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Frost & Sullivan Malaysia Sdn Bhd (522293W)
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EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT ON THE MOBILE
TELECOMMUNICATIONS INDUSTRY IN MALAYSIA FOR MAXIS BERHAD (“MAXIS” OR “COMPANY”)
We, Frost & Sullivan Malaysia Sdn Bhd (“Frost & Sullivan”), have prepared the Executive Summary of the Independent Market Research report on the mobile telecommunications market in Malaysia (“Report”) for inclusion in Maxis’ Prospectus dated 28 October 2009 (“Prospectus”) in relation to the initial pUblic offering and the listing of and quotation for the entire issued and paid-up share capital of Maxis on the Main Market of Bursa Malaysia Securities Berhad.
We are ci~vdi’e that this Report will be’ included in the Prospectus and we further confirm “that we are aware· of·’-­our responsibilities under section 214 of the Capital Market and Services Act, 2007.
This research is undertaken with the purpose of providing an overview of the mobile telecommunications industry in Malaysia.
We acknOWledge that if we are aware of any significant changes affecting the content of this Report between the date hereof and the issue date of the Prospectus, we have an on-going obligation to either cause this Report to be updated for the changes and, where applicable, cause Maxis to issue a supplementary prospectus, or withdraw our consent to the inclusion of this Report in the Prospectus.
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Figure 1.1 provides historical mobile market indicators in Malaysia between December 31, 2006 and June 30, 2009.
Igure 11.. Mob”1Ie M kid 2
ar et n icators (Malaysia), December 31, 2006 -June 30, 009
Subscribers (‘000) As at Dec 31, 2006 As at Dec 31,2007 As at Dec 31,2008 As at J2009 une 30,
Postpaid Prepaid Total Subscribers by Operator (‘000) Maxis Celcom DiGi U Mobile Total Postpaid I Prepaid (‘000) Maxis Postpaid Prepaid Total Celcom Postpaid Prepaid Total DiGi Postpaid Prepaid Total 3,363 3,941 5,520
16,096 19,435 21,632 22,296
19,459 23,376 27,152 28,545
8,068 9,765 11,234
6,079 7,202 8,761 9,698
5,312 6,409 7,062 7,230
0 0 95 194
1,628 1,953 2,644 2,899
6,440 7,812 8,590 8,524
8,068 9,765 11,234 11,423
1,230 1,282 1,765
4,849 5,920 6,996 7,549
505 706 1,099
4,807 5,703 5,963 6,054
Note: AI! figures are rounded; selected June 30, 2009 figures are estimates. Source: Frost & Sullivan
,,,Malaysia is the”.second-most developed .mol:)jle market in.$putheastAsia behind. Singapore and exhibited a mobile subscriber growth rate of 16.2% to 27.152 million subscribers at the end of 2008. Total mobile subscribers grew from 25.167 million as at June 30, 2008, to 28.545 million mobile subscribers as at June 30, 2009. To put this in perspective, the Malaysian population stood at approximately 27.4518 million as at June 30, 2008 and approximately 28.0073 million as at June 30, 2009 respectively. Thus, this represented a mobile penetration rate that rose from 91.7% as at June 30, 2008 to cross the 100% mark to 101.9% as at June 30, 2009.
Most of the net subscriber additions come from the prepaid segment. We believe that the Malaysian mobile market will grow modestly over the next few years where growth will come from an increasing number of multiple SUbscriptions (mUltiple mobile SIM cards), mobile broadband growth and subscriber growth coming from East Malaysia and rural areas. Mobile operator revenue which currently is primarily from mobile voice services will also be supported by the growth in mobile data services and mobile broadband services.
Residential fixed-line services have seen a general decline and the increasing preference for mobile services are expected to continue the pace of fixed-to-mobile substitution effect where more users are expected to adopt mobile services over fixed-line services.
Chart 1.1 shows the historical growth rates of mobile subscribers versus residential fixed­line subscribers in Malaysia between 2004 and 2009.
Chart 1.1: Comparison of Growth Rates of Mobile Subscribers and Residential Fixed-Line (Malaysia), 2004-2009
___ Mobile Subscribers (‘000) __ Residential Fixed Line Subscribers (‘000)
Note: The sharp decline in growth rate in 2006 is a result of the nationwide prepaid registration initiative by operators in line with the Malaysian Govemment’s directive to register all prepaid users.
Note: 2009 figures are estimates. Source: MCMC and Frost & Sullivan
(This part of the page is intentionally left blank)
Figure 1.2 shows the historical data of residential fixed-line and mobile subscribers in Malaysia between 2003 and 2008; and estimated data for 2009.
Figure 1.2: Comparison of Historical Residential Fixed-line and Mobile Subscriber Growth (Malaysia), 2003-200ge
Year Residential Fixed Line Subscribers (‘000)
2003 3,194
2004 2,938
2006 2,831
200ge 2,686
Penetration Rate (per 100 households)
Total Mobile Mobile
Subscribers Penetration
(‘000) Rate’ (%)
11,004 43.9
14,597 57.1
19,511 74.7
19,459 73.0
23,376 86.0
27,152 97.9
30,251 107.0
Penetration rates are calculated based on population and household figures from the Department of Statistics and MCMC, Malaysia
Note: All figures are rounded; 2009 figures are estimates. Source: Department ofStatistics, MCMC & Frost & Sullivan
..”’,’-,
1.2 Industry/Market Segmentation
Segmentation of telecommunications services in Malaysia can be summarized in Chart
1.2. The mobile market is defined as a market that provides mobile services which include 2G, 3G and 3.5G services. On a broad level, mobile services would include mobile voice, mobile data and mobile broadband services. Within this report, mobile revenue refers to the mobile service revenues of an operator for when goods are delivered or services are rendered. This would not include handset sales and activation fees. Total mobile revenues are estimated based on the individual reported figures by operators and Frost & Sullivan, where necessary.
Chart 1.2 depicts the market segmentation of telecommunication services in Malaysia.
Chart 1.2: Market Segmentation of Telecommunications Services in Malaysia
r———————,
Mobile data services refer to the non-voice services that generate revenues for a mobile operator, which include data traffic charges ryvAP, GPRS revenues), wireless broadband revenues, messaging revenues and non-messaging revenues. Premium content includes the chargeable content and services delivered over mobile, which exclude messaging revenues and data traffic charges. Premium content revenues include non-messaging mobile data revenues recorded by mobile operators. This sometimes also includes the portion of revenuesihat goes to third-party contenf providers. Total m6bile data revenues are based on the individual reported figures by operators and Frost & Sullivan estimates, where necessary.
The wireless broadband space in Malaysia is becoming more competitive with a mixture of mobile broadband 3.5G and fixed wireless broadband (WiMAX, iBurst) services. Mobile broadband is the term used to describe various types of wireless high-speed Internet access through a portable modem, telephone or other devices. Various network standards may be used. The provision of 3.5G services relates to High-Speed Downlink Packet Access (“HSDPA”) and High-Speed Uplink Packet Access (“HSUPA”) technologies, collectively known as High-Speed Packet Access (“HSPA”). The use of HSPA has so far been positioned as an alternative broadband service over a wireless connection.
For market definition purposes, we consider a subscriber as a mobile broadband subscriber when subscribed to a monthly broadband data plan from a service provider in Malaysia including mobile operators and WiMAX operators. However, we note that as each service provider has different product bundles, there is no standard definition as to what constitutes a broadband data plan. The implication of this is that a mobile subscriber for a certain plan which may be deemed as a mobile broadband subscriber under one service provider may not be deemed as such under a different service provider.
Devices that enable mobile broadband include: PC data cards, USB modems, USB dongles, phones with data modems and portable devices with built-in support for mobile broadband (like notebooks, netbooks and Mobile Internet Devices (MIDs)). Frost & Sullivan does not include EDGE and GPRS users as mobile broadband subscribers.
1.3 Key Industry Participants
There are a total of four key industry participants that operate in the mobile space in Malaysia namely Maxis, Celcom, DiGi and U Mobile. All four mobile operators offer mobile voice, mobile data and mobile broadband services. Maxis and Celcom are the earliest 3G participants launching their 3G services in 2005 U Mobile commercially launched its services in March 2008 providing mobile broadband and a year later, DiGi also launched its 3G mobile broadband services in March 2009 after securing the transfer of 3G spectrum from TimedotCom.
Within the mobile broadband space, competition is also expected from the four new WiMAX service providers. In 2007, the Malaysian Government issued four WiMAX licenses in the 2.3 GHz band to YTL E-Solutions, Packet One Networks, Asiaspace Dotcom and REDtone-CNX Broadband. However their impact on the mobile broadband space is expected to be minimal in the near term as the WiMAX service providers are presently competing with Telekom Malaysia’s fixed broadband offering, Streamyx. Furthermore, the current commercially available WiMAX technology has limited mobility compared with mobile broadband and suffers from the lack of WiMAX-enabled devices and support by large telecommunications providers.
Several Mobile Virtual Network Operators (“MVNOs”) have been introduced into the Malaysian mobile market. A MVNO is a company that provides mobile services but does not have its own frequency allocation of the radio spectrum, nor does it have the entire infrastructure required to provide mobile services. MVNOs are generally set up to target specific segments within the market such as enterprise customers or foreign workers.
The first two such companies were set up by REDtone International Bhd, namely REDtone Mobile Services and Merchantrade Asia Sdn Bhd. The former targets the enterprise customers within the postpaid segment while the latter addresses foreign workers in Malaysia. XOX Com Sdn Bhd (“XOX”) which is targeting the Chinese community was launched in May 2009. TuneTalk Sdn Bhd (“Tune Talk”) (which is affiliated to AirAsia Berhad) launched its services in August 2009 targeting budget-conscious prepaid mobile users. With the addition of XOX and TuneTalk, a total of four MVNOs are expected to increase the competition in the mobile space for their respective targeted segments. The four MVNOs are hosted by Celcom.
1.4 Supply Conditions
We believe that having four mobile operators providing voice and data services sufficiently address the Malaysian mobile market. Maxis and Celcom have continued to invest in their network by upgrading their base stations to provide HSDPA mobile broadband services. U Mobile and DiGi have investments planned for providing improved network coverage for ‘3G Gind dataservice~’: The three key mobile operators Maxis, Celcbm and DiGi are increasingly competing in the areas of network quality and customer services as opposed to network coverage.
The introduction of MVNOs in the country has been largely to address specific segments. However the impact of MVNOs on the leading mobile operators has not been felt. MVNOs on the other hand are SUbject to risks to supply conditions in terms of network ownership and therefore will need to consider effective partnerships. This is because of the requirement to enter into wholesale agreements with network providers on a negotiated basis makes it more challenging to compete on tariffs when compared to markets where wholesale prices are regulated.
The wireless broadband space is becoming more competitive with all four mobile operators offering 3.5G services. They have since launched mobile broadband access services through USB dongles and data cards. At the end of 2008, there were 412,500 mobile broadband subscribers in Malaysia. In addition, the introduction of four WiMAX companies in the second half of 2008 also increased competition. The WiMAX companies are in various stages of rolling out their services and networks.
1.5 Market Share Analysis
Maxis is the largest mobile operator in Malaysia with 11.4 million subscribers followed by Celcom with 9.7 million, DiGi with 7.2 million and U Mobile with an estimated 0.2 million subscribers, as of June 30, 2009.
Chart 1.3 shows mobile operator market share by subscribers in Malaysia as at June 30, 2009.
Chart 1.3: Mobile Operator Market Share by Subscribers (Malaysia), June 30, 2009
Total Mobile Subscribers: 28.5m as at June 30, 2009
Urv1obile,
Maxis has been the leading mobile service provider by subscribers and mobile revenues over the last fIVe years, from 2004 to 2008. Between the years 2006 to 2008, the market ranking has not changed and the market share of the three leading mobile operators, namely Maxis, Celcom and DiGi remained very stable. U Mobile entered the market in 2008 but so far has had minimal impact, holding approximately 0.7% of the market as of June 30, 2009.
Executive Summary Independent Mat1<et Research on the Mobile Telecommunications Mat1<et In Malaysia Page 8
1.6 Barriers to Entry
The mobile telecommunications industry is subject to high entry barriers due to its capital intensive nature, licensing requirements, scarce spectrum allocation, the need for wide network coverage and the overcrowded nature of the industry. There is also strong brand affinity amongst Malaysians for the three leading operators, a result of many years of strong marketing push and establishing their presence. Mobile data services and mobile broadband services are part of mobile telecommunication services and therefore are subject to the same barriers as mobile services. However, mobile broadband services are also competing for a share of a broadband market dominated by incumbents prOViding a fixed or wireline alternative to mobile broadband services. Mobile broadband services are also reliant on having sufficient devices to support the market and achieve economies of scale.
1.7 Relevant Laws and Recent Regulatory Developments
The Malaysian Communications and Multimedia Commission (“MCMC”) is the regulator for the communications and multimedia industry and its key role is in the regUlation of the communications and multimedia industry based on the powers provided for in the Malaysian Communications and Multimedia Commission Act (1998) and the Communications and Multimedia Act (1998). Pursuant to these Acts the role of the MCMC is to implement and promote the Malaysian Government’s national policy objectives for the communications and multimedia sector.
The Communications and Multimedia Act (1998) also provides for the establishment of a Universal Service Provision (“USP”) Fund to enable the roll out of services in areas identified for USP. The objective is to pool the resources of the telecommunications industry to promote the widespread availability and use of network services and applications services throughout Malaysia by encouraging the installation of network facilities and the provision of services in underserved areas or for underserved groups within the community. In this respect, all telecommunications operators are required to contribute part of their applicable service revenues to USP development.
Mobile Number Portability (“MNP”) was launched in October 2008 and enables mobile subscribers to keep their existing numbers after changing mobile operators. MNP is a service enabled by mobile operators to promote competition and enhance customer choice in the mobile market. It is perceived as an effective tool to eliminate customer “stickiness” resulting from an attachment to a mobile number or perceived premium attached to a prefix, as may be the case in Malaysia. However, it is observed that MNP has had iimited impact so far amongst the mobile operators since it was launched, as promotions have not been appealing enough to encourage subscribers to switch mobile operators.
1.8 Reliance and Vulnerability to Imports
Generally, the telecommunications industry in Malaysia is dependent on imports for the majority of its network components as most of the network equipment cannot be sourced locally. The mobile operators rely on a number of leading intemational equipment vendors to provide network equipment and facilities. Nevertheless, operations can be adversely affected if the required supply of equipment or services is not met in a timely manner. Due to the licensing requirements and nature of the mobile telecommunications business, it is not possible for overseas service prOViders to provide mobile telecommunications services in Malaysia.
1.9 Product Substitution
The threat of product substitution arises from other businesses which are able to provide mobility services via a different technology or business model. Two immediate technologies expected to impact the mobile services market are WiMAX (which has been launched to a limited extent) and mobile voice-over-IP (“VoIP”). VolP is the transmission of voice through the Internet or packet-based networks. It is anticipated that there will be little near term impact from the new WiMAX licensees and from third party mobile VolP service providers. Due to current limitations in the rollout of WiMAX networks, WiMAX service providers are only prOViding fixed or nomadic wireless broadband and thus are not competing with mobile voice services by the mobile operators. With the grOWing demand for broadband services, the mobile operators have also entered the foray providing mobile broadband via USB dongles. Frost & Sullivan also anticipates competition within the broadband space to increase with the HSBB project by Telekom Malaysia which intends to offer fibre-to-the-home (“FTTH”) services against the mobile and wireless broadband players.
1.10 Market Size and Growth Forecast
1.10.1 Mobile Services Market
Malaysia is one of several countries in the Asia Pacific region that exhibits strong mobile penetration rates. By the end of 2009 the mobile penetration rates for the following countries is estimated at: Singapore (138.8%), South Korea (96.8%), Taiwan (119.8%), Thailand (101.5%), Philippines (81.5%), Hong Kong (139.8%), and Australia (114.4%).
Malaysia is currently the second-most developed mobile market in Southeast Asia behind Singapore. As at June 30, 2009 mobile penetration rate stood at 101.9% with 28.5 million subscribers. Year-on-year subscriber growth rate declined slightly from 20.1% in 2007 to 162% in 20n8. with most of th <> ‘let subscriber additions coming from the prepaid segment. We believe that the Malaysian mobile market will grow modestly over the next few years where growth will come from an increasing number of multiple SUbscriptions (customers with mUltiple SIM cards), mobile broadband growth and subscriber growth coming from East Malaysia and rural areas. Mobile operator revenue, which is primarily from mobile voice services, will also be supported by the growth in mobile data and mobile broadband services.
Chart 1.4 and Figure 1.3 shows the historical data of total mobile subscribers in Malaysia between 2004 and 2008; and estimated data for 2009. Chart 1.4: Total Mobile Subscribers and Growth Rates (Malaysia), 2004­200ge IlI!IlIlII Mobile Subscribers (‘000) Growth Rate (%)
2004 2005 2006 2007 2008 200ge Year
Note: Ail figures are rounded; 2009 figures are estimates. Sourr;e: Frost & Sullivan
Executive Summary Independent Market Research on the Mobile Telecommunications Market in Malaysia Page 11
Figure 1.3: Mobile Penetration Rate, Total Mobile Subscribers and Growth Rates (Malaysia), 2004-200ge
Year Malaysia Population (‘000) Mobile Penetration Rate’ (%) Total Mobile Subscribers (‘000) Growth (%) -33.7 (0.3) 20.1 16.2 .. 11.4
2004 25,581.0 57.1 14,597
2005 26,128.0 74.7 19,511
2006 26,640.2 73.0 19,459
2007 27,173.6 86.0 23,376
2008 27,728.7 97.9 27,152
200ge ……. . 28,284.6 107·9 .30,251
‘Mobile penetration rate is calculated based on population figures from the Department of Statistics, Malaysia Note: The negative growth rate in 2006 is a result of the nationwide prepaid registration initiative by operators in line with the Malaysian Government’s directive to register all prepaid users. Note: All figures are rounded; 2009 figures are estimates. Source: Frost & Sullivan
Chart 1.5 and Figure 1.4 shows the historical data of total mobile revenues in
Malaysia between 2004 and 2008; and estimated data for 2009.
Chart 1.5: Total Mobile Revenues and Growth Rates (Malaysia), 2004-200ge
_ Total Mobile Revenues (RM Million) __ Growth Rate (%)
2004 2005 2006 2007 2008 200ge Year Note: All figures are rounded; 2009 figures are estimates. Source: Frost & Sullivan
Figure 1.4: Total Mobile Revenues and Growth Rates (Malaysia), 2004­200ge
Year Mobile Revenues (RM Million) Growth (%)
2004 10,946 –
2005 12,512 15.4
2006 13,830 10.5
2007 15,755 13.9
2008 17,450 10.8
200ge 18,724 7.3
. Note: Allfigures are rounded; 200; ;/;;ures are estimates.’:’:’u~rce: Frost & Sullivan
. 1.10.2 Mobile Broadband Services Market
In the broadband space, the total number of fixed broadband subscribers in Malaysia stood at just over 1.3 million subscribers in 2008, an increase of 28.5% from 2007 Malaysia had a 21.4% fixed household broadband penetration rate in 2008, compared to 17.0% in 2007. However, it is still low in comparison to neighbouring countries in the region such as Australia (63.7%), Taiwan (66.0%), Hong Kong (85.0%), Singapore (78.5%), and South Korea (92.8%). This is mainly due to the slower expansion activities of the fixed line broadband provider and the relatively recent entry of mobile and WiMAX. players into the Malaysian broadband space.
Historically, with the notable exceptions of Japan and perhaps South Korea, 3G wireless or mobile broadband business models have not been a resounding success in most parts of the Asia Pacific region. The example challenges cited, which are similar across the region where expensive terminals, poor network coverage, high service pricing, operator hype and lack of local content.
However, the growth of mobile broadband in Malaysia has recently been very strong with total mobile broadband SUbscriptions reaching 412,500 at the end of 2008. This represented a growth of 266.0% over 2007. In 2008, mobile broadband SUbscriptions represented 24.1 % of the total broadband market in Malaysia. We expect this proportion to increase to 39.6% of the total broadband connections bringing total mobile broadband subscriptions to over 1.0 million by the end of 2009.
Chart 1.6 shows the historical data of total mobile broadband subscribers in Malaysia compared with fixed broadband between 2004 and 2008; and estimated data for 2009.
Chart 1.6: Total Fixed and Mobile Broadband Subscribers (Malaysia),
2004·200ge
III Fixed Broadband subscribers • Mobile Broadband subscribers
3~OOl
2004 2005 2006 2007 2008 200ge
Year Note: All figures are rounded; 2009 figures are estimates. Source: Frost & Sullivan
Figure 1.5 shows the historical data for Malaysia’s mobile broadband subscriber
base between 2006 and 2008; and estimated data for 2009. Figure 1.4 also shows the ratio of total mobile broadband subscribers to total broadband subscribers in Malaysia.
Executive Summary Independent Market Research on the Mobile Telecommunications Market in Malaysia Page 14
Figure 1.5: Total Mobile Broadband Subscribers, Growth Rates and Ratio to Total Broadband Subscribers (Malaysia), 2006-200ge
Year % of Total Broadband Subscribers Fixed Broadband Subscribers Total Mobile Broadband Subscribers (‘000) Growth (%)
2006 1.5 882.1 13.1 –
2007 10.0 1,010.9 112.7 760.3
2008 24.1 1,301.6 412.5 266.0
200ge 39.6 1,571.3 1,031.6 150.1
Note. All figures are rounded, 2009 figures are esbmates. Source. Frost & SullIVan
‘:.-,
Chart 1.7 and Figure 1.6 show the historical data of total mobile broadband
revenues in Malaysia between 2006 and 2008; and estimated data for 2009.
Chart 1.7: Total Mobile Broadband Revenues and Growth Rates
(Malaysia), 2006-200ge
…Mobile Broadband Revenues (RM Million) –+-Growth Rate (%)
‘” 300
‘0 ~
-0=:=t 200 ~
‘0 .­
e :2 150 ,;;
100 <.9
2006 2007 2008 200ge Year
Note. All figures are rounded; 2009 figures are estimates. Source: Frost & Sullivan
Executive Summary Independent Marl<et Research on the Mobile Telecommunica6ons Market in Malaysia Page 15
Figure 1.6: Total Mobile Broadband Revenues and Growth Rates (Malaysia), 2006­200ge
Year Mobile Broadband Revenues (RM Million) Growth Rate (%)
2006 12.6 –
2007 53.1 322.5
2008 205.0 285.8
200ge 554.0 170.3
Note: All figures are rounded; 2009 figures are estimates. Source: Frost & Sullivan
1.10.3 ··Mobile Data Services Marke~
The mobile data services market garnered RM4.41 billion revenues in 2008, which represented a growth of 22.3% over 2007. Growth in this segment is driven by factors such as greater 3G coverage and deployment, greater number of mobile data users, the declining cost of advanced multimedia handsets, and the competition to secure continuous stream of content through partnerships.
Chart 1.8 and Figure 1.7 shows the historical revenue for mobile data services market in Malaysia from 2004 to 2008; and estimated data for 2009.
Chart 1.8: Mobile Data Services Revenues (Malaysia), 2004-200ge
_ Mobile Data Revenues (RM Million) __ Growth Rate (%)
5,000 “2
~ 4,000:2
e; 3,000
20 0:::
15 ~ :ii 2,000
0::: 1,000
Figure 1.7: Mobile Data Services Revenues (Malaysia), 2004-200ge
Year Revenues (RM Million) Growth (“!o)
2004 1,574 –
2005 2,153 36.8
2006 2,915 25.4
2007 3,610 23.9
2008 4,415 22.3
200ge 5,243 18.7
In 2008, mobile messaging revenues contributed 75.0% of the total mobile data
.. revenues. Data value added services (“VAS”) or premium content, comprising the segments of mobile entertainment, information, and others covered 25.0% of the total mobile data revenues. In the next few years, the messaging segment is expected to continue to contribute a large portion of total mobile data revenues, however the contribution is anticipated to decline slowly in place of growth in the entertainment and information segments.
Chart 1.9 and Figure 18 show the historical data of the contribution of messaging, entertainment, information and others to total mobile data revenues in Malaysia from 2004 to 2008; and estimated data for 2009.
Chart 1.9: Mobile Data Services by Segment (Malaysia), 2004-200ge
• Massaging 0 Entertainrrenl I!! Information II Others
• Others include mobile commerce, mobile marketing I advertising, mobile banking, mobile e-mail,
lelemalics elc. Note: All figures are rounded; 2009 figures are estimates. Source: Frost & Sullivan
Executive Summary Independent Market Research on the Mobile Telecommunications Market in Malaysia Page 17
Figure 1.8: Messaging and Non-messaging Percentage Contribution to Mobile Data services (Malaysia), 2004-200ge
Year Messaging Non-Messaging
Entertainment Information Others
2004 85.2% 12.0% 2.0% 0.7%
2005 81.7% 14.2% 3.0% 1.0%
2006 79.0% 16.2% 3.6% 1.2%
2007 76.5% 18.0% 4.1% 1.4%
2008 75.0% 18.8% 4.5% 1.7%
200ge 73.6% 19.3% 5.1% 2.0%
1.11 Demand Conditions
Demand for mobile services in the market is expected to remain healthy with the increasing importance of mobility. Further, the falling prices of mobile handsets will increase the reach of mobile services to a wider category of people, particularly the younger segments. Growth is expected from new subscribers in East Malaysia and rural segments as well as niche market segments. Increased competition and innovation with regards to mobile services are expected to further stimulate a higher number of mobile subscribers in a household. It is anticipated that the migration of prepaid users to postpaid will continue as a result of the removal of anonymity due to prepaid registration and more appealing tariffs and bonuses associated with postpaid plans.
At the end of 2008, Malaysia had a 21.4% fixed broadband household penetration rate which implies a significant proportion of the Malaysian population is not on broadband. The Malaysian Government has also mandated a target to achieve 50% household broadband penetration by 2010. These factors present an opportunity for other broadband alternatives such as mobile broadband to help improve the broadband penetration in the country.
MCMC conducted a survey on home Internet users to collect statistics pertaining to access and use of the Internet. The MCMC’s Household Use of the Internet Survey 2008 (HUIS 2008) suggests that the number of Internet users comprising the age group of teenagers to young adults is fairly large (17.9% of the household user base is between the ages of 15 to 19 years, while 15.7% are between 20 and 24). The study also infers that the high number of ’15 to 19 year olds’ seem to indicate that interest in Internet usage starts increasing when students reach their ninth year of formal education in Malaysia. This interest appears to continue when students pursue
their higher education and becomes ingrained as part of a digital and mobile lifestyle
for this generation of users. We believe this to also be a driver for mobile broadband
There is also significant room for growth in the mobile data services segment given the infancy of the mobile data service industry. Aiding the demand for data services is the penetration of colour and feature rich handsets and smartphones which are becoming more affordable to the mass market. Higher data usage is expected to result in the migration of premium prepaid subscribers to postpaid packages. Further, market drivers such as the mobility lifestyle and social networking sites are driving demand for mobile data services.
1.12 Fut11re Outlook and Prospe<:-ts
Demand for mobile services in the market is expected to remain healthy with the increasing importance of mobility. Mobile operators are looking for options to expand their business and to grow or maintain ARPU levels. 3G services are anticipated to be the next area for competition considering 3G subscribers represented apprOXimately 19.9% of total mobile subscribers as at June 30, 2009. Further, mobile operators will also be looking at the migration of a predominantly prepaid market to postpaid.
Figure 1.9 shows the historical growth of 3G subscribers in Malaysia from 2005 to 2008; and estimated data for 2009.
Figure 1.9: 3G Subscribers (Malaysia), 2005-200ge
Year 3G Subscribers (‘000) Ratio of 3G to Total Mobile Subscribers (%)
2005 68 0.3
2006 427 2.2
2007 1,555 6.7
2008 4,366 16.1
200ge 6,898 22.8
Note: All figures are rounded; 2009 figures are estimates. Source: MCMC & Frost & Sullivan
In Malaysia, prospects for the mobile telecommunications industry are service convergence and triple play (provision of voice, data and video services) as the market is already developed and sophisticated, and will need this as the next driver for growth. As
discussed earlier, broadband penetration in Malaysia is still fairly low and there remain opportunities for various alternative technologies and means to provide broadband services to Malaysian consumers.
Frost & Sullivan anticipates that for the near to medium term, due to the readiness of the networks, availability of devices (dongles, data cards) to support connectivity and good network coverage, mobile broadband services by way of 3.5G HSPA has an edge over WiMAX networks which is still in its development and emerging phase. We anticipate that 3.5G HSPA connectivity will dominate the wireless broadband space over the next few years for these very reasons. Frost & Sullivan foresees that wireless broadband subscriptions will exceed the market share of fixed line broadband SUbscriptions over the next five years.
Mobile data services have a strong role to play in contributing to mobile operator revenues. Mobile data segments with a positive outlook include peer-to-peer messaging services, mobile Internet and mobile instant messaging. Messaging still constitutes a significant part of a service provider business and remains the most significant mode of communication after voice. It is imperative that operators understand that they need flexible platforms to respond to market demands qUickly and cost effectively and proper segmentation of the customer base is crucial to roll out new services or tariff plans. The discussion about mobile broadband services so far shows much promise.
Mobile Internet access is advancing in many Asia Pacific countries such as Hong Kong, Taiwan, Malaysia, Singapore, and Indonesia The popularity of the unlimited data plans in these countries has picked up where it is either competitive or cheaper to have a mobile broadband connectivity than over a fixed network. Further content bundles are also likely to become more prominent as part of operator differentiation strategies. Social networking services such as Facebook, Friendster and MySpace are also playing a key role in the growth of the mobile Internet. An indicator of the popularity of such sites over mobile is the development of device specific applications to make it convenient for users to qUickly access their social networks via mobile. We believe these social networks will also present an opportunity for brands and media companies to introduce new products and entertainment content in different ways.
Other areas of growth expected are in providing mobile video services to address consumption of video content over services like YouTube and mobile commerce enabling convenient methods of paying for small-value items or other transactions with mobile phones.
Frost & Sullivan has prepared this report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of the report. We believe that this report presents a true and fair view of the industry within the limitations of among others, secondary statistics and primary research. Our research has been conducted with an “overall industry” perspective and may not necessarily reflect the performance of individual companies in this industry. We are not responsible for the decisions andl or actions of the readers of this report. This report should also not be considered as a recommendation to buy or not to bUy the shares of any company or companies.
For and on behalf of Frost & Sullivan Malaysia Sdn Bhd,
.). .-~
ExecutNe Summary Independent Market Research on the Mobile Telecommunications Market in Malaysia Pagel!