce censorship of material. Only Yahoo? has established
a local office in Vietnam and Facebook is reportedly banned as a
result of Decree 72.
Rescinding the law would presumably be a requirement for
Vietnam to join the TPP; however, forcing it to do so may be
more difficult as we believe the state will be unwilling to remove
its censorship procedures and invite anti-government content. This
may prove to be a sticking point in discussions and both the US and
Vietnam have shown an unwillingness to compromise on issues so
far. Therefore, while we see little impact from these provisions for
the vast majority of TPP members due to their current compliance,
there is scope for wide-reaching change in Vietnam, which would
boost growth of the internet sector.
South Korea
Source: WIPO, BMI
Governments in Singapore, Brunei and Malaysia also hold stakes

in key companies such as SingTel and Telekom Malaysia. There is
less evidence to suggest that governments in these markets actively
favour the state-owned incumbents, so the impact would be a lot
smaller than in Vietnam. We also highlight Peru and Mexico as
markets with competitive concerns, where Telefnica and Amrica
Mvil, respectively, hold dominant positions in the provision of
mobile, fixed-line and broadband services. Over the past two years,
the governments of these two markets have attracted new players
to the markets to improve competitive dynamics and in the case
of Mexico, have instituted a market share cap of 50% on Amrica
Mvil's Telcel and Telmex units. With plans already underway to
address problems of unfair competition, the TPP will again have
limited effect in these markets.
E-Commerce Booming With Or Without TPP

The proliferation of the Internet has huge economic ramifications
for markets, in particular for small enterprises looking to promote
their business and attract customers. This section of the TPP looks to
enhance e-commerce activity by removing various impediments and
Global
Asia
custom duties, facilitating digital product transfers, authentication of

electronic transactions and consumer protection. While this ostensibly is a positive move for a number of these markets, e-commerce
is largely being facilitated at the market level already, helped by the
greater availability and affordability of internet connections through
both fixed line and mobile devices, with smartphone proliferation
expected to play a key role in this development. Increasing wages,
expanding internet uptake and easing foreign investment restrictions will help give rise to more prominent e-commerce activity,
mostly in the lesser developed markets in Asia and Latin America,
as e-commerce is a fixture of everyday life in the US and other
developed markets.
ICT Patents The Most Sought After
Patents Filed By Technology Type (%), 2013
Computer
Technology, 7.7
Digital
Communications,
7.3
Semiconductors,
3.8
Audio-Visual
Technology, 3.6
Telecommunicati
ons, 2.7
Others, 74.9
Source: WIPO, BMI
For markets such as Vietnam, Malaysia, Singapore and Brunei,

BMI has previously identified the growth potential for e-commerce
as a result of the Association of Southeast Asian Nations (ASEAN)
Economic Community (AEC) (see 'E-Commerce Benefits Most
From AEC Plans', September 19 2014). While the TPP also looks
to play a role in expanding the digital economy, BMI argues that the
provisions in the AEC will have a more significant impact given the
closer proximity and the broader remit of the plans. For example, the
easing of foreign investment laws among ASEAN states will help
increase the level of capital expenditure on internet infrastructure,
expanding the coverage and upgrading the quality of service.
Interestingly, the TPP member states that BMI forecasts to
have the strongest growth in internet users over the next five years
are Mexico and Peru. As previously mentioned, reforms and new
competition in these telecoms sectors will help spur increased investment, lower prices and expanded coverage of internet networks.
Mexico is a market that BMI highlights as being among the most
attractive in Latin America from an e-commerce perspective, due to
the country's proximity to the US and growing consumer spending
power (see 'Mexico A Regional Outperformer For E-Commerce',
November 26 2014). US e-commerce players will target Mexico
for its growth capability and from a logistics and infrastructure
standpoint, Mexico is also among the more developed in Latin
America, which will facilitate the sending and receiving of goods
from the US, Latin America and within the country. The number
ofinternet users in Peru is projected to grow at a compound annual
growth rate (CAGR) of 8.8% between 2014 and 2019, increasing
by about 5mn users. Peru will therefore have the most to benefit
from the TPP e-commerce rulings, particularly as it became the
first country in Latin America to enact e-money legislation. This
tool for financial inclusion will help address e-commerce concerns
Telecommunications
regarding Peru's cash-based economy, opening up growth potential

for small businesses as well as international e-commerce companies
looking to enter the market.
Tech Start-Ups Undeterred By Restrictive IP

Provisions
The implications for intellectual property (IP) such as patents, trademarks and copyright have become among the most controversial
aspects of the TPP. US negotiators are pushing for the adoption
of copyright measures that exceed current international treaties,
including the adoption of the Anti-Counterfeiting Trade Agreement
(ACTA).All signatory countries will be required to conform their
domestic laws and policies to the provisions of the Agreement, which
would extend the existing international IP enforcement norms in
the Agreement on Trade Related Aspects of Intellectual Property
(TRIPS) to the online environment.
The IP policies are intended to strengthen the copyright protections of digital products, particularly as the US is becoming increasingly concerned with China and Russia's adherence to existing IP
laws. Critics say that the TPP's IP provisions go too far and turn
Internet Service Providers into copyright enforcers through limiting user access to infringing websites and terminating accounts of
those alleged to have engaged in repeated violations. Other criticisms suggest that the policies would violate user privacy and curb
innovation, as they would be unable to meet the evolving IP needs
of the technology sector.
Despite these factors, we deem it unlikely that the new IP legislation would have a significant impact on information technology innovation, mostly because the financial rewards far outweigh the risks.
Funding for tech start-ups and application development reached new
highs in 2014 and continues to gain traction, as developers look to
create the next Snapchat, Instagram or Uber. These companies
are valued at billions of dollars, with angel investors and venture
capital funds looking to get in early to reap the potential benefits
from global success stories such as Facebook and Twitter. Chile, for
example, has tried to replicate this model through the implementation
of its Start-Up Chile program, offering visas and funding to foreign
entrepreneurs in order to encourage its own 'Chilecon Valley' of
tech companies. Start-Up Chile has had mixed success so far but
worldwide, patents filed for telecoms, IT, semiconductors and other
related digital products accounted for 25% of the total patents in
2013. This is likely to improve over the coming years, as tech plays
a wider role in the global economy. Whether or not the TPP IP laws
are more restrictive will do little to curb innovation, when billions
of dollars are at stake.
Google's Project Fi Opens Up

New Battleground
BMI View: Google's launch as a MVNO reinforces our view that
the next telecoms battle is between operators offering premium
services, and those offering good-enough services. We believe the
latter will be dominated by diversified players where the telecoms
bottom line is less of an imme diate concern, and that the form er
will need to make the case for consumers to upgrade. We still believe
that Google's long-term strategy is to become a fully vertical player,
with regulation the main risk to its plan.
Google has launched an MVNO service in the US, dubbedProject
Global
Asia
Fi. The service will work across several technologies including one
million Wi-Fi hotspots and will use both Sprint and T-Mobile's
networks for traditional cellular accesses, providing seamless transition and putting customers on the best possible network at the time.
The service will cost USD20 for unlimited voice and messaging, and
USD10/GB of cellular data, which will be credited if unused. The
plan also includes roaming in 120 countries, and is only available
on the Google Nexus 6 at launch.
Leveraging Network Capacity Through MVNOs
Sprint & T-Mobile, MVNO Subscriptions (LHS, mn), Share Of MVNO
(RHS, %), 2013-2014
12
20
18
10
16
14
12
6
10
8
6
4
2
0
for these premium services.

BMI foresees one operating group which will focus on that
segment, but we believe that 'coopetition' and not competition will
occur. Hutchison Whampoa, owner of the 3 Group, has bucked
the trend in Europe by not embracing the convergence paradigm,
but it has also been able to acquire some of its competitors in the
markets where it operates (Austria, Ireland, UK). It is able to do so
because the 3 Group only represents 16% of its total revenues, a
rate increasing to 21% if its Asian telecoms holdings are included.
As such, it is less reliant on immediate returns from its telecoms
arm and can still offer some of the most competitive plans in the
market, either though pricing or services offered. The group recently
launched its own mobile virtual network enabler (MVNE), Hue, to
increase its revenues by focusing on the wholesale market, and this
is where we see a strategic fit between Google and Hutchison, as a
partnership would enable the former to launch in other markets by
utilising some of the latter's telecoms specific experience, and also
by dealing with one single player.
Diversification Key To Offer Good-Enough
Services
Hutchison Whampoa Revenues Share (%), 2014
0
Q113
Q213
Sprint
Q313
Q413
T-Mobile
Q114
Q214
Sprint Share
Q314
Telecommunications
40
Q414
35
T-Mobile Share
30
25
Source: Sprint, T-Mobile
20
15
10
5
Finance &
Investments
Asia Telecoms
Hong Kong
Telecoms
3 Group Europe
Husky Energy
Cheung Kong
Infrastructure
Retail
Property & Hotels
0
Ports
BMI believes the service will have a limited impact at launch,

because of the limited number of Nexus devices in circulation,
and we also believe it is a more conservative launch than Google
Fiber, which has brought greater competition in the markets where
it launched. However, it provides an alternative to the current pricing system introduced by many operators, not only in the US but
worldwide, looking to grow revenues through greater data usage by
connecting more devices and objects; it is a battle we have called
'premium vs. good-enough' (see 'Premium Vs. Good-Enough The
Next Battle' March 24). Google is not the first operator to launch a
service primarily using Wi-Fi networks, or providing data rollovers
by giving customers greater choice but, like Apple with its Watch,
Google can leverage its stronger brand name to make a far greater
impact than first movers.
As operators move further towards offering premium services
to boost their revenues, we see an opportunity in the lower-end of
the segment from consumers wanting more basic packages of voice,
messaging and data services. However, we also believe that pure
telecoms players will struggle by focusing exclusively in that segment, as the demand for data services needs heavy investments, and
higher margins, which will not fit with the offer of cheaper plans. As
such, we believe diversified players, such as Google or Facebook,
have the best chance to be successful as operators, because they
will be able to leverage their core services and specific profitability
will matter less, at least at the onset; this is the case with YouTube,
which is not profitable on its own, but provides Google with a
wealth of data of importance for its core advertising business. We
also worry that operators' vision of premium services to cure their
current profitability problems may not come through, especially in
Europe, as history reminds us. Back in 2000, operators spent large
sums in spectrum auctions (USD35.5bn in the UK, USD46.6bn in
Germany), with the vision that 3G data services would lead to a
quadrupling of ARPU. ARPU has been flat and declining since, and
operators will only be successful if they manage to make the case
Source: Hutchison Whampoa
Regulation may also help Google. In the US, the Federal Communications Commission (FCC)'s recent decision to open up the
3.5GHz frequencies to commercial actors its first foray into spectrum sharing also gives the possibility to use the spectrum on an
ad-hoc basis, as though it was unlicensed as Wi-Fi frequencies (see
'Spectrum Sharing A Benefit To New Players', March 30). This could
help Google improve coverage at a lower price, as well as improve
capacity in denser areas. But the company could also be helped by
regulators in Europe. This may sound surprising bearing in mind
its recent antitrust investigation concerning Google Shopping and
Android, but BMI believes the forthcoming Digital Single Market
(DSM) strategy, due on May 6 2015, could provide opportunities
for better wholesale terms, helping Google. The DSM will update
regulation for content providers, not in itself a negative aim, but it
is likely to include greater financial contribution from those players
towards the roll-outs and deployments of network infrastructure. If
this is the case, we believe the DSM will have to offer balance and
mandate more attractive wholesale terms in Europe, making it easier
to launch services, an area which Google could further leverage by
offering the first pan-European mobile network.
It remains BMI's opinion that Google's long-term strategy is
to become a fully vertical player (see 'Google Has Networks In Its
Long-Term Strategy', January 22). The company should beware of
greater regulatory scrutiny, especially relating to its use of consumer
Asia
Asia
data, but its ambitions are highlighted by its multiple projects to

provide internet access through balloons, drones or lasers. These
could provide alternatives to the traditional methods of providing
internet access across the globe but, in the short-term, Google's
projects are there to highlight what it considers best practice so that
legacy players follow in its footsteps with more innovative services.
Telecommunications
must therefore look to increase its appeal to the remaining players

and, to do that, it must emphasise products that are more software
and application-focused. Although such products would, ideally,
be sold in conjunction with legacy and future mobile infrastructure,
they will also be platform-agnostic, enabling Nokia/Alcatel-Lucent
to augment networks supplied by other vendors.
Asia Keeps Nokia Busy
Asia
Nokia Networks Asia Sales (EURmn)

1,400
Asia Will Be Nokia-Alcatel's Key

Battleground
Greater China
Rest of Asia
1,200
1,000
BMI View: Buying Alcatel-Lucent would provide a welcome boost

to Nokia's ability to engage with clients across Asia, and in Greater
China in particular. A stronger, more diverse and more focused
product portfolio would provide for a more sustainable Asian business. However, low-cost Chinese vendors will continue to threaten
the company's ability to win and secure customers.
800
600
400
200
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Nokia's proposed purchase of Alcatel-Lucent is a move born

of necessity, driven by a need for increased scale and product
diversification, as much as a need to future-proof the companies'
intellectual properties in an increasingly convergent industry (see
'Nokia/Alcatel-Lucent: A Difficult But Necessary Deal', April 14).
As Asian markets accounted for 39.5% of Nokia Network sales in
Q414 and 41.7% of sales for 2014 as a whole, BMI believes that
a marked improvement in the enlarged entity's Asian business will
be key to determining its long-term viability.
Asian markets are still in the process of migrating from 2G to 3G
technologies, while 4G is only just beginning to be commercialised.
BMI believes there are ample opportunities the merged company
can exploit across the region, particularly if it can leverage Alcatel's
expertise in small cells technology and efficiency-boosting offerings
based on software defined networking (SDN) and network functions
virtualisation (NFV).
Consolidation in markets as diverse as Hong Kong, Indonesia,
Vietnam and Cambodia means the entity's addressable market is
shrinking in terms of total numbers of discrete mobile networks; it
Source: Nokia
For Q414, Nokia Networks reported a 3.0% y-o-y decrease in

sales to Greater China and a modest 0.9% improvement in sales to
the rest of Asia. The latter was driven by higher mobile broadband
network deployments in Vietnam, Myanmar and India, but were
undermined by lower deployments in Japan. With regards to Greater
China, Nokia opined that lower deployments of TD-LTE solutions
were behind the fall in sales.
Year-on-year growth was a little brighter, however, with nonChinese Asian sales increasing by 17% as a result of continued
strong demand for network infrastructure in Vietnam, Myanmar,
Indonesia and Japan; weaker demand from India prevented sales
from rising any further. In China, net sales increased by 8% as demand for TD-LTE products increased. The Chinese government has
now authorised operators to deploy FDD-LTE technology alongside
TD-standard platforms. Alcatel-Lucent was quick to capitalise on
Nokia Networks Selected Asian Contracts/Deals, 2014-15

Date
Contract
March 2015
China Telecom selected Nokia Networks as its largest non-Chinese vendor in its Phase 2 LTE tender process. Flexi Multiradio 10 Base Stations,
NetAct network management system and professional services are to be provided. The value of the deal was not disclosed.
March 2015
Vodafone Hutchison Australia awarded a four-year managed services deal to Nokia Networks. This is an extension of an initial managed services
contract signed in 2006. It covers 2G, 3G and 4G+ networks.
January 2015
Bharti Airtel commissioned Nokia Networks to extend its 4G network to six new circles, utilising 1800MHz spectrum. Nokia equipment was already
providing 4G and 2.3GHz in two circles.
November 2014
Nokia Networks was awarded a 3G contract by Bharti Airtel to enhance its 3G network in the Mumbai, West Bengal and Bihar telecom circles. The
deal includes an India-first dual band, dual carrier 3G network implementation, refarming 900MHz to complement Mumbai's existing 3G network on
2.1GHz.
October 2014
Nokia Networks and China Mobile announced a framework agreement for mobile communication equipment and services valued at USD970mn.
Nokia Networks will provide its 4G TD-LTE technology including Evolved Packet Core (EPC) and GSM wireless networking equipment, core application platforms, OSS, software, and services to support China Mobile's 4G wireless broadband network rollout in 2014 and 2015. Deliveries under
the agreement commenced in Q114.
August 2014
Vodafone New Zealand selected Nokia Networks to enable the launch of its commercial 700MHz LTE network.
May 2014
Telenor Group selected Nokia as a candidate supplier for radio access equipment and professional services over a period of five years. The operator is modernising its existing 2G and 3G networks and continuing to deploy LTE across Europe and Asia.
May 2014
Celcom Axiata selected Nokia's optimisation services to enhance its network, voice and data quality in Klang Valley and Kuala Lumpur. Celcom's
2G and 3G networks were to be enhanced.
Source: Nokia
Asia
Asia
this development, winning a substantial order from China Mobile

in January 2015 and building on its existing long-running relationships with China Telecom and China Unicom. It seems clear that
Nokia's traction in China will bite deeper if it acquires its FrenchAmerican rival.
Asia Will Be Nokias Battleground
Nokia Networks Annual Sales By Region, 2014
Latin America
9.0%
Europe
26.2%
North
America
13.7%
Middle East &

Africa
9.4%
Asia Pacific
29.4%
Greater China
12.3%
Source: Nokia
Alcatel is particularly strong in Greater China, as demonstrated

not only by its recent successes in supplying LTE mobile broadband
solutions to the three principal operators, but also its well-established
reputation as a supplier of high-quality IP routing/networking equipment as well as fundamental wireline access solutions, which are
still in demand by operators in countries that are in the process of
migrating from legacy narrowband networks.
Its mobile equipment business lacks traction outside of China,
however; with Chinese economic growth slowing markedly over the
next few years (a development that will impact many of China's key
trading partners across the Asian region), we believed this would
undermine Alcatel-Lucent's ambitious transformation programme,
geared towards reinventing itself as a next-generation converged
solutions provider.
In some respects, Alcatel-Lucent's so-called 'Shift' strategy was
well-timed to capitalise on the emerging demand for infrastructure
and solutions designed to leverage the power of 'Big Data' and cloud
computing among economies seeking to diversify away from traditional engines of growth. The company's expertise in small cells
and IP routing equipment will appeal to cost-conscious businesses
looking to migrate to the digital world and, in fact, the emphasis on
non-telecoms customers was expected to insulate Alcatel-Lucent
from the shrinkage playing out in its traditional telecoms operators
and carriers market. It is this broader appeal that will improve Nokia's
long-term sustainability in the years ahead and, in that regard, the
merger makes strategic sense.
With Nokia as the surviving entity, we expect mobile infrastructure and related solutions to continue to be central to its product
portfolio. This is no bad thing, given that a number of Asian markets
have yet to migrate to 3G while 4G-powered mobile broadband remains a cost-effective solution to the problem of rolling affordable
broadband services into rural areas.
However, the market will remain highly competitive as Ericsson and Huawei Technologies have accounted for the majority of
mobile broadband/4G contract wins outside of China. Ericsson has
a long association with operators in the region, and has largely been
untroubled by the need to rebrand or realign its product portfolios
Telecommunications
as a result of mergers and acquisitions, unlike Alcatel-Lucent and,

to a degree, Nokia Networks. Continuity of brand and portfolio can
be just as important as pricing, innovation and breadth of offering,
which is the key strength of Chinese upstart Huawei Technologies.
We believe Ericsson and Huawei will compete more aggressively
on pricing while Nokia integrates Alcatel-Lucent and winnows out
unprofitable or duplicated product lines. Both along with ZTE
already offer comprehensive converged products and solutions,
giving them an edge in the short to medium term.
Meanwhile, by moving into the IP networking business through
Alcatel-Lucent, Nokia will be facing new competitors such as Cisco
Systems and Juniper Networks; these are key players both globally
and regionally in the nascent market for SDN/NFV and the broader
cloud computing arena. They, too, will be difficult to dislodge.
BMI believes that Nokia will make further acquisitions to bolster its converged products portfolio both prior and subsequent to
completing its purchase of Alcatel-Lucent. The company must be
careful not to place too much pressure on its ability to absorb new
product lines and intellectual property while still giving itself enough
freedom to rationalise those parts of the business that could act as
an impediment to growth.
We believe the toughest battles for supremacy will be waged
across the Asia region over the next three years. A very different
Nokia and a very different client base will emerge at the end
of that period.
Asia Fibre Market Differing

Speeds Of Light
BMI View: Asia's telecommunications markets are at widely varying stages of development and the case for deploying fibre varies
considerably from market to market. Advanced economies such as
Hong Kong, Singapore and South Korea benefit from being fibrerich, whereas there is little short-term incentive to invest in fibre
in frontier markets such as Myanmar, Cambodia and Laos. Nevertheless, fibre can have a vital role to play in assisting economic
development in even the most challenging of markets.
Developed Markets Lead The Way
Asia FTTH/B Household Penetration (%), 2014
South Korea
Hong Kong
Japan
Singapore
Taiwan
China
FTTH
Malaysia
0
10
20
30
40
50
FTTB
60
70
Source: FTTH Council, IDATE
The demand for advanced rich media communications services by

consumers, as well as the growing 'big data' processing requirements
of governments and businesses, is driving investment in fibre-optic
infrastructure as a replacement for, or alternative to, legacy copper
access networks and relatively underpowered mobile broadband plat-
Asia
Asia
forms. However, fibre is expensive to install and price-sensitive consumers will continue to hold out for 'good enough' lower-bandwidth
connections, making it difficult for governments to justify investing
in national broadband networks and for infrastructure owners to find
ways of persuading customers to upgrade.
GDP Growth Reflected In Fibre Investment
Strategies
Top Fibre Markets Real GDP Growth (%)
Telecommunications
The FTTH Council Europe's annual assessment of fibre-to-thehome (FTTH)/fibre-to-the-building (FTTB) deployment globally
(which only covers markets with more than 200,000 households)
showed that, at the end of 2014, of the 38 markets globally with
broadband household penetration in excess of 1%, seven Asian
markets were featured, and five made it to the top 10. South Korea,
Hong Kong and Japan came behind only the United Arab Emirates
in this survey, testament to those countries' early adoption of fibre,
intense government support for fibre and demand for premium high
bandwidth services by end-users.
TV Everywhere Depends On The Cloud
Cloud Computing Spending Forecasts (USDmn), 2013-2019
e/f = BMI estimate/forecast. Source: BMI
New technologies such as VDSL/vectoring, DOCSIS3.0 and

LTE-A enhance the data throughput rates of copper, cable TV
and mobile broadband platforms, respectively.However, these are
interim solutions at best; prolonging the commercial lives of assets
operators can ill afford to write-off at a stroke. Fibre offers the most
economic solution to the bandwidth crunch, albeit one that only
delivers an appreciable return on investment (ROI) over the long
term, in the order of 10 years or more.
The 28 Asian markets tracked by BMI's ICT research teammay
be grouped into three different bands of economic, infrastructural
and technological development. The case for fibre while compelling in all markets from an economic growth perspective varies
considerably both between and within these three bands.
Utilising data from our ICT, Country Risk and Operational Risk
research teams, as well as inputs from teams covering high-growth
industries that are reliant on advanced communications technologies
(such as Autos, Infrastructure, Healthcare and Power) and filtered
through our proprietary Risk/Reward Indices (RRIs), we believe
Asia's fibre markets can be classified into the following bands:

10
Band A: High-growth, mature economies, supported by

advanced technological infrastructure Japan, Singapore,
Hong Kong, South Korea, Taiwan and Macau.
Band B: Large populations, robustly-growing economies
and a high penetration of advanced communications infrastructure and services, held back only by 'digital divide'
issues such as a lack of rural penetration and a lack of
concerted political and business willpower to push through
capital-intensive infrastructure rollouts Australia, China,
New Zealand, Malaysia, Indonesia, Philippines, Thailand,
Sri Lanka and Fiji.
Band C: Weak or underperforming economies, highly dependent on imports, large and widely dispersed populations,
topographic obstacles to fibre deployment, little integration
of broadband and economic policies, etc India, Pakistan,
Afghanistan, Mongolia, Brunei, Vietnam, East Timor,
Bangladesh, Nepal, Myanmar, Cambodia, Bhutan and Laos.
Although growth is still possible in the Band A markets, it is

slowing as saturation approaches and operators there must now look
to new ways of monetising these resources. In this respect, the case
for fibre has shifted away from an infrastructure-led argument to a
service differentiation approach. Investors will now be switching
focus to the Band B and C markets.
China and Malaysia, as the next-highest ranked markets in the
FTTH Council's study, are developing rapidly, thanks to concerted
efforts by China Telecom and China Unicom as well as Telekom
Malaysia, DiGi.com and TIME dotcom, among others. We expect
the pace of development to be rapid, but improvements in penetration will be slow owing to the vast size of the addressable market
in China and the difficulties in extending fibre across the heavily
forested and mountainous Malaysian peninsula.
The Chinese operators are being driven by aggressive demands
from the central government, which has a vested interest in seeing its
control of the media and economy extend to the electronic domain,
while private sector organisations are generally left to set their own
agendas in Malaysia, albeit within a focused multi-year development
drawn up by the government.
Perhaps the most interesting markets within Band B are Indonesia, the Philippines and Thailand. All three face very different industry and business environment opportunities and headwinds, and our
daily analysis has tended to focus on these markets in recent months.
Indonesia Wakes Up To Fibre

Indonesian incumbent PT Telekomunikasi (PT Telkom) has been
building a national fibre-optic superhighway, the Palapa Ring, over
the last decade. High-capacity fibre cables have been installed, linking the archipelago's largest islands and population centres, while
its newly-created Telkom Akses division has been extending the
reach of the multi-service access network (MSAN) with FTTH/
fibre-to-the-premises (FTTP) technology, replacing 15mn legacy
Asia
Asia
copper local loops with fibre. Its rival in the mobile and wireline
broadband market, PT Indosat, is also investing in fibre in order
to transform itself into a multi-service provider.
Data Traffic Surges In Asia
Asia IP Traffic Growth Forecasts (PB/month), 2013-2018
60,000
50,000
40,000
30,000
20,000
10,000
0
2013
2014e
2015f
2016f
Consumer Managed IP
Business IP
2017f
2018f
Consumer Internet
Mobile Data/Internet
e/f = Cisco estimate/forecast. Source: Cisco Visual Networking Index 2014
Meanwhile, MNC Group announced plans to invest USD2-3bn

to create an alternative fibre-optic high-speed broadband network in
Indonesia over the next 10 years. The media conglomerate which
operates the largest and most popular group of TV channels in the
country states that its aim is to make affordable broadband access
widely available. This is a laudable goal, and one that we welcome.
However, given its diverse digital media portfolio, BMI suggests
MNC's aim is to enhance the monetisation opportunities for its existing businesses (see 'Bullish Pay-TV Outlook Motivates USD3bn
Investment', January 23 2014).
Besides using the new network to deliver programming to many
more prospective new consumers, MNC may well see the opportunity to generate additional revenue through secondary digital media
materials, such as app-driven value-added content supplementing
key programmes. Indonesia's pay-TV subscription base is forecast
to rise to 8.691mn by 2020. This represents a near-tripling of the
2012 subscription base, yet still achieves TV household penetration
of just 21% (versus 7% in 2012).
In October 2014, the government announced a new national
broadband initiative (see 'Broadband Plan No Mere Economic
Growth Smokescreen', October 20 2014). BMI maintains the view
that although we do not expect the plan to realise all of its aims, it
does play to our expectations that the key to the country's credibility
as a regional business centre lies in expanding and modernising its
broadband infrastructure and that the use of fibre would ensure the
resulting national broadband network will be future-proof.
Under the 2014-2019 Indonesia Broadband Plan, up to IDR278trn
(USD23.2bn) is to be invested in extending wireline broadband
services to 30% of the urban population and 6% of the rural population, while mobile broadband services are to be rolled out to 52% of
rural consumers. Approximately 10% of the ambitious project will
be financed by the state, meaning that the onus will fall squarely on
Indonesia's wireline and mobile operators.
Mobile Operators Set The Pace In Thailand

Thailand offers considerable potential from a fibre investment perspective. Wireline broadband penetration is relatively low, at just
3.2% in 2014, owing to the high cost of personal computers and the
poor quality of local access and backbone infrastructure provided
by state utilities TOT and CAT. The former has developed an am-
Telecommunications
bitious plan to roll out a nationwide fibre-centric next-generation

access network, but faced with the loss of income from its mobile
concessionaires, it no longer has the resources to finance the project.
The government has also proved unwilling to bankroll the initiative
given the likelihood that fibre adoption will be slow in this lowincome market, jeopardising returns on investment. The replacement
of the former government with an unelected military-backed junta
suspicious of social media and electronic communications services
means that the project seems ever-more likely to take off.
However, mobile operators AIS and DTAC are stepping into
the fray, promising to invest in wireline broadband infrastructure
to bolster their core businesses and address the perceived shortfall
in access to higher-speed broadband services in Thailand. They
have seen rival True capitalise on its DOCSIS 3-enhanced cable
TV network to offer converged multiplay services, slowing ARPU
declines. AIS will spend USD124mn to develop its wireline footprint. DTAC is deploying fibre technology from Alcatel that will
initially focus on augmenting its backhauling capabilities and boost
the effectiveness of its telecoms towers.
Meanwhile, Jasmine International has outlined plans to list a
newly-created infrastructure fund (IFF) that would house its wireline
broadband business, Triple T Broadband, to fund the expansion of
its fibre-optic network in the Bangkok Metropolitan area (BMA) as
well as provincial Thailand. Jasmine International would own onethird of the fund.Although homes passed averaging 28% in 2013,
Jasmine/TTT has increased its market share from 21% to 29.5%
over the past five years by reaching provincial customers, making it
the third-largest player with 1.6mn broadband subscribers. Around
75% of its customers come from the provinces (see 'High Risks And
Rewards For Jasmine's Broadband Foray', November 18 2014).
Philippines Looks To The Cloud

Incumbent PLDT owns and operates the most extensive last-mile
access network in the Philippines. The company has succeeded in
diversifying into complementary lines of business including outsourcing and has built a powerful data centres business that enables
it to offer high-quality cloud computing services to multinationals
looking to establish a regional hub yet are unwilling to entertain
the high cost of operating out of Hong Kong or Singapore. PLDT's
launch of desktop-as-a-service (DaaS) in January 2015 augments
the company's reputation in the enterprise communications market.
Rival Globe Telecom has not been slow to follow suit, building its
own enterprise-class service portfolio.
Both PLDT and Globe have secured substantial multi-billionpeso loans to finance their 2015 capex requirements; both have cited
gigabit optical fibre as a necessity for responding to increase demand
for cloud and 'big data' solutions from local and international clients.
Minor players such as Liberty Telecoms and Sky Cable are also
significantly increasing their 2015 investment budgets to capitalise
on latent demand in the cloud.
BMI's forecasts for cloud computing spending cover 12 Asian
markets at present, with spending set to be highest in the leading
Band A and B markets, led by China. More consumer-focused services and applications are set to launch in Asia in 2015, including
streaming video services such as Netflix and iflix.With more connected devices in use across the region, the time is right to launch
such services. However, high-capacity infrastructure needs to be in
place if consumers are to fully engage with the 'TV Everywhere'
model posed by over-the-top (OTT) services. iflix's launch in the
Philippines and Malaysia highlights the importance of a fibre-centric
broadband infrastructure to such applications; its decision to launch
11
Bangladesh
in Indonesia, Thailand and Vietnam in 2015 reflects efforts being

made in those markets with regards to fibre (see 'Content Costs Key
To iflix's Success', March 24).
India Fails To Pass Muster

Bridging the digital divide between India's urban and rural populations was one of new Prime Minister Narenda Modi's key visions for
the telecoms sector, outlined in October 2014. Despite the renewed
focus on rural broadband, BMI does not believe significant broadband coverage will be realised within the next three to five years.
Reaching rural communities requires many hurdles to be overcome
such as the timely roll-out of the National Optical Fibre Network
(NOFN) and the return on investment to bring broadband outside
major towns and cities.
Bureaucracy remains a key barrier to growth in India's telecoms
market. Cable laying and trenching contracts for the NOFN remain
unresolved, with 70% of contracts not awarded by late 2014. Aside
from this delay, the NOFN only lays the fibre-optic cable. To reach
consumers and businesses, India's telecoms operators have to roll
out their own last-mile cables from the NOFN infrastructure. BMI
believes there are few operators willing to invest in this network, as
the potential for return on investment is low. The NOFN is funded by
India's Universal Service Obligation Fund (USOF), which is generated by an annual payment of 5% of revenues from all operators.
The NOFN project was launched in 2011 with plans to reach all
250,000 gram panchayats (local village or small town governments)
by the end of 2013. However, only 800 panchayats had received
fibre cable connectivity by the deadline, an insufficient proportion to
cause us to revise our broadband uptake forecasts. A new deadline
has been set for reaching the goals, with the NOFN now expected
to be completed by September 2015.
Modi's election win bodes well for businesses, BMI believes,
and we expect new policies to focus on encouraging investment.
For rural broadband to grow, a combination of technologies will
be needed to reach rural areas, with wireless platforms easier
and more cost-effective to deploy than fixed cables. While we
believe highlighting rural broadband is an important step, it will
take longer than the two-year timeframe set out for the NOFN to
make a difference.
Asia
Telecommunications
otherwise in selling beyond bandwidth. Voice revenues are declining but a combination of voice and data has greater monetisation
potential from both a retail and wholesale perspective. Many FTTH
providers sell bandwidth as mobile backhaul to mobile network
operators, looking to enhance the capabilities of their towers, particularly in urban areas. Tower companies in India, Malaysia and
Indonesia have made much of the fact that they need to invest in
fibre to keep up with burgeoning traffic-routing demands.
FTTH is a long-term investment and one that will be slow to
realise returns. Ultimately, however, it should be seen as a key part
of 'nation-building' strategies. Therefore, governments should take
a more proactive role in supporting fibre-led broadband network
initiatives. The key economic consideration should be 'total cost
of ownership' (TCO). Investing in copper today requires a modest
outlay but the cost of maintaining copper over a 10- or 20-year
period will yield much higher expenses than committing heavily
to fibre in the short term.
Governments must also consider the fact that, with the falling
price of bandwidth, it is far from certain that an operator will recoup
its investment in copper before it needs to upgrade to fibre. Governments can afford to take a longer-term view of fibre investments
than commercially-driven operators. Thus, we believe the Asian
markets presenting the greatest fibre investment opportunities are
those that are supported by clear and focused government policies
and national broadband strategies.
Bangladesh
Wireless Broadband Behind

New Towers Paradigm
BMI View: Lowering costs will drive greater demand for towers
companies in Bangladesh. Mobile operators have driven the market
thus far, but wireless broadband providers will generate an increasing proportion of the demand for towers in markets like Bangladesh.
Towers Access Will Support Faster Growth
Bangladesh Broadband Forecasts
Data Traffic Floods Across Asia

Cisco Systems a key provider of networking equipment to enterprises and carriers globally believes that IP traffic volumes in Asia
reached 17,950 petabytes (PB) a month in 2013, a figure likely to
have reached 22,119PB in 2014. Cisco predicts this volume to rise
to 47,273PB per month by 2018, representing a compound average annual growth rate of 21%, behind only the Middle East and
Africa, and then only to the latter region's start from a lower base.
IP traffic consists of consumer and business-grade Internet data
transfers, as well as mobile data/mobile internet-specific traffic.
The contributions of these types of applications will grow steadily
over the 2014-2018 period, but it is mobile-based traffic that will
grow fastest, at a compound annual growth rate (CAGR) of 67%.
This may call into question the wisdom of investing in fibre
rather than mobile broadband infrastructure, but with mobile
increasingly being integrated into triple- and quad-play service
packages and with high-definition media content beginning to
outpace the capabilities of small-screen devices, the consumer
proposition for fibre looks more appealing when viewed as a
long-term strategy.
The multi-play trend is key to telecoms operators' success or
12
e/f = BMI estimate/forecast. Source: BTRC, BMI
Tower sharing trends in telecoms markets have tended to focus on

mobile services, allowing operators in the sector to extend the reach
of their networks at lower costs. The expansion of a deal between
wireless broadband operator Qubee and passive infrastructure provider edotco is an extension of the existing telecoms tower trend.
The use of third-party infrastructure for expansion purposes will
boost Qubee's presence in the Bangladeshi broadband market and
India
deliver upside potential to overall market growth.

Qubee started as a WiMAX operator, gaining its licence for
broadband wireless access services in 2008 and launching WiMAX
in 2009. Since late 2013, Qubee has held a licence to offer LTE
services over which it offers wireless broadband services. The latest
deal with edotco is the third addendum to a deal that also includes
edotco's sister company, mobile operator Robi ; both companies
are owned by Malaysia-based Axiata.
edotco owns 12,000 towers in total, half of which are in Bangladesh and partners with the biggest players in the country including
Grameenphone, Banglalink, Citycell and TeleTalk. As Qubee
moves from WiMAX to LTE, cutting the costs of expansion will
be very important. WiMAX did not take off as a global broadband
technology, leaving many operators that invested in WiMAX
platforms trying to cover the costs of these roll outs. The BTRC
reported there were just 233,000 WiMAX subscribers at the end
of 2014, down from 315,795 a year earlier.
Bangladesh's broadband market remains subdued, reaching
only 0.6% penetration at the end of 2014. We forecast double-digit
growth but the market will barely reach 2.5mn connections by the
end of 2019. As more services are offered online, demand for faster
internet connections will grow and products such as Qubee's portable wireless hotspot will provide viable alternative access options
for subscribers. Incumbent BTCL has also concentrated on LTEbased fixed-wireless services and we believe wireless technologies
will underpin much of the broadband market's potential. Increasing
access to towers will help drive this growth, by lowering the cost
of network expansion. We believe this will encourage the towers
trend in Bangladesh.
Asia
Telecommunications
networks while seeing an increase in data usage, but BMI foresees

two drawbacks to the operator's plan. One concerns convincing
companies to take part in the scheme. US mobile operatorAT&T's
lack of apparent success for a similar endeavour suggests that Airtel
may not find it easy to offer a series of relevant free services to
its customers. The second issue concerns perception, as free services will give consumers the wrong impression about the value
of data services, and BMI believes it will make it harder for any
upsell towards paying for greater usage as the expectation of free
services remains in place.
Airtel's move also has domestic implications, coming soon
after the latest spectrum auction, where operators spent INR1.1trn
(USD17.6bn), and a regulatory consultation on a potential framework for over-the-top (OTT) services. Regulators in many countries, especially in developed markets, may have an issue with
Airtel's zero-rated service, but BMI does not expect the Indian
regulator to come out with strong net neutrality legislation. The
OTT consultation has a clear operator-bias in its framework and
wording, saying that OTT competed with operators by offering the
same services without building infrastructure, and that their model
allowed them to bypass operators to deal directly with consumers, and BMI expects the regulator to continue with light-touch
data regulation as a way to counter the heavy fees and subsequent
taxes asked of operators to offer services in India. This fits in our
overall view that net neutrality regulation will remain fragmented
worldwide and that a one-size-fits-all approach will not be suitable,
especially in emerging markets.
Growing Data Base Does Not Result In
ARPU Growth
3/4G Subscribers & APRU (INR), 2013-2019
India
Sponsored Data Insufficient To

Drive Demand
BMI View: Sponsored data plans will only have a limited impact on
3G/4G uptake in India, as they do not address the greater issues of
coverage and device affordability. BMI also believes that zero-rated
plans flout net neutrality standards, but the regulator is unlikely to
take a stand, highlighting the fragmentation in regulatory standards
between developed and emerging markets.
Bharti Airtel has launched Airtel Zero, a platform offering companies the possibility to offer their applications and services at
no data charge to Airtel customers. The zero-rated or sponsored
data service is seen by Airtel as a way to improve data uptake in
the country by making the companies, and not the end-user, pay
for the services they use.
BMI has written extensively about zero-rated services in emerging markets, and our view that they flout net neutrality rules, but
this particular example is interesting as it is an operator, and not
Facebook nor Google, that is introducing such a plan. Airtel is
pushing the benefits of the service, both for public policy as a way
to improve digital inclusion, as well as for the companies that
will take part in the service, arguing the zero-rated approach will
cost less than traditional marketing campaigns in terms of brand
recognition. Uptake of the service may seem like a win-win for
Airtel, as it would still receive compensation for the use of its data
e/f = BMI estimate/forecast. Source: Operators, regulator, BMI
Airtel may see sponsored data as a way to improve profitability

and data penetration, and while we expect strong growth in terms
of 3G and 4G subscribers in India, it will still remain a minority
of all mobile users and will not improve overall ARPU. The heavy
regulatory fees mean that operators are likely to roll out in the
more profitable areas, leaving swathes of rural parts uncovered.
BMI also believes that zero-rated plans only address one part of
the problem, in that it remains expensive to for most users in India to purchase a smartphone and be able to access data services,
free or otherwise. Tackling coverage and affordability issues are
better bets to increase uptake than the introduction of sponsored
data plans, even though they will negatively impact profitability
in the short-term.
13
Kiribati
Asia
Spectrum Monetisation Pressure Weighs On Minor Players

BMI View: Pressure for India's smallest mobile network operators
to consolidate will increase dramatically following the conclusion
of the latest round of spectrum auctions. However, even the largest
players will be weighed down by increased debt burdens and will
struggle to monetise their newly-acquired assets in the medium to
long term.
3G/4G Services Provide A Modest Boost To
Growth
India 3G/4G Forecasts
Telecommunications
Telewings brand) may look to buy fellow underperformers in order

to give it the scale to compete effectively. However, its options in
this regard are limited, owing to the fact that players such as TTSL,
Videocon and Quadrant have small footprints and investors that
would ask for the highest price possible while their spectrum remains
their most valuable assets. Telenor must, instead, content itself with
being a competitive player in the markets where it is not challenged
outright by its larger peers, negotiate spectrum swaps or look to be
acquired by a larger company. Fifth-ranked Aircel would be a good
fit, as it has relatively small user bases in key markets such as Gujarat, Maharashtra and Uttar Pradesh, where Uninor is quite strong.
Kiribati
Small Market Seeks Large

Investor
BMI View: The consolidation trend across the global telecoms
industry is beginning to play out in smaller markets. The driving
forces are the same, including high costs and shared expertise that
create economies of scale that can be leveraged to remain profitable and competitive.
Kiribati Offers Potential
Mobile Penetration (%)
The auctions of 800MHz, 900MHz, 1,800MHz and 2,100MHz spectrum drew bids totalling INR1.1trn (USD17.6bn) from the majority
of India's mobile network operators. At stake was the opportunity
to retain valuable resources on which their core businesses and subscribers are highly dependent. There was also the chance to acquire
spectrum that would fill gaps in geographic coverage or extend
services into new regions. Consequently, bidding was aggressive,
netting a 35% premium on the minimum price demanded by the
government. Unsurprisingly, not all players got the spectrum they
wanted or at a price they can afford and we reiterate our view that the
auctions will provide the catalyst for further market consolidation.
Third-ranked IDEA Cellular bid INR303.1bn for spectrum in
the 900MHz, 1,800MHz and 2,100MHz bands; it was followed
by market leader Bharti Airtel, which offered INR291.3bn, and
by second-ranked Vodafone India, which bid INR258.1bn. The
price per megahertz varied according to the region of the country
to which it was assigned, as well as the contiguity of frequencies to
other airwaves held or pursued by the bidder. Smaller players such
as Reliance Communications, Aircel and Tata Teleservices Ltd
(TTSL) also secured spectrum, generally managing to retain their
footprints. Yet-to-launch 4G operator Reliance Jio Infocomm
spent INR78.8bn on 49 blocks of 800MHz spectrum in 10 regions.
Telenor-backed Uninor and privately-owned Videocon Telecom proved unsuccessful, as the high price of spectrum in their
target regions quickly outstripped their ability to profit from their
proposed investments. Although non-voice services are popular
with Indian consumers, a bitter price warhas seen data usage costs
on 3G and 2G networks fall sharply. Increased data usage has,
therefore, produced only limited revenue growth in real terms and
has accentuated the issue of weakening contributions from voice
and messaging services.
Speculation has been mounting that Uninor (operating under the
14
Fiji's Amalgamated Telecom Holdings (ATH) acquired Kiribati

telecoms incumbent Telecom Services Kiribati Ltd (TSKL) for
AUD7.5mn (USD5.7mn). The acquired company, previously 100%
government-owned, is the sole provider of telecoms services to
Kiribati's 104,000 population. ATH owns Fijian incumbent Telecom
Fiji, mobile operator Vodafone Fiji and Fiji's international telecoms
provider FINTEL (among other local companies), but TSKL is the
first acquisition outside the country.
The Kiribati government gives no indication of how much the
entity generates in revenue but its rollout of 3G and 4G technology
in October 2013 will have been a significant investment and one
that the government is unlikely to want to repeat. The high cost of
deploying and maintaining infrastructure is likely a driving force
behind the decision to sell. As a larger company, ATH will be able to
benefit from stronger buying power and more expertise that will keep
costs down and bring new technologies to the market more quickly.
BMI notes that consolidation among players in small island nations is a growing trend, principally seen in the Caribbean, driven
by high costs of upgrading services. We believe ATH's acquisition
Malaysia
Asia
of TSKL is the start of a similar trend across Pacific Island nations.

Cable & Wireless Communications (CWC) is in the final stages
of acquiring Columbus Communications, while the possibility
of acquiring pan-Caribbean player United Telecommunications
Services has attracted both CWC and regional rival Digicel (see
'Digicel And CWC Move Battle To Curaao', February 16).
As the telecoms market moves towards generating revenue from
content, rather than simple connections, larger players can negotiate
more favourable terms for the products they offer. This is a global
trend driving consolidation across companies operating in different
segments of the telecoms market. Operators seek to offer services
across both fixed and wireless infrastructure. In smaller markets
where there are fewer players and economies of scale are less, linking
up with regional players to boost negotiating power is the driving
force behind the trend. We expect this trend will continue among
operators across the pacific, either through mergers or partnerships.
Malaysia
Investments Unlock Malaysia's

Data Centre Hub Potential
BMI View: Strong cloud computing and data centre revenue growth
was reported for 2014, ensuring that our bullish view of Malaysia's
prospects as a 'Big Data' hub for South East Asia continues to play
out. Robust government support through national policies and a
structured approach to promoting local IT and telecoms companies
will benefit both the IT market as well as the economy.
Cloud Key To Economic Growth
Malaysia Cloud Forecasts, 2013-2019
Telecommunications
to the growing numbers of multinational corporations looking to

establish regional headquarters in the country. Through investment
in a new 700-acre centralised data hub adding to the 1mn square
feet of data centre space already in service the government will
be looking to position Malaysian IT companies as leading players in under-developed markets such as Vietnam, Thailand and
Myanmar as well as compete more aggressively with relatively
well-developed markets such as Indonesia and the Philippines.
The new Sedenak Iskandar Data Hub will be equipped with
1mn servers and will be powered by 600MW of electricity. Hosting many of Malaysia's IT and telecoms service providers, it will
be in a strong position to cater to the growing needs for 'big data'
services across multiple verticals, both in Malaysia and overseas.
The government is keen to see the cloud and data centre services
industry quickly become a major contributor to economic growth
and with revenues expected to reach MYR915mn by the end of
2015 and MYR2.2bn by 2020, its continued strong support for
the development of the sector is welcomed. Around MYR143mn,
or 18% of total revenues in 2014, came from offshore operations,
greatly improving on the MYR44.1mn (7%) recorded in the previous year.
Government agencies accounted for 29% of total revenues in
2014, while the banking and financial services sector accounted for
19% and 'content and technology' companies accounted for 17%.
Half of all revenues were attributed to 'managed services' (versus
20% in 2013), highlighting the increased outsourcing capabilities
of the sector's leading players.
The latest results reflect BMI's long-term outlook for Malaysia's IT market and for cloud computing in particular. We estimate cloud-only spending reached MYR487mn in 2014, a y-o-y
increase of just over 51%. This is expected to rise by 31.2% to
MYR638mn by the end of 2015 and to reach MYR1.536mn by the
end of 2019. Cloud-based managed and outsourced services will,
therefore, become the principal application for the country's data
centre industry, particularly as overseas activities make a more
substantial contribution.
New Zealand
CallPlus Deal Broadens M2's

M&A Appeal
Data centre and cloud computing-related services and infrastructure

revenue grew by 26.2% to MYR795mn (USD219mn) in 2014, according to new data from the Malaysian government's Performance
Management and Delivery Unit (PEMANDU) and the Multimedia
Development Corporation (MDeC). Although less pronounced
than the 39.4% revenue increase seen in 2013, this was still a remarkable achievement and highlights the potential for Malaysia
to achieve its goal of becoming a cloud-centric IT services hub
for the South East Asian region.
Over the last five years, the data centre industry has grown
rapidly to support 26 data centre service companies and nearly
200 specialised service providers capable of providing affordable,
scalable and high-quality remote data storage and retrieval services
BMI View: Acquiring CallPlus will make M2 more appealing

to prospective buyers as Australia's telecoms consolidation race
reaches its peak. The deal also strengthens CallPlus's position in
New Zealand's less mature broadband market, making it a focal
point for M&A in that country.
M2 Group has agreed to buy CallPlus Group and its related entity
2Talk Ltd for a total consideration of NZD250mn (USD186mn),
a deal that gives the Australian company access to400,000 consumer, business and wholesale broadband customers, equivalent to
around 15% of New Zealand's broadband services market. Valued
at 5.6 times CallPlus's EBITDA, the deal is expected to lift M2's
earnings per share (EPS) by 15% in the financial year ending June
2016. BMI expects M2 to become a more appealing acquisition
target in its own right as service diversification becomes more
important to Australia's surviving alternative operators.
Although M2 has already consummated a number of highprofile acquisitions aimed at expanding its reach in the enterprise,
15
Singapore
Asia
utility and consumer voice and broadband service markets it

acquired Engin, Dodo and Eftel in 2013 and Primus Australia in
2012, for example the company is increasingly being outpaced
in terms of customer additions and revenue growth by rivals iiNet
and TPG Telecom.
Consumer & Broadband Drive CallPlus' Business
CallPlus's FY14 Revenues By Segment (TOP) & Product (BOTTOM)
Wholesale
5%
Business
28%
Telecommunications
Singapore
SMRT Lends Weight To Fourth

Mobile Licensee
BMI View: A fourth mobile network operator would help drive
prices down and increase consumer choice, but there is little room
for a newcomer in this saturated market. Leveraging the infrastructure resources of SMRT, OMGTel is well-positioned to exploit the
remaining opportunities in the market than rival MyRepublic; however, the latter's low-price model should not be dismissed outright.
Little Room For A Newcomer
Mobile Subscriber Net Additions (000)
Consumer
67%
Mobile
5%
Other
3%
Fixed
34%
Source: Operators, BMI
Data
58%
Source: M2, CallPlus
iiNet, in particular, has been growing through the purchase of

smaller infrastructure-centric players as it bids to compete with
Telstra and Optus in terms of network reach. Service-focused
players like M2 have been left on the sidelines for now. Although
CallPlus is also service-centric and reaches customers through copper and fibre local loops rented from Chorus, its low-cost coverage
of 65% of the population of New Zealand means that M2 can reach
a large, established market very quickly and profitably. Its experience in delivering advanced services, such as cloud computing,
will help CallPlus compete more effectively with incumbent Spark
and rival Vodafone New Zealand.
The fragmented nature of New Zealand's broadband service
market means that customers have historically been able to
choose from a limited number of service providers. The rollout
of the ultrafast broadband (UFB) network is changing the market
dynamic and, in order to keep pace, CallPlus needs a broader
and more appealing service portfolio, which it will gain through
ownership by M2.
BMI believes that, as consolidation among Australia's infrastructure operators begins to peak, so the survivors' collective
attention will turn to service-centric providers. Players with
diverse customer, product and geographic portfolios will figure
highly in those expansion plans and, with CallPlus, under its belt,
M2 would become a much more attractive investment prospect
than it is at present.
16
Singapore Mass Rapid Transit Group (SMRT) has agreed to

invest up to SGD34.5mn (USD25.5mn) in OMGTel if the latter
secures Singapore's fourth mobile network operator licence later
in 2015. Access to SMRT's extensive fibre-optic, copper cable
and radio networks employed within its national public transport
network would enable OMGTel to rapidly and cheaply roll out
its proposed mobile network. OMGTel would also be able to tap
the data SMRT holds on its commuter customers, enabling it to
directly target potential users.
OMGTel aims to become the country's third largest mobile
operator, displacing either StarHub or M1. Those companies
respectively served 2.148mn and 1.852mn subscribers at the end
of 2014, well behind market leader incumbent SingTel (4.092mn).
All three have recorded variable customer growth rates in recent
years, owing to the saturated nature of the market; mobile penetration reached 146.7% in 2014. Although BMI forecasts the
market to continue growing due to bundling and fixed-mobile
convergence initiatives, increased price competition will drive
revenues down. We believe this will force the existing players to
become more selective with regards to network investments as
profit margins shrink.
MyRepublic which is also applying for the new mobile licence
has already disrupted the fibre-optic broadband market with ultralow prices; it has indicated it will do the same in the mobile arena.
Mobile ARPUs averaged SGD49 in 2014, down only slightly over
the last three years; we therefore believe the market will embrace
lower rates and that the new entrant would see strong interest in
the short to medium term. However, in the longer term, the existing
players' ability to offer full converged service packages would have
the greater appeal and offer increased monetisation opportunities.
Thailand
Asia
We therefore believe that a price-focused new entrant would

offer market upside only in the short to medium term. Such a player
could carve out a niche in the mobile-only field but, as data from
the existing operators show there is stronger demand for premium
multi-product packages than low-cost prepaid services, the new
entrant's contribution would be modest at best.
Cybersecurity An Important
Segment For Diversification
BMI View: SingTel's acquisition of Trustwave will help with its
ambition to diversify its services beyond core offers such as voice
and data services. We expect cybersecurity to become a key topic
for enterprise and IT services going forward, as more threats and
vulnerabilities emerge as the number of connected devices continues
to expand.
Looking For Diversification
Revenues By Operating Units (USDmn), 2014
Pay
Digital Business
Television,
, 139.8
Sale Of
251.7
Equipment,
Others, 211.1
International 1244
Telephone,
688.9
National
Telephone,
1502.5
Mobile
Communications,
7249.9
Telecommunications
further growth. The enterprise market is by definition more global

than the retail market, and SingTel has to compete with the largest
operators offering a range of IT services to their clients worldwide,
with cyberthreats a growing concern as highlighted by Orange
during the presentation of its Essentials2020 strategic plan (see
'Essentials2020: Orange Needs To Make The Case', March 18).
BMI believes the acquisition of Trustwave, an American company,
gives SingTel a greater global reach, as well as the possibility to
leverage a greater range of IT products and services to Trustwave's
existing customer base.
Thailand
NTT Com Regional Expansion

Goes Mobile
BMI View: An MVNO service will add value to NTT Com's enterprise communications services business in Thailand. Improving its
ability to monetise its local data centres business, this new strategy
could easily be replicated in other underserved Asian markets,
providing further uplift to NTT Com's long-term growth outlook.
Cloud Gaining In Appeal
Thai Cloud Market Forecasts, 2013-1019
Fibre Rollout &

Maintenance,
154.1
Business
Solutions, 567.8
Managed
Services,
1697.8
Data &
Internet, 3140.5
Source: SingTel
SingTel has acquired a 98% stake in cyber and managed security

services company Trustwave, for a fee of USD810mn. Trustwave's
main security offerings include threat management, vulnerability
management and compliance management, and it currently has
three million customers.
SingTel has been looking to diversify beyond its core legacy
businesses of offering voice and data services to consumers, with
acquisitions in the mobile marketing and advertising space through
Amobee, Adconion and Kontera and a recent joint venture with
Sony Pictures and Warner Bros Entertainment to establish an
over-the-top (OTT) video service called Hooq in its Asian markets
(see 'SingTel Sets Itself Up As OTT Challenger', February 2). Cybersecurity is another area of growth for the operator, as the Trustwave
acquisition follows a partnership with FireEye in February 2015
to set up the Advanced Security Operations Centre (ASOC) in the
region. The operator has identified the most threatened industry
verticals are government, telecommunications, financial services,
high-tech and transportation, and BMI foresees great opportunities
for cybersecurity services, both on the consumer and enterprise side
as more and more objects become connected and institutions realise
the threats they face.
SingTel will have opportunities domestically, as Singapore rolls
out its Smart Nation initiative (see 'Smart Nations Privacy, Security Are Key Considerations', February 4), but it is by expanding
those capabilities regionally and globally that the operator will find
NTT Communications Corporation (NTT Com) has launched

mobile data services for enterprises in Thailand, providing wireline and mobile voice and data services on a one-stop basis. The
company claims that, for the first time, Thai enterprises can avail
solutions that link mobile devices and private networks. NTT Com
Thailand secured an MVNO licence early in 2015 and will use its
new ability to provide mobile services to offer extra-flexible solutions that enhance its existing offerings for the business market.
NTT Com Thailand claims to serve 'thousands' of enterprises
of varying sizes and sees considerable potential in a market that
is grossly underserved by incumbent wireline operators TOT and
CAT Telecom and which has yet to be properly exploited by
consumer-focused players AIS, DTAC and True. The latter three
companies have pledged to invest heavily in wireline broadband
infrastructure over the next three years, but they will struggle to
match the Tier 1 capabilities of NTT Com's local IP-based network
which was augmented with high-capacity points of presence in
2014 and gained access to one of the largest independent data
centre facilities in the Greater Mekong Sub-region (GMS) in 2013.
NTT believes Thailand will be a central hub for ICT resources
and services for GMS countries such as Myanmar, Laos, Cambodia
17
Thailand
Asia
and Vietnam. It has been working to secure new multinational

clients that either already operate in these countries or which are
looking to enter these markets but require suitable high-quality
communications solutions. The GMS countries have a total population of 300mn and enterprises are flocking to these markets as liberalisation and economic growth open up new business opportunities.
BMI believes NTT Com's strategy of securing an MVNO
licence in Thailand could be replicated in the other GMS markets
it is targeting. This will be facilitated by its January 2015 launch
of a new global machine-to-machine (M2M) service, Arcstar Universal One Mobile, in Hong Kong and Thailand. We expect NTT
Com to pursue MVNO licences in the GMS markets, benefiting
both the company's core enterprise services business, in addition
to boosting its host network partners' revenues and, more broadly,
spending on cloud services and data centre facilities.
In Thailand, spending on cloud services is already outperforming
the traditional telecoms services sector as well as IT service and
hardware spending trends as a whole. We forecast the Thai cloud
market to grow in value from USD98mn in 2013 to USD462mn by
2019; by then, cloud spending will account for 15.2% of the total
value of the Thai IT market.
Telecommunications
The Thai mobile gaming market generated revenues of approximately USD94mn in 2014, a 164% increase y-o-y, according
to NewZoo. This represented approximately 40% of total gaming
revenues for the country as PC-based immersive gaming is being
supplanted by mobile-centric casual gaming. By 2018, the mobile
gaming sector will be worth approximately USD297mn, or 60%
of the USD488mn overall market.
BMI forecasts annual sales of smartphones and tablet PCs to
grow to 19.7mn and to 2.5mn, respectively, over the 2014-2019
period, increases of 38.3% and 13.8%. The increased penetration
of smartphones and tablet computers, plus the increased availability of locally-produced, locally-relevant mobile-optimised
content will be key elements in sustainable sectoral growth. It is
BMI's core view that services and content, rather than customer
acquisition and handset sales, will be key to operators' continued
growth in saturated markets.
Digital Content Driving & Driven By Device Sales
Thailand Consumer Electronics Forecasts, 2013-2019
Sinoze Investment Fits AIS's

Game Plan
BMI View: Mobile gaming will aid AIS's transformation into a
'digital lifestyle service provider'. By leveraging its indirect relationships with games developers and publishers, such as Sinoze,
AIS's business model is one that could easily be extended to regional partners, capitalising on the growing ubiquity of connected
devices and consumers' insatiable appetites for casual games.
Mobile-Centric Casual Gaming Takes Off
Thailand Online Gaming Revenues By Type (USDmn)
Source: Newzoo, Applift
InVent will invest USD750,000 in Thailand-based games developer Sinoze, in return for a 16.7% stake in the business. Sinoze
has approximately 1mn monthly users of its mobile music game,
Thapster, and is developing an international version, Electhap.
InVent has already invested THB130mn (USD4mn) in five local
mobile gaming, cloud computing and online health applications
companies and will leverage its relationship with Thailand's largest mobile network operator to increase the exposure of these
companies to Thai and international audiences. In doing so, AIS
and strategic partner SingTel will benefit through increased usage
of mobile data services on their networks.
18
As InVent is a subsidiary of InTouch Holdings, itself a 40%

investor in AIS, this kind of close relationship between mobile
network operator and mobile content producer will be financially
beneficial for all parties, giving Sinoze the freedom to develop a
broader range of products. It will help AIS attract and retain customers and give both AIS and third parties, such as advertisers,
access to deeper consumer background and engagement data that
can be aggressively monetised. At the very least, AIS can expect
to see a modest uplift to its non-voice mobile service revenues in
the short to medium term: the company's data revenues grew by
49.3% to THB33.054bn in 2014, offsetting shrinkage in the voice
and messaging business.
Singtel which operates mobile networks in Singapore, Australia (Optus), Indonesia (Telkomsel), India (Bharti Airtel)
and the Philippines (Globe Telecom) is facing similar challenges with regards to service monetisation. We believe it would
benefit from the indirect relationship with InVent's investments.
Potentially, it could collaborate with the venture capital business
to invest in further technology companies across the region or
utilise its expertise in identifying attractive start-ups in new and
existing markets
Singtel needs no longer be constrained by having a limited
geographic footprint, beginning its transformation from an operator
of networks to a provider of digital lifestyle services. Its Amobee
mobile advertising business is already active across Asia; it, too,
would benefit from the increased access to so-called 'big data' from
users of InVent-backed applications.
Vietnam
Asia
Vietnam
Viettel Expansion Benefits

Underperforming Markets
BMI View: Leveraging its considerable financial and logistics
assets, Viettel will exploit opportunities and weaknesses in emerging markets where its low-cost 'good enough' services will help
it outperform struggling minor players and increase competitive
pressures on market leaders.
Viettel Group, Vietnam's incumbent telecoms operator, will
invest up to VND10trn (USD465mn) in its 97.6%-owned subsidiary, Viettel Global, increasing its registered capital to more
than USD1.04bn. This will partly finance Viettel Global's planned
USD2.2bn expansion into eight new markets over the next three
years, increasing its population coverage by more than 180% to
350mn. Strong performances in markets such as Haiti and Mozambique suggest that Viettel's low-cost, high-efficiency model can
drive significant improvements in lacklustre markets and act as a
catalyst for the withdrawal of inefficient minor players.
Viettel Global's international expansion strategy has, so far,
involved the takeover of distressed assets such as the purchase of
Beeline Cambodia (see 'Beeline's Demise Shows Small Players
Have Little Value', March 20), or the purchase of all-new operating
licences allowing to build its own mobile and/or wireline networks,
as was the case in Peru, Tanzania and Burundi. A new variation on
that strategy sees Viettel partner with an established player, such
as Myanmar's Yatanarpon Teleport, to provide the financial and
technical assistance needed for the deployment of advanced infrastructure and the development of monetisable value-added services.
We believe that Viettel's prowess in logistics born of its history as a unit of the Vietnamese military and its deep access to
finance, courtesy of the government, will play to the strengths of
this flexible multi-layered strategy.
Only limited financial data and scant key performance indicator data are available for the Viettel Group, making it difficult
to assess the success of the international expansion strategy to
date. However, ad-hoc local press reports emanating from Peru,
Telecommunications
Burundi and Haiti indicate that the company's core basic voice and
messaging services tend to be of a higher quality than established
players' offerings while more advanced services are limited in
scope but still represent greater value for money than incumbents'
products. We believe this will prove to be the case in Cameroon and
Tanzania, where Viettel only recently secured operating licences,
as well as in the eight new markets the group wants to enter over
the next three years.
As we have often opined, Asian and African markets suffer from
a surfeit of licensed telecoms players. Many of these are privatelyowned and have yet to fully exploit resources such as spectrum and
infrastructure, holding back the emergence of affordable advanced
services. A winnowing-out of these underperforming investors and
the redistribution of resources to more dynamic players is to be
welcomed. In some markets, Viettel competes with well established
multinational players such as Orange, MTN, Airtel, Digicel and
Tigo; here, Viettel's 'good enough' low-cost services are sufficient
to ensure it can build a modest market share and still generate a
reasonable return on investment.
Viettel Global has yet to identify those markets it is targeting
over the next five years, but the recent investments in Cambodia
and Myanmar expanded its footprint to 10 countries and press
reports suggest that Orange Kenya is next on its list and that its
Swavitel unit in Swaziland expects to win that country's second
mobile operator licence before the end of 2015. Building on its
investments in Haiti, we expect Viettel to look to capitalise on the
opening-up of the telecoms sector in Cuba over the next few years;
the country could benefit from Vietnam's experience in moving to
a capitalist economy and business environment.
Vietnam's membership of the Trans-Pacific Partnership will
enhance its ability to establish mutually-beneficial trade deals
with other member states as well as neighbouring markets in Asia.
Questions remain over the Vietnamese government's control over
the media and its financial influence over utilities and life services
markets in Vietnam (see 'Limited Impact On ICT From Trans-Pacific
Partnership', April 13), but this is unlikely to prevent Viettel Global
from investing further across the region and opportunities could
well arise in Nepal, Thailand and Bhutan as new licences become
available, and in crowded markets such as Pakistan and Bangladesh
where consolidation becomes inevitable.
Viettel Global International Investments, 2015

Company
Country
Viettel Global Ownership (%)
Vietnam (holding company for investments in Haiti)
100.0
Viettel Timor Leste UNIP LDA
East Timor
100.0
TNHH Viettel Cambodia
Cambodia
90.0
Mozambique
70.0
Cameroon
70.0
TNHH Viettel Overseas
TNHH Movitel
Viettel Cameroon SARL
National Telecom SA (Natcom)
Viettel Burundi SA
TNHH Viettel Tanzania
Haiti
60.0
Burundi
85.0
Tanzania
100.0
Note: Omits Beeline Cambodia and investment in Yatanarpon Teleport as these were still in the process of being ratified at the end of March 2015. Source: Viettel Global
Analysts: Andrew Kitson
2015 Business Monitor International Ltd. All rights reserved.
Sub-Editor: Elizabeth Carroll
All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International Ltd, and as such no
part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd.
Subscriptions Manager: Yen Ly

Production: Fauzia Borah Isahaque
Copy Deadline: 29 April 2015
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of
publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information
provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the
content.
19

BMI Asia Pacific Telecommunications Insight June 2015

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

BMI Asia Pacific Telecommunications Insight June 2015

Încărcat de

Drepturi de autor:

Formate disponibile

IMPORTANT NOTICE:

Asia Pacific Risk/Reward Index

Of the four markets that recorded improvements to their Industry

outright impediments to foreign investors working in the country,

Asia-Pacific Telecoms Risk/Reward Index, Q315

growth trends continue within expectations, consumption of mobile

est over the coming years. Ongoing Association of Southeast Asian

ted electronically (as a result of nationality or territory in

Limited Impact On ICT From

Commitments not to impose customs duties on digital

Limited Telecoms Impact Among Developed

Source: National sources, BMI

Vietnam The Outlier In Local Data Storage

Vietnam The Laggard

Telecoms State-Owned Enterprises A Minor

Vietnam is the major outlier here, which passed Decree 72 in

Source: WIPO, BMI

Governments in Singapore, Brunei and Malaysia also hold stakes

E-Commerce Booming With Or Without TPP

custom duties, facilitating digital product transfers, authentication of

Source: WIPO, BMI

For markets such as Vietnam, Malaysia, Singapore and Brunei,

regarding Peru's cash-based economy, opening up growth potential

Tech Start-Ups Undeterred By Restrictive IP

Google's Project Fi Opens Up

for these premium services.

Source: Sprint, T-Mobile

Property & Hotels

BMI believes the service will have a limited impact at launch,

Source: Hutchison Whampoa

data, but its ambitions are highlighted by its multiple projects to

must therefore look to increase its appeal to the remaining players

Nokia Networks Asia Sales (EURmn)

Asia Will Be Nokia-Alcatel's Key

BMI View: Buying Alcatel-Lucent would provide a welcome boost

Nokia's proposed purchase of Alcatel-Lucent is a move born

For Q414, Nokia Networks reported a 3.0% y-o-y decrease in

Nokia Networks Selected Asian Contracts/Deals, 2014-15

this development, winning a substantial order from China Mobile

Middle East &

Alcatel is particularly strong in Greater China, as demonstrated

as a result of mergers and acquisitions, unlike Alcatel-Lucent and,

Asia Fibre Market Differing

Source: FTTH Council, IDATE

The demand for advanced rich media communications services by

e/f = BMI estimate/forecast. Source: BMI

New technologies such as VDSL/vectoring, DOCSIS3.0 and

Band A: High-growth, mature economies, supported by

e/f = BMI estimate/forecast. Source: BMI

Although growth is still possible in the Band A markets, it is

Indonesia Wakes Up To Fibre

e/f = Cisco estimate/forecast. Source: Cisco Visual Networking Index 2014

Meanwhile, MNC Group announced plans to invest USD2-3bn

Mobile Operators Set The Pace In Thailand

bitious plan to roll out a nationwide fibre-centric next-generation

Philippines Looks To The Cloud

in Indonesia, Thailand and Vietnam in 2015 reflects efforts being

India Fails To Pass Muster

Wireless Broadband Behind

Data Traffic Floods Across Asia

e/f = BMI estimate/forecast. Source: BTRC, BMI

Tower sharing trends in telecoms markets have tended to focus on

deliver upside potential to overall market growth.

networks while seeing an increase in data usage, but BMI foresees