Official publication
Market Overview
Telcos eye South Asian investment opportunities as 3G begins to roll
The government of Pakistan seems set to issue three 3G licences by the end of this year, according to recent Reuters reports. Pakistan is one of a number of populous Asian nations whose hunger for more widely available communications services are proving to be a major growth engine for telecoms groups with global ambitions. However, it does remain to be seen if there exists a solid business case for investment in third generation networks in a region where the most basic prepaid voice and SMS services are stimulating economic activity by providing consumers and businesses with connectivity.
This has not deterred the state-owned GSM operator in Nepal, one of the world's poorest countries, from launching 3G services. The 3G SIM card reportedly costs about US$64.50 with 3G tariffs said to be similar to that of prepaid rates. The service launched in the Ring Road area of the capital city Kathmandu. The launch hit an early snag within days, with the independent regulator objecting to Nepal Telecom's setting a new subscription fee for 3G services without its permission. A spokesperson for the Authority said that under the country’s Telecommunications Act, prices levied by a service provider must first be approved by the NTA and the rates published as directed by the agency.
However bullish the Nepalese telco might be, the business case for 3G-enabled rich data services in emerging markets is still bound to have its critics. Each wave of ever less affluent subscribers is thought to have a negative effect on operator ARPU. In Pakistan. a new source of competition may depress prices further. The country's Telecommunication Authority has released guidelines for the running of MVNOs and any new virtual market entrants could choose to compete purely on price with their network partners, as has been the case in markets across the developed world.
Notwithstanding these challenges, interest in acquiring telecoms assets in South Asia remains very strong. Pakistani press reports say that Warid Telecom is negotiating to sell a minority stake to a foreign investor. The potential suitors include Singapore Telecom, Vodafone and Kuwait’s MTC. Several international investors have reportedly approached the company over taking a minority investment in the past six to eight months. Warid Telecom is owned by the Abu Dhabi Group and is Pakistan’s third largest cellular operator. The group is also active in Bangladesh, where its recently launched a network means it is now running the country's sixth mobile operator. At launch, the network covered about 70% of the population. Warid, which has already spent US$300 million on the network and licensing, plans to invest another US$500 million in Bangladesh over the next three years.
Elsewhere in the region, Telekom Malaysia has announced it has sold 3.2% of shares in its Sri Lanka Dialog unit. This is not, however, a retreat from the Sri Lankan market. On the contrary, this is part of a plan to boost stock trading in Dialog, which has a 60% share of Sri Lanka's mobile market. Dialog reportedly hopes to win users through new services, including Sri Lanka's first high-speed wireless network and pay television. The TM share in Dialog will not be reduced below the level of 80%, clearly indicating that this is a market in which the Indonesia telco means to stay very active.
Cellular operators in Sri Lanka face competition from a number of fixed-wireless players, whose services may prove very well suited to remote, rural populations for whom the model of every subscriber owning and using a mobile handset may continue to prove prohibitively expensive. These operators are aiming to provide value-added services on top of the basic voice offering. One example is WLL operator Lanka Bell, which has become the first provider in the country to launch voice-based SMS messaging, under the brand name ‘Bell Voice SMS’. The new service enables users to record and send voice messages up to 30 seconds in length to any domestic network, fixed or mobile.
Overall, Telekom Malaysia has earmarked to spend MYR8 billion (US$2.3 billion) this year expanding its international mobile businesses in Indonesia, Sri Lanka and Bangladesh, which is considerably more than the MYR2.8 billion it spent on its overseas units last year. CEO Dato' Abdul Wahid Omar said TM’s foreign operations are expected to make 30% of group revenue this year, compared with 25% in 2006. Doubtless, rich opportunities remain across South Asia. There exists a unique opportunity to meet and do business with the region's mobile operators and the investors behind them - Mobile South Asia, hosted by Informa Telecoms & Media in Dhaka, Bangladesh, 10-11 July 2007. Supported by the South Asia GSM Operators' Forum, and co-located with their annual CEO-level invitation-only regional meeting, the conference offers a convenient one-stop shop for all organisations seeking to develop contacts and do business with the cellular sector of this booming region.
