ASIA–PACIFIC
TELECOMS INSIGHT
BUILDING COmpeTITIve ADvANTAGe IN The WORLD’S mOST DYNAmIC
TeLeCOmS AND meDIA mARKeTS
Inside
www.analysysmason.com
Introduction
p3
Global expertise on a regional level
p4
3G in India: selling 3G services to the ‘next 15%’ of
customers requires a new strategy
p6
Improving revenue yield and reducing network
costs for mobile broadband
p8
Pay TV in Asia–Pacific – the next opportunity?
p10
The role for LTE: a business model decision
rather than a technology choice
p12
Did SK Telecom pay too much in the
South Korean Spectrum Auction?
p14
Success of universal broadband in India hinges on
the choice of investment model
p16
Asia–Pacific regional research programme
p18
Research portfolio
p20
Thinking and doing: what we offer
p22
Contact us
p26
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INTRODUCTION
Analysys Mason works with clients from across the
telecoms and media value chain, helping to support
successful business decisions in the diverse and dynamic
markets of the Asia-Pacific region.
Analysys Mason’s experienced consultants and analysts offer deep insight and clear, forward-thinking
recommendations on strategy, technology, regulation, and investment in Asia’s emerging and developed
telecoms and media markets. With specialists in areas ranging from spectrum valuation to customer retention
strategies, from towercos and infrastructure sharing to content rights regulation, we welcome the opportunity to
help your organisation maximise opportunities and face challenges in the Asia-Pacific region.
Clients can access our ongoing Asia-Pacific telecoms market analysis and forecasts through Analysys Mason’s new
Asia–Pacific regional research programme. Through the programme’s reports, forecasts and ongoing
commentary, our expert research team delivers value to our clients through identifying and quantifying the major
trends and growth opportunities in the region, examining and forecasting individual country markets, and
highlighting areas of best practice.
Key issues we will examine in the programme include:
• which next-generation mobile standards will dominate in the region, and how the timing of network and service roll-outs will vary across markets and have an impact on operator payback periods
• which operators are leading the market in terms of innovative services, to foster greater usage and extension of advanced data and content services among an already sophisticated user base
• how service providers can apply more sophisticated customer segmentation, bundling and pricing models, to maximise customer value in both emerging and developed Asian markets
• what types of new mobile applications and revenue models are finding traction in the market, and how these are differentiated across the region and between developed and emerging markets
• which new business models and partnerships are developing around emerging service areas, such as
cloud and M2M, and how quickly these will markets grow.
For more complex client requirements, Analysys Mason’s Strategy Consulting teams in Singapore and New Delhi
bring years of experience in Asia’s telecoms and media markets, as well as deep technical expertise, to both
large and small engagements in the region.
This brochure presents highlights from our recent research and analysis on key issues for telecoms and media
players in the Asia-Pacific. The following articles discuss the opportunities and challenges we consider most
important for service providers, vendors, regulators and financial institutions active in the region.
Our goal is simple: to enable our clients to build competitive advantage in Asia’s dynamic telecoms markets.
We look forward to working with you.
Alexandra Rehak
Head of Telecoms Research
Analysys Mason
alexandra.rehak@analysysmason.com
Yang-Soon Lee
Partner
Analysys Mason – Singapore
yang.soon.lee@analsysymason.com
Kunal Bajaj
Partner
Analysys Mason – India
Kunal.bajaj@analysysmason.com
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Global expertise on a regional level
Singapore office
Our Singapore team has worked in virtually every country in the
Asia–Pacific region. Over the last ten years we have worked with most
of the telcos, regulators, financial institutions and media companies
in the region.
Analysys Mason has been active in the Asia–Pacific region for more
than ten years, well before we established an office here in
Singapore in 2006. We recently moved to a new office in Robinson
Centre, in the heart of Singapore’s Central Business District near
Raffles Place and the newly developed Marina Bay Financial Centre.
Analysys Mason has worked in virtually every country in the Asia–
Pacific region. Over the last ten years we have worked with most of
the telcos, regulators, financial institutions and media companies in
the region.
Our work includes assisting clients to win licences in the early
years, helping them launch their businesses and then supporting
their commercial strategy and operations as their markets face
increased competition and consolidation.
We have also assisted regulators to develop and implement
far-reaching policies and regulations, and have supported financial
institutions and private equities firms in major transactions. In
short, we work with players in the industry to solve their most
pressing issues by formulating practical strategies and plans that
transform their businesses and improve their operations.
Some of the notable work undertaken by our Singapore team
recently, with support from experts in our other offices around the
world, includes:
• Developing a data strategy for a regional mobile operator
• Assisting a pure-play mobile operator with its transformation into a triple-play operator
• Developing a framework for the national broadband network for a major regulator, and also assisting two other regional regulators in the development of national broadband plans
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• Working with a pay-TV operator on a series of issues such as content strategy, churn management and channel optimisation
• Advising a regulator on a series of engagements covering spectrum trading and auctions
• Supporting several financial institutions and private equity firms on transactions such as the privatisation of a publicly listed company, acquisition of towers, telecoms and cable companies and funding of network expansion
• Conducting a thorough network audit for a major operator following a significant outage.
The Asia–Pacific team in Singapore is led by Yang-Soon Lee and
Amrish Kacker. Both are Partners at Analysys Mason, with extensive
consulting experience in the telecoms and media industries, both
globally and within the region. The office is supported by a team of
equally experienced Senior Managers and Consultants, most of
whom have postgraduate degrees from major universities such as
Columbia, INSEAD, Oxford, Cambridge and LSE.
For more information, please contact Yang-Soon Lee, Partner,
at yang-soon.lee@analysysmason.com, Tel: +65 6493 6038 or
Amrish Kacker, Partner, at amrish.kacker@analysysmason.com,
Tel: +65 6493 6038.
India Office
Our office in India ensures that Analysys Mason is better positioned
to meet the needs of its clients in the region, and that we continue to
meet the growing demand for strategy consulting from leading players
across Asia and the Middle East.
Based in New Delhi, the India team comprises experts with
backgrounds in telecoms, media, technology and professional
services, who are in frequent contact with telecoms regulators,
investors, operators and multinational vendors.
• Conducting a business due diligence of a leading local search and listings service provider in India.
Analysys Mason’s India office has been operational since 2004, and
has a team of 19 professionals with extensive experience in
corporate planning, strategy consulting, transaction advisory and
research.
• Developing a growth strategy for a global MVAS provider’s India business, identifying possible growth opportunities based on the total addressable market, competitive intensity across bearer channels (e.g. WAP) and distribution channels (e.g. D2C) and possible business model shifts between current and future services
Our team works closely with international and Indian operators,
original equipment manufacturers (OEMs), telecom infrastructure,
value-added service (VAS) companies along with global private
equity / venture capital firms on market entry, growth strategy,
business due-diligence and transaction advisory.
• Developing a granular ten-year forecast model for India’s wireless services market, with individual circle-level breakout of subscribers, technology generation, ARPU, market drivers and pricing trends, voice versus data subscribers and revenues, and expected 2G/3G/4G evolution.
The team also works closely with and advises industry associations
/ public organisations such as the Federation of Indian Chambers of
Commerce and Industry (FICCI), the Confederation of Indian
Industry (CII), the GSM Association (GSMA), the Cellular Operator
Association of India (COAI) and the Internet and Mobile Association
of India (IAMAI).
• Assessment of the mobile value-added services (VAS) market in India for the Internet and Mobile Association of India (IAMAI)
Some recent examples of our work in the telecoms, technology and
media industry in India include:
• Assessing the economic impact of wireless broadband in India for the GSM Association, including the quantification of direct and indirect economic impact across various sectors.
The India team, based in New Delhi, is led by Kunal Bajaj, Partner at
Analysys Mason. Kunal, a former McKinsey consultant and New
York entrepreneur, moved to India in 2004 to work within the
Telecom Regulatory Authority of India (TRAI) on India’s broadband
development, spectrum and other regulatory initiatives.
For more information, please contact Kunal Bajaj, Partner at
kunal.bajaj@analysysmason.com, Tel: +91 11 4700 3100
• Developing a strategy for a Fortune 500 technology client to reinvigorate its revenues in India.
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Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
3G in India: selling 3G services to the ‘next 15%’ of
customers requires a new strategy
Kunal Bajaj
Partner
India
“A sub-segment
of the top 10% of
subscribers act no
differently than
their global peers,
adopting mobile
broadband data for
their laptops and
using smartphones
to access off-deck
mobile Internet
services/apps.”
The top 10% of wireless subscribers in India contribute 35% of revenue and 55% of
margins for the large GSM operators – and selling 3G services to these subscribers is
relatively easy. Operators though will need a different approach to sell 3G services to
the ‘next 15%’ (N15) – which contributes an additional 35% of revenue and 35% of
margins. Analysys Mason believes this approach will not be based on price alone, but
on selling services as a complete package, including apps/services.
A sub-segment of the top 10% of subscribers act no
differently than their global peers, adopting mobile
broadband data for their laptops and using
smartphones to access off-deck mobile Internet
services/apps. Globally, operators have used mobile
broadband, handset based data access, and apps/
services on 3G to drive non-voice contribution to
ARPU – which is evident from the significant increase
in this value over the last few years (Figure 1).
The N15 will include many first-time Internet users
who will be slow to monetise. With only 60 million
Internet users in India (and with most of these
accessing the net via shared terminals or cyber
cafes), the N15 will comprise primarily first-time
owners of Internet access devices. While they are
aspirational and upwardly mobile, their initial
sophistication levels are likely to resemble the lowest
15% of subscribers in mature markets.
If catered for correctly, the top 10% can help
operators pay back much of the recent investment
made in 3G spectrum and network upgrades. Other
than for investments in Delhi and Mumbai, most
large operators only need to enhance the existing
ARPU of these high-end subscribers by 15–25% in
order to break even on their 3G investments within
five years. To begin to recoup the investment in the
larger cities, operators need to tap into the N15.
Bundles and prices need to be pitched carefully. The
N15 are not going to be BlackBerry/iPhone users,
but will be enabled by access to smartphones priced
at less than EUR55. They will be ready to consume
multimedia content and engage in social networking,
but it will not be easy to determine what apps/
services to offer, bundled with which devices, and on
what kinds of tariff plans.
We believe the battle for the N15 will focus on
quality of customer service and an end-to-end
offering combining voice, data, the device, and apps/
services. They will require greater management of
the user experience and will need to be backed by
an informed customer service operation that can
deal with apps/services problems, not just billing
and voice.
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Customer service and appropriate tariffs will
influence future purchase, spend and churn
decisions – and the operator that can provide the
N15 with what they want will be able to create real
differentiation and enhance monetisation beyond the
top segment.
For more information, please contact Kunal Bajaj,
Partner, at kunal.bajaj@analysysmason.com
“We believe the battle for the N15 will focus on quality of customer service and an end-toend offering combining voice, data, the device, and apps/services. They will require greater
management of the user experience and will need to be backed by an informed customer
service operation that can deal with apps/services problems, not just billing and voice.”
Bundles and prices need to
be pitched carefully. The
N15 are not going to be
BlackBerry/iPhone users,
but will be enabled by access
to smartphones priced at
less than EUR55.
Figure 1: Non-voice ARPU as a percentage of total ARPU, selected 3G operators, 2006–2009
[Source: Analysys Mason, 2011]
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Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
Improving revenue yield and reducing network
costs for mobile broadband
Amrish Kacker
Partner
Consulting
“The rising take-up
of mobile broadband
will require
significant capex and
opex in the coming
years – we estimate
that delivering a
mobile broadband
experience to 20%
of the subscriber
base would double
the NPV of cash
outflows.”
The provision of a full-screen Internet experience using mobile broadband USB
modems has been extremely successful: in developed markets, mobile broadband
USB modems typically represent 25%–35% of all broadband connections and more
than half of net additions, while in emerging markets they account for over 50% of
the total broadband market and are still growing.
Although the level of take-up is translating into high
revenue growth, a profitable business case for
mobile broadband data has still to be established.
Analysys Mason has undertaken projects on this
issue with operators focused in Asia–Pacific, where
the growth of mobile broadband has been significant.
Results indicate that revenue yields (revenue per MB)
for mobile broadband data are extremely low – ten
times lower than for handset data access – due to
the high volume of data consumed (2–3GB per
month) and the flat-rate tariffs offered. Moreover, the
revenue yields for both handset and mobile
broadband data are declining rapidly (see Figure 2
for publicly available data with similar trends).
The facts revealed from statistics in Norway are
consistent with the experience of operators in
Asia-Pacific and are clearly challenging:
• Although dongle revenues have grown by 75% (and even more in emerging markets), traffic has increased by 175%.
• Handset revenue has grown by a mere 10%, while traffic has more than doubled – clearly implying declining yields.
• Yields for mobile broadband data are ten times less than those for handset data. (Similar ratios are also found in emerging markets.)
• Dongle traffic is ten times that for handset data, implying significantly more capex at a much lower yield.
• Revenue yields for USB modems have declined by 48% in the last year, and by 36% for handsets.
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Growing demand will dramatically increase
investment requirements
The rising take-up of mobile broadband will require
significant capex and opex in the coming years – we
estimate that delivering a mobile broadband
experience to 20% of the subscriber base would
double the NPV of cash outflows. A big driver for the
increase in cash outflows will be the need to improve
backhaul and transmission, which will account for up
to one third of the NPV of cash outflows (in an
illustrative business case).
Given that the revenue yield on mobile broadband is
likely to be extremely low, there remain significant
concerns about whether a profitable business model
exists.
Delivering better revenue yields and cost-reduction
measures are fundamental to future profits
Tackling the challenges in building a profitable
mobile broadband business will require a disciplined
and systematic approach to improving revenue yield,
as well as more effective reduction of network costs
(see figure 3). The key initiative to improve revenue
yield is pricing that focuses on creating profitable
subscriber segments. The major network initiatives
under evaluation by operators in the region are peak
traffic offload (e.g. using Wi-Fi or femtocells) and
backhaul optimisation.
Analysys Mason works with mobile operators on
commercial and technical initiatives to support the
development of a profitable mobile broadband
business.
For more information, please contact Amrish Kacker,
Partner, at amrish.kacker@analysysmason.com.
“Tackling the challenges in building a profitable mobile
broadband business will require a disciplined and
systematic approach to improving revenue yield, as
well as more effective reduction of network costs.”
0.0
1H 2008
Traffic: Handset
Yield: Handset
0.0
1H 2009
Traffic: Dongle
Yield: Dongle
0
Initiatives
Initiatives
Figure 2: Norway case study: Internet traffic and revenue yield
for handset and dongle [Source: NPT, Analysys Mason]
20
4.0
Yield improvement
0
Target costs
20
Transformation
Total costs (normalised to 100)
Initiatives
40
Optimisation
0.0
60
Offload
Traffic: Dongle
Yield: Dongle
0.5
80
Base costs
0.0
1H 2009
1.0
Target yield
0.5
1.5
Cost allocation
1.0
2.0
Traffic mgmt
1.5
2.5
Pricing
2.0
100
Base yield
2.5
Network cost reduction
3.0
Yields (normalised to 1)
3.0
Yield (NOK per megabyte)
3.5
Initiatives
Figure 3: Network initiatives to improve profits from mobile broadband (illustrative)
[Source: Analysys Mason, 2011]
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Target costs
0.5
40
Transformation
0
1.0
Optimisation
0.5
200
1.5
60
Offload
1.0
400
2.0
80
Base costs
1.5
600
Total costs (normalised to 100)
2.0
800
2.5
Target yield
2.5
1000
100
Cost allocation
1200
Network cost reduction
3.0
Traffic mgmt
3.0
Pricing
Traffic (terabyte)
1400
Yield improvement
Base yield
3.5
Yields (normalised to 1)
4.0
1600
Yield (NOK per megabyte)
1800
The key initiative to improve
revenue yield is pricing that
focuses on creating
profitable subscriber
segments. The major
network initiatives under
evaluation by operators in
the region are peak traffic
offload (e.g. using Wi-Fi or
femtocells) and backhaul
optimisation.
Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
Pay TV in Asia–Pacific – the next opportunity?
Lim Chuan Wei
Partner
Consulting Team
“The competitive
dynamics between
satellite players on
one hand and IPTV/
cable operators
on the other can
differ significantly
across markets.
Satellite provides a
much wider reach
compared to IPTV/
cable and is likely
to be much more
cost-efficient in
rural areas.”
The pay-TV market in the Asia–Pacific region has undergone significant changes over
the past decade. In contrast to the 1990s, the market is now more professional and
developed. Whilst there are still regulatory and policy constraints because of the
political sensitivity of media, there remains a significant opportunity to invest in the
market. Market themes for pay TV can include leveraged buyout, consolidation,
capital injection for digitisation and hence revenue growth, and turnaround situations.
In reviewing the opportunity for pay TV in Asia–Pacific
and elsewhere, a number of questions needs to be
considered:
• Is cable/IPTV or satellite the more appropriate technology?
• How can the assets be further leveraged?
• Can access to content be maintained, or better still remain exclusive?
• What is the potential for additional services?
• How can the cost of deployment be controlled?
The competitive dynamics between satellite players
on one hand and IPTV/cable operators on the other
can differ significantly across markets. Satellite
provides a much wider reach compared to IPTV/cable
and is likely to be much more cost-efficient in rural
areas. In contrast, IPTV/cable provides a better
viewing experience, and potentially offers a higher
profitability since the same asset can be used for
delivery of broadband and interactive services. Over
time, there may be a possibility that market share
moves towards cable as infrastructure becomes
more developed, but satellite will continue to play an
important role in large geographical markets such as
Indonesia and India.
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Cable has seen a more significant increase in
profitability compared to satellite in the past few
years, driven by the re-use of assets by broadband.
In some markets, for example Indonesia, broadband
revenues have even exceeded pay-TV revenues.
Surprisingly, despite the higher profile of FTTx
technology, cable continues to make a comeback
in market share, as is the case with Taiwan, partly
as cable operators recognise the incremental
revenue benefits.
Content is the key driver for pay TV takeup. In
markets where free-to-air content remains
competitive, pay TV has been making less headway
as people do not see the need to switch. In most
other markets however, content on pay TV is
significantly better than on free-to-air. In markets
where pay TV is more dominant, in order for the pay
TV operators to remain dominant, content cost will
become more expensive. How the pay TV operators
continue to acquire appealing content while
maintaining control of the cost and exclusivity of
content would be one of the key drivers in assessing
the likelihood of success for the operator.
“Content is the key driver for pay TV takeup. In markets where free-to-air content
remains competitive, pay TV has been making less headway as people do not see
the need to switch. In most other markets however, content on pay TV is significantly
better than on free-to-air. In markets where pay TV is more dominant, in order for
the pay TV operators to remain dominant, content cost will become more expensive.”
The threat to pay TV from ‘over-the-top’ (OTT)
services cannot be underestimated. Broadband, the
key enabler for such video content, has grown
significantly. The core business in pay TV will remain
scheduled programming, although we can expect
that on-demand viewing will become more popular
as part of the liberalisation when it comes to
‘anytime, anywhere’ programming.
Pay TV is moving into the digital age in most of the
Asia–Pacific market. Besides the headend upgrade
cost, the biggest component cost is the set-top boxes
(STBs). Controlling the STB cost in terms of unit
price and logistics cost will be essential, and could
have a significant impact on the valuation of the
companies.
Analysys Mason has
significant experience
conducting both commercial
and technical due diligence
on pay-TV assets in the
Asia–Pacific region. Our
Singapore team has
completed close to ten due
diligence exercises in the
pay-TV sector.
In order for cable operators to compete with satellite
operators, the line deployment cost will have to drop.
Line deployment costs vary across markets and
much depends on the local regulation with regard to
roll-out. With ARPUs at less than USD20 in Asia–
Pacific, the payback period based on line roll-out
alone is going to be quite significant.
Analysys Mason has significant experience
conducting both commercial and technical due
diligence on pay-TV assets in the Asia–Pacific region.
Our Singapore team has completed close to ten due
diligence exercises in the pay-TV sector.
For more information, please contact Lim Chuan
Wei, Partner, at lim.chuan.wei@analysysmason.com
11
Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
The role for LTE: a business model decision rather than
a technology choice
Amrish Kacker
Partner
Consulting
“When selecting
an appropriate
business model for
LTE, an operator
needs to consider
both financial and
strategic criteria.”
Triggers for evaluating LTE
Operators around the world are now evaluating the role for LTE in their overall
business, because LTE will provide better cost economics in additional spectrum that
will become available, and an enhanced user experience through technology
improvements.
• Spectrum in which LTE can be deployed is available via new allocations (700/800MHz, 2.6GHz) or refarming (1.8GHz).
• The availability of additional spectrum in these bands will enable more cost-efficient networks that can accommodate increasing demand for data from handsets and USB modems.
• LTE will enable operators to offer services with headline speeds comparable to those of fixed broadband.
Business models for LTE
Operators are evaluating three business models for
LTE, as summarised in Figure 4.
1.Ubiquitous LTE: An aggressive network deployment
with the business rationale of offering a premium
service in the market as well as potentially reducing
network costs when assessed over a period of five to
seven years. The lower network cost is a result of
avoiding capacity-driven investments in HSPA in the
initial years. Typically, mobile-only operators (such as
CSL in Hong Kong) are most likely to adopt this
approach.
2.Hot-zone LTE: Focused LTE deployments to reduce
network congestion, and gradually expand coverage
over time in a managed technology migration path.
While there is some potential for ARPU improvement
(for example, by offering LTE headline downloads
only in the higher-end packages), the primary
rationale for this strategy is to manage short-term
capacity requirements and costs effectively. Typically,
integrated incumbents (such as T-Mobile in
Germany) are most likely to adopt this approach.
3.LTE for marketing: Limited and selective
deployments for use as a marketing message in
branding next-generation capability to consumers.
Typically, spectrum-constrained operators (such as
M1 in Singapore) are most likely to adopt this
approach.
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“The strategic assessment needs to take into account
the shifts in user behaviour and potential competitive
dynamics arising from the deployment of LTE.”
Selecting the right approach
When selecting an appropriate business model for
LTE, an operator needs to consider both financial
and strategic criteria.
The financial assessment needs to take into account:
• the costs of meeting the demand requirements
using additional HSPA sites/carriers
• the cost of upgrading the network to LTE
• the revenue upside from higher-ARPU premium
mobile services
Analysys Mason supports
mobile operators in
assessing the role for LTE
through spectrum valuation
and strategy, auction
support, network costing for
product profitability and
business models.
The strategic assessment needs to take into account
the shifts in user behaviour and potential competitive
dynamics arising from the deployment of LTE. For
example:
LTE potentially gives mobile operators an opportunity
to drive fixed–mobile substitution for broadband,
although profitability challenges remain
adoption of LTE can give an operator a position of
technology leadership – particularly in addressing
high-value segments, such as enterprise customers.
• the (expected) availability of competitively priced
handsets and USB modems
Analysys Mason supports mobile operators in
assessing the role for LTE through spectrum
valuation and strategy, auction support, network
costing for product profitability and business models.
• the operator’s overall spectrum strategy, including
the potential role for paired TD-LTE spectrum.
For more information, please contact
amrish.kacker@analysysmason.com.
Figure 4: The evolution of LTE roll-out under various business models
[Source: Analysys Mason, 2011]
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Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
Did SK Telecom pay too much in the South Korean
Spectrum Auction?
Morgan Mullooly
Research Analyst
Research
“SKT’s winning bid
in the 1800MHz
band is particularly
noteworthy on
account of the
unusually high
price paid for this
spectrum.”
A very significant auction took place recently in South Korea in Q3 2011. The rules of
the auction dictated that no MNO could acquire spectrum in more than one band and
the results were:
• Korea Telecom (KT) won 10MHz in the 800MHz band for KRW261 billion (USD245 million)
SK Telecom (SKT) won 20MHz in the 1800MHz band for KRW995 billion (USD933 million)
• LG Uplus won 20MHz in the 2100MHz band for KRW445.5 billion (USD412 million).
SKT’s winning bid in the 1800MHz band is
particularly noteworthy on account of the unusually
high price paid for this spectrum. The auction of this
band was notable for its high initial reserve price and
fiercely competitive bidding over eighty-three rounds
between SKT and KT. A number of explanations can
be put forward to explain the high price paid by SKT
for the spectrum:
• The two dominant MNOs could were barred from compete for spectrum in the 800MHz and
1800MHz band for competitive reasons. Furthermore, to realise maximum speeds offered by LTE, 20MHz blocks of spectrum are required, and this was only available in the 1800MHz band.
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• The 1800MHz band has a higher capacity than the 800MHz band and also provides decent coverage. South Korea is one of the world’s most densely populated countries, and cell sites are heavily burdened with subscribers.
• Many countries are refarming 20MHz GSM spectrum in the 1800MHz band for LTE services and there are already six operational LTE networks using this band globally, with many more planned This will result in economies of scale for chipsets, devices, and network infrastructure designed for this band, allowing SKT to tap into an attractive ecosystem.
Spectrum in the 800Mhz and 2100Mhz bands were
picked up at the reserve prices. Spectrum in the
2100MHz band was picked up by LG Uplus, as SKT
and KT were barred from competing in this band, on
competitive grounds. KT picked up the 10MHz
available in the 800MHz spectrum, almost by default,
due to the absence of a new-entrant which could
have competed for the spectrum.
“The key question arising from the recent South Korean auction process is whether
the high price paid by SKT in the 1800MHz auction will pay off for the operator.
SKT must achieve payback in the face of a number of challenges in the South Korean
mobile market:.”
The key question arising from the recent South
Korean auction process is whether the high price
paid by SKT in the 1800MHz auction will pay off for
the operator. SKT must achieve payback in the face
of a number of challenges in the South Korean
mobile market:
• Mobile ARPU is falling. This is a result of several
factors, including MNOs offering competitively
priced mobile services to data-hungry consumers,
and recent mobile tariff reductions imposed by the
government to curb consumer price inflation.
• KT and LG UPlus will be able to compete with SKT
by investing in, and offering, value-added services.
Notably, during the spectrum bidding process, SKT
denied rumours that it would bid for the US-based
VOD provider Hulu. Its competitors, KT and LG
UPlus are now better placed to take advantage of
offering such propositions because they will have a
greater pool of spare capital for investment
relative to SKT following this auction.
• Spectrum will be freed up when the analogue
television switch-off occurs in South Korea on the
31December 2012. The switchover will result in a
digital dividend of spectrum in the 698–806MHz
frequency band. Much of this spectrum can be
expected to be reallocated for mobile
communications. KT and LG Uplus may be better
positioned than SKT to acquire spectrum in the
relatively near future, as SKT’s board may be
reluctant to authorise the further release of huge
sums to acquire spectrum licences. KT and LG
Uplus may be better able to convince their boards
to authorise large capital expenditure after picking
up licences in this round of auctions at the reserve
prices. Nevertheless, in a future digital dividend
auction,the Korean regulator (KCC) may lay down
spectrum cap rules to prevent any operator from
acquiring relatively inequitable spectrum holdings.
Mobile ARPU is falling.
This is a result of several
factors, including MNOs
offering competitively
priced mobile services to
data-hungry consumers,
and recent mobile tariff
reductions imposed by the
government to curb
consumer price inflation.
For more information, please contact Morgan Mullooly,
Research Analyst, at
morgan.mullooly@analysysmason.com
15
Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
Success of universal broadband in India hinges on the
choice of investment model
Sourabh Kaushal
Lead Consultant
Consulting Team
“According to our
analysis, the most
cost-effective way
to provide universal
broadband access in
India, given the large
geographical spread
and non-existence
of fixed networks in
the rural areas, will
be to use a backhaul
network based
on optical fibre to
connect the 250 000
large villages first.”
Governments across the globe, and especially those in emerging economies, are
recognising the importance of broadband connectivity to drive economic
development and support the less advantaged sections of society.
The Indian government has recently thrown
considerable weight behind an ambitious deployment
of broadband infrastructure. Within two years, the
government plans to provide high-speed data
network connections to the 250 000 large villages
(gram panchayats), and thereafter to all unconnected
villages with more than 500 habitants. We estimate
that the overall investment in broadband
infrastructure will be around INR397 billion (USD8.6
billion).
Having made this commitment, the government is
now engaged in discussions with key stakeholders
(operators, infrastructure providers and industry
associations) to decide the optimal technology and
investment model for the deployment of backhaul
(core and middle mile) and access infrastructure.
The Confederation of Indian Industry (CII) asked
Analysys Mason to undertake a detailed study to
identify the different investment model options for
deployment of broadband infrastructure in rural
areas across India.
According to our analysis, the most cost-effective
way to provide universal broadband access in India,
given the large geographical spread and nonexistence of fixed networks in the rural areas, will be
to use a backhaul network based on optical fibre to
connect the 250 000 large villages first. ‘Last-mile’
access can then be provided using wireless
technologies (such as HSPA, WiMAX and LTE). Based
on Analysys Mason’s calculations, the backhaul
network will require the deployment an additional
301 000km route of fibre, and around 37 500 towers
will be required to provide broadband access
covering rural India. This topology can offer
broadband connectivity to a large number of people
in the next five years, and at relatively low cost.
16
While the details of the deployment plan are
important, the single most critical factor for the
successful and timely implementation of the
broadband network is the choice of investment
model.
As part of our support for the CII, we worked in close
co-operation with the industry to define the approach
that best meets the government’s public-service
objectives, while providing equal opportunities for all
market participants. Depending on the role the
government decides to play, there are three principal
investment models, referred to as ‘ownership’,
‘public–private partnership’ (PPP) and ‘financial
incentives’. Each approach has a number of variants,
which are summarised in Figure 5.
We concluded that the best outcome would be
provided by adopting different ownership and
investment solutions for backhaul infrastructure and
for access infrastructure.
For backhaul infrastructure, the best solution lies in
the PPP model, involving an operator-led specialpurpose vehicle (SPV). The government creates and
owns a parent SPV, which, in turn, owns all of the
deployed network assets. Network deployment and
ongoing operations and maintenance will fall to
subsidiary SPVs (based on the number of regions
carved out for deployment). These subsidiary SPVs
will have joint equity ownership between the parent
SPV and a telecoms operator.
“While the details of the deployment plan are important,
the single most critical factor for the successful and
timely implementation of the broadband network is the
choice of investment model.”
For access infrastructure, the best solution lies in
subsidies to end users, paid directly to each
household from the USOF. In this model, any
operator can roll out services in any area across
rural India, taking advantage of subsidised backhaul
from the SPV and subsidised tower infrastructure
from existing USO programmes.
By considering a comprehensive solution that
includes backhaul, access and access devices (CPE),
the Indian government has taken highly positive
steps. Furthermore, the initial adoption will be driven
forwards by the eGovernance initiatives currently
being undertaken by central government. However,
the take-up and usage of services by the mass
market will depend on the availability of localised
content and applications, as well as services that can
be used on a daily basis (livelihood-enhancing
services such as education and utility services).
Analysys Mason has been working actively with
industry participants around the world, to educate
governments on infrastructure deployment models
and best practice adopted by countries that have
implemented national broadband networks. We have
also helped governments in building detailed
frameworks for national broadband plans, which
address all the current and emerging issues around
business viability, spectrum, policy and regulation.
The work completed recently in India can be
accessed for download at www.analysysmason.com/
india.
For more information, please contact Sourabh
Kaushal, Lead Consultant, at sourabh.kaushal@
analysysmason.com
Ownership
1
Ownership
1.1
Central
government
1.2
State government or
municipality owned
State government
Telcos (core
or municipality
and access)
(core)
Central/ state
government/ USOF/
municipality
Central government
& PSUs with
SPV (core)
backhaul (core)
Central
government/
USOF and BSNL
3
2.1
Jointly funded and owned
SPV – telco led
Telcos and
SPV (Core
central government
and access)
(core and access)
Central government
and public/ private
operators
2.2
Jointly funded and owned
SPV – government led
Central government
SPV (core
and Telcos (core
and access)
and access)
Central government
and Public/ Private
Telcos
3.1
Government loans and
subsidies, private owned
Public/ private
telcos (core
and access)
Public/ private
telcos (core
and access)
Central government
and public / private
telcos
3.2
Reverse auctions
Public/ private
telcos (core
and access)
Public/ private
telcos (core
and access)
Central government
and public/ private
telcos
(PPP)
Financial
incentives
Note: 1. Special Purpose Vehicle
Note: 2. Telecoms operator Bharat Sanchar Nigam Ltd
Funding
Central government
BSNL (core
(core); BSNL
and access)
(access)
Incumbent-owned,
2
Deployment
Central government
owned
1.3 government-supported SPV1
Investment
models
We concluded that the best
outcome would be provided
by adopting different
ownership and investment
solutions for backhaul
infrastructure and for
access infrastructure.
Source: Analysys Mason, Industry Inputs
Figure 5: Possible deployment models for broadband infrastructure in India
[Source: Analysys Mason]
17
Asia-Pacific Telecoms Insight
Building competitive advantage in the world’s most dynamic telecoms and media markets
Asia–Pacific regional research programme
Alexandra Rehak
Head of Telecoms Research
Research
“The telecoms landscape
in emerging Asia
Pacific markets is
changing quickly and
dramatically.”
“Analysys Mason’s Asia–Pacific regional research programme offers clients critical data
and insight into the rapidly evolving Asia–Pacific telecoms environment. Asian markets
offer numerous examples of innovative practices, ranging from technology choices and
partnership initiatives, to service design, pricing and bundling. The programme
provides the forward view on consumer, enterprise, and technology issues, to help
market players understand the most effective way to maximise growth opportunities.”
Alexandra Rehak, Lead Analyst for Asia–Pacific regional research programme
Analysys Mason’s Asia–Pacific regional research
programme offers clients critical data and insight
into the opportunities and challenges in the Asia–
Pacific telecoms market.
The programme benefits from our deep
understanding of telecoms market dynamics in the
region, supported by the on-the ground resources in
our regional offices in Singapore and New Delhi.
The programme’s research aims to help clients both
within and outside the region to maximise growth
opportunities
Key questions for emerging and developed Asia–
Pacific markets include:
• How can service providers apply more sophisticated customer segmentation, bundling and pricing models, to maximise customer value in both emerging and developed Asian markets?
• What types of new mobile application and service are providers rolling out to consumers, and how are these differentiated across the region’s markets?
• How can network operators time infrastructure investments and upgrades appropriately and extend networks cost-effectively?
Forthcoming topics
Analysys Mason provides comprehensive analysis of
the key issues affecting all parts of the telecoms
value chain in Asia–Pacific. We will be covering
critical industry issues, including:
• The Developed Asia–Pacific telecoms market: trends and forecasts 2011–2016
• The Emerging Asia–Pacific telecoms market: trends and forecasts 2011–2016
• Extending connectivity: access network strategies in the Asia–Pacific region
• Innovation and best practice in loyalty schemes for mobile customers: an Asia–Pacific perspective
• Building MVNOs in Asia: strategies and market opportunity analysis
• Cloud services in the Asia–Pacific region: market forecasts and case studies
• National broadband initiatives and public–private partnerships in Asia
• Connected Consumer primary research survey: telecoms usage and preferences in India, China, Malaysia and Indonesia
For more information, please contact
Alexandra Rehak, Head of Telecoms Research, at
alexandra.rehak@analysysmason.com
18
Research programme deliverables: Asia–Pacific
Deliverable type
Reports: forecasts,
quantitative modelling and
survey reports, with in-depth
analyses of critical topics
Indicative number
(over 12 months)
4
Viewpoints: targeted analyses
of key industry issues and
players in the form of case
studies, best practice studies
or forecasts of specific services
6-8
Country reports:
comprehensive overviews of
the telecoms and media
landscape, including
regulation and market outlook
13
Asia–Pacific CEO Digest:
informed opinion on the latest
industry developments
4
Geographical coverage
Analysys Mason’s Asia–Pacific regional research
programme covers all Asian markets with a
particular focus on emerging market strategies and
challenges.
The programme provides operational KPIs for fixed,
mobile and broadband players in, as well as country
reports for 13 key markets:
• Australia
• Malaysia
• Bangladesh
• Pakistan
• China
• Singapore
• Hong Kong
• South Korea
• India
• Taiwan
• Indonesia
• Thailand.
• Japan
Regional-level forecasts are provided for two
sub-regions:
• Emerging Asia–Pacific
• Developed Asia–Pacific.
19
research portfolio
We offer a comprehensive portfolio of global
telecoms research programmes
Analysys Mason’s portfolio of research programmes offers a mixture of qualitative and
quantitative market intelligence, to which many of the world’s leading network operators,
vendors, regulators and investors subscribe. Core outputs include:
• annual five-year forecasts covering all aspects of services, subscribers and revenue for all regions of the world, and 30 countries in Europe and 26 in Asia–Pacific and the Middle East and Africa
• annual or quarterly data for all regions globally and at country level that provides historical service, subscriber and traffic, usage and revenue data, ongoing tracking of market share and leading offers for key services.
21
ThINKING AND DOING
What we offer
THINKING MARKETS
THINKING MOBILE
THINKING SYSTEMS
22
THINKING TECHNICAL
Auckland +12.00
Vanuatu +11.00
Sydney +10.00
Tokyo +9.00
Singapore +8.00
Bangkok +7.00
Dhaka +6.00
New Delhi +5.30
Dubai +4.00
Moscow +3.00
Cape Town +2.00
Paris +1.00
London 0.00
Azores -1.00
South Georgia -2.00
Buenos Aires -3.00
Caracas -4.00
Washington DC -5.00
Mexico City -6.00
Denver -7.00
San Francisco -8.00
Anchorage -9.00
Tahiti -10.00
Samoa -11.00
Knowing what’s going on is one thing. Understanding how to take
advantage of events is quite another. Our ability to understand the
complex workings of TMT industries and draw practical conclusions,
based on the specialist knowledge of our people, is what sets Analysys
Mason apart. We deliver our key services via two channels: consulting
and research.
Consulting
Research
For over 25 years, our consultants have been
bringing the benefits of applied intelligence to
enable clients around the world to make the most
of their opportunities.
Our subscription research programmes address key
industry dynamics in order to help clients interpret
the changing market.
Unlike some consultancies, our focus is exclusively on TMT. We
advise clients on regulatory matters, support multi-billion dollar
investments, advise on network performance and recommend
commercial partnering options and new business strategies. Such
projects result in a depth of knowledge and a range of expertise that
sets us apart.
• consumer services
We look beyond the obvious to understand a situation from a client’s
perspective. Most importantly, we never forget that the point
of consultancy is to provide appropriate and practical solutions. We
help clients solve their most pressing problems, enabling
them to go further, faster and achieve their commercial objectives.
• market data
Our research programmes include five key offerings:
• enterprise services
• network technologies
• telecoms software
We analyse, track and forecast the different services accessed by
consumers and enterprises, as well as the software, infrastructure
and technology delivering those services.
Subscribing to our research programmes also gives you regular and
timely intelligence and direct access to our team of analysts. That
means the opportunity to engage one-to-one with our subject
experts for insight, opinion and practical advice relating to your
most critical business decisions.
Take advantage of this service and you’ll be in good company. Many
of the world’s leading network operators, vendors, regulators and
investors subscribe to our programmes and rely on our insight on a
daily basis to inform their decision making.
Our research is an essential resource for strategic planning,
forecasting, investment, marketing and benchmarking.
23
Regulation
We offer regulatory advice to operators, vendors,
media rights owners, regulators and policy makers.
We blend our range of skills each
day, every day, to solve our clients’
most complex challenges.
Transaction support
Regulation
Systems
and
infrastructure
Strategy
and
planning
Transaction
support
Telecoms,
Media and
Technology
(TMT)
marketing
and
products
24
We specialise in economic cost modelling, policy development, radio
spectrum and licensing management, content access and rights
pricing. Our work in this area is nothing short of international.
Recently, we advised the Communications Regulators Association of
Southern Africa (CRASA) on what action to take to lower roaming
charges, assisted a telecoms regulator in a southern African
country to examine the effectiveness of past policy and to formulate
future policy, and identified the optimum framework for Ofcom for
releasing available digital dividend spectrum to the market in a way
that would maximise benefits for the economy and society.
procurement
Technical
audit and
assurance
Transaction support is about the provision of due
diligence and business planning expertise to help
vendors, purchasers and lenders.
We provide valuation support, buy- and sell-side support,
transaction management, value generation and regulation risk
appraisals, as well as help clients with negotiations. Recent clients
include: financial institutions, operators, vendors and media
companies around the world. For example, we managed the
production of an application for a fixed licence for an international
fixed and mobile operator in a large country in the MENA region,
helped an operator in Nigeria acquire a fixed and mobile licence by
bidding for an operator in sub-Saharan Africa, assisted a venture
capital company undertake a high-level commercial due diligence of
a South Asian operator, and supported a client with its acquisition of
a broadband triple-play operator in Europe.
Technical audit and assurance
Strategy and planning
Our technical audit and assurance role is about
assisting major organisations to maximise returns
from investment in networks and technology.
Analysys Mason is expert in the development and
critical appraisal of operational plans and strategy.
Our services include: the technical audits of networks, technical risk
analysis, the optimisation of network performance, control room/
call centre review and optimisation, and the development of ICT
strategy. We recently undertook a radio frequency (RF) survey
across three islands in the Bahamas.
Our work ranges from strategy development/review, technology
portfolio analysis, to revenue uplift and market entry strategies,
customer segmentation, competitor profiling and market analysis.
We recently completed a detailed market assessment to support
the investment decision on a European/Asian transit product, and
advised on the diversification strategy for a fixed and mobile
operator planning to move into TV content.
Procurement
Systems and infrastructure
Our procurement experience translates into highly
effective vendor management for clients in both the
public and private sector.
Our systems and infrastructure work focuses
on advising operators, vendors, public and
private sector clients on business systems and
infrastructure.
In particular we manage the tender review and selection process,
develop valuation criteria, evaluate supplier responses (from both a
technical and commercial perspective), vendor selection, contract
negotiation, RFI and RFP authoring and version control. Recent
projects include: one of the largest public sector procurements ever
to be undertaken in Scotland as part of the ongoing South of
Scotland Broadband Pathfinder Project, support for national mobile
radio network projects in Austria and Norway, and acting as
technical advisor to the UK’s Department of Health on its
Ambulance Radio Project.
Specifically, we can help with high-level architecture, network
and systems design, fibre and network roll-out, planning
next-generation, high-capacity core networks, evaluating business
models and software processes, the management of infrastructure
deployment and network sharing. Recent projects in this area
include managing the main OSS/BSS systems required for
commercial launch of a 3G business for a major Asian operator, and
undertaking a like-for-like cost-per-bandwidth analysis of several
wireless access technologies for a major UK MNO.
Marketing and products
We are experienced in helping operators,
broadcasters and content providers create profitable
service opportunities in the consumer, enterprise
and public sector markets.
Specifically, we can help with segmentation strategy and subbranding, wholesale services and service creation, proposition
development, partnering options and service profitability analysis
through the development of complex business models. Recently, we
successfully identified and recruited indirect channel partners to
support the growth plan for a leading UK MVNO and helped a
top-ten international retail bank develop a mobile banking and
payment go-to-market strategy and produce an associated business
plan for emerging markets.
25
Contact us
www.analysysmason.com
Cambridge
Analysys Mason Limited
St Giles Court
24 Castle Street
Cambridge, CB3 0AJ
UK
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
cambridge@analysysmason.com
London
(Registered office)
Analysys Mason Limited
Bush House
North West Wing
Aldwych
London, WC2B 4PJ
UK
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
london@analysysmason.com
Dubai
Al Shatha Tower, 3110
Dubai Internet City
P O Box 502064
Dubai
UAE
Tel: +971 4 446 7473
Fax: +971 4 446 9827
dubai@analysysmason.com
Dublin
Analysys Mason Limited
Suite 242
The Capel Building
Mary’s Abbey, Dublin 7
Ireland
Tel: +353 (0)1 602 4755
Fax: +353 (0)1 602 4777
dublin@analysysmason.com
Edinburgh
Analysys Mason Limited
Apex 3
95 Haymarket Terrace
Edinburgh, EH12 5HD
Scotland
UK
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
edinburgh@analysysmason.com
26
New Delhi
Analysys Mason India
Private Limited
BD – 4th Floor
Big Jo’s Tower
Netaji Subhash Place
Pitampura
New Delhi 110034
India
For general enquiries
enquiries@analysysmason.com
Tel: +91 11 4700 3100
Fax: +91 11 4700 3102
newdelhi@analysysmason.com
Madrid
Analysys Mason Limited
Sucursal en España
José Abascal 44 4°
28003 Madrid
Spain
Paris
Analysys Mason
66 avenue des Champs Elysées
75008 Paris
France
Tel: +34 91 399 5016
Fax: +34 91 451 8071
Tel: +33 (0)1 72 71 96 96
Fax: +33 (0)1 72 71 96 97
madrid@analysysmason.com
paris@analysysmason.com
Manchester
Analysys Mason Limited
5 Exchange Quay
Manchester, M5 3EF
UK
Singapore
Analysys Mason Pte Limited
#10-02 Robinson Centre
61 Robinson Road
Singapore 068893
Tel: +44 (0)845 600 5244
Fax: +44 (0)845 528 0760
Tel: +65 6493 6038
Fax: +65 6720 6038
manchester@analysysmason.com
singapore@analysysmason.com
Milan
Analysys Limited Italia
Via Durini 27
20122 Milan
Italy
Washington DC
Analysys Mason Limited
818 Connecticut Avenue NW
Suite 300
Washington DC 20006
USA
Tel: +39 02 76 31 88 34
Fax: +39 02 36 50 41 09
milan@analysysmason.com
Tel: (202) 331 3080
Fax: (202) 331 3083
washingtondc@analysysmason.com
27
www.analysysmason.com