Booming: Bangladesh, Cambodia, India, Indonesia, Laos, Pakistan, Sri Lanka and Vietnam were home to some 487 million mobile users, accounting for 37.1% of Asia-Pacific's total mobile subscriber base

The finding comes from a report by Frost & Sullivan covering eight nations: Bangladesh, Cambodia, India, Indonesia, Laos, Pakistan, Sri Lanka and Vietnam, all of which have mobile penetration rates of under 50 per cent.

According to Frost & Sullivan's industry analyst Jeff Teh, last year these emerging markets were home to some 487 million mobile users, accounting for 37.1 per cent of Asia-Pacific's total mobile subscriber base.

Mr Teh said Frost's research shows that the mobile services sector in these eight countries earned revenues of US$33.27 billion in 2007.

'This is forecasted to reach a market size of US$61.35 billion by end-2013, at a CAGR (compound annual growth rate) of 10.7 per cent (2007-2013),' he said.

Growing at a CAGR of 15.1 per cent (2007-2013), the mobile subscriber base is expected to hit 1.13 billion by end-2013 to account for 46 per cent of Asia-Pacific's total subscribers.

Mr Teh noted that these eight nations conform to the description of emerging markets. 'Emerging markets are defined as countries with low tele-density and Internet penetration, and a sizable population that are largely under-served or completely without telecommunication services.'

Most mature markets in Europe, the Americas and even Asia are fast reaching saturation, adding fewer connections and offering fewer growth opportunities, he pointed out.

'As mobile operators in Asia scramble to add another staggering one billion subscribers onto their networks, Asia's emerging nations offer the most palpable growth prospects, particularly in the rural sectors,' Mr Teh observes.

He added that such opportunities are, however, not without a gamble.

'The inherent characteristics across these emerging markets are that they are generally lower-income hence low ARPU (average revenue per user) segments, with blended ARPU as low as US$3.90 per month in some countries, and subscribers are largely inclined towards prepaid services.'

He noted that between 86-97 per cent of mobile users in these markets are prepaid subscribers.

'The challenge for mobile operators and foreign investors as such is to introduce new business models and flat-rate pricing plans to appeal to these price-sensitive consumers.'

Mr Teh added that much of the uptake for mobile services will be limited to basic services such as voice calls and text messaging in the near term.

'Apart from having to manage the typical regulatory issues and service affordability, operators face a further uphill task of extending network connectivity well into the rural districts while managing operational and capital expenditure in a cost-effective way to maintain healthy profit margins,' the analyst noted.

An upside for mobile operators, however, is that fixed-mobile substitution is a distinct phenomenon in these countries, given that it is more cost-effective to erect cellular towers than to lay fibre-optic cables to install landlines.

'Competition from fixed-line services therefore is almost non-existent,' Mr Teh observed. He, however, added that despite this, competition amongst mobile operators is rife.

'In most of the emerging nations, there are more than five active mobile service providers in any given market. Over time however, we expect market consolidation as mobile penetration rates increase and sustaining operations prove tricky for the smaller operators.'

To drive the adoption of mobile services among rural communities, some countries have rolled out initiatives such as village phones, transmission tower-sharing among operators, as well as linking communities with mobile services to facilitate access and payments.

Mr Teh believes that such innovation is necessary to achieve the connectivity vision, as wireless technologies will enable Internet access in these areas.

'One of the most compelling features of wireless networks in emerging markets is the ability to provide a faster and cheaper alternative to desktop computers for accessing the World Wide Web, especially considering the lack of fixed-line infrastructure and power sources.'

Mr Teh noted that some tariff plans such as getting paid to receive calls are risky, although revolutionary, and will only be possible when mobile advertising takes off in a big way.

'But for now it remains a game of managing risks for potential high returns.'   - 2008 September 1   BUSINESS TIMES

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Lessons U.S. Can Learn
From Asia's '3G' Experience
In heavily networked Japan and South Korea, young people don't think twice about using their mobile phones to create short movies, watch the Webcam inside their home or download pop songs from the Internet.

When Tomomi Suzuki returned to her hometown on vacation last summer, she wanted to give friends back in Tokyo a taste of what she was doing.

One night during a fireworks festival, she used her cellphone to make a 10-second video of the spectacle and e-mailed it directly to chums in the Japanese capital.

"I do this all the time," the 21-year-old nightclub hostess says.

In heavily networked Japan and South Korea, young people such as Ms. Suzuki don't think twice about using their mobile phones to create short movies, watch the Webcam inside their home or download pop songs from the Internet. In South Korea, people can even watch live, streamed television on their phones -- one operator offers eight channels -- and use their phones to make bank transactions or buy movie tickets.

That is a sharp contrast to the U.S. and Europe, where advanced mobile services driven by high-speed Internet connections only now are getting off the ground. "You typically see [phone] innovation in Asia first, and then it makes its way over to North America," says Perry LaForge, head of a Costa Mesa, Calif., telecommunications trade group called CDMA Development Group.

Consumers in the U.S. and Europe may never go wild for advanced "third generation," or 3G, phone technology like the mobile-phone aficionados in South Korea and Japan. Still, industry executives say lessons can be learned from those nations that could speed the adoption of 3G technology in the West.

Lesson No. 1: Phones need to be sleek and small. When Japan's NTT DoCoMo Inc. launched its 3G service in late 2001, its phones were big and unattractive. Most weighed 5.25 ounces and quickly ran out of power. Also, 3G network coverage initially was poor, with phones going dead in places such as train stations.

The 3G handsets out now in South Korea and Japan are generally no bigger than less-advanced phones and have comparable battery life. DoCoMo's new N900iS, a sleek-looking handset made by NEC Corp., weighs just about four ounces -- less than some non-3G cellphones. It allows users to talk continuously for 140 minutes.

Operators in Europe, including subsidiaries of Hutchison Whampoa Ltd., also deployed bulky phones early on, and paid the price. This year, Hutchison rolled out a slim model from Korea's LG Electronics Inc., and sales in Europe and Hong Kong have picked up.

Lesson No. 2: Target the youth market. In Asia, phone companies went after this group initially rather than business customers. Operators kept prices low and packed phones with entertainment features such as video cameras and MP3 players, which caught on quickly and brought 3G into the mainstream. In Japan, many young people upgraded to 3G because fees for data transfer -- basically, anything besides voice calls -- were cheaper than those for older cellphones.

In contrast, U.S. and European operators are trying to tap the business market first by focusing on services such as videoconferencing on 3G phones, something that hasn't proved particularly popular in Japan and South Korea.

Lesson No. 3: Teaming up produces results. Japanese and Korean mobile operators worked in close collaboration with local phone makers to devise innovative services. While some U.S. and European phone companies have relied on outside phone makers to come up with cool services, South Korean wireless operator SK Telecom Co. frequently shares technology with its phone suppliers, including LG and Korea's Samsung Electronics Co., says Wonhee Sull, a vice president with SK Telecom's platform research-and-development group. SK Telecom, Korea's largest mobile operator, says about one third of its 18.8 million subscribers have 3G service.

DoCoMo also shares technology with Japanese phone makers. That has resulted in eye-catching phones that sport megapixel cameras and screens that are touch-sensitive or swivel around. The Bluetooth wireless standard allows cellphone users to wear a wireless earpiece -- even when the handset is buried deep in a pants pocket or handbag. Japan's second-largest carrier, KDDI Corp., soon will begin using its 3G network to let users download full versions of pop songs to their phones.

Phone companies in the West, meanwhile, "have spent a lot of time deploying networks, but maybe not as much time deploying applications" that will entice people to buy expensive 3G phones, says Bart Vogel, the head of Asia-Pacific operations for Lucent Technologies Inc., a big provider of 3G networking gear.

Final lesson: Don't make companies bid for new parts of the wireless spectrum to offer 3G. This cost operators in Europe a lot of money. Japan and South Korea didn't hold auctions for 3G licenses, which meant Asian providers could spend money instead on research and development.

Asia's success with 3G is all the more intriguing because the technology still has a sketchy reputation in the West. It has lagged behind in the U.S. and Europe for a variety of reasons, industry executives say. Government policies supporting widespread Internet access and uniform technical standards have been stronger in Japan and South Korea, making it easier for operators to introduce new phone services. Many Japanese and Koreans spend hours a day riding subways to work or school, giving them -- unlike car-bound Americans -- plenty of time to play games or watch TV on their phones.

Still, the U.S. continues to venture into this technology, though for now, mainly for faster wireless access for laptops, not phones. Verizon Wireless now offers in 14 cities the same type of advanced technology popular in South Korea, called EV-DO. Sprint PCS plans to deploy EV-DO in laptops in a few markets this year and to launch the service in more than 35 U.S. cities in 2005.

Cingular Wireless hopes to introduce a different flavor of the technology, but likely not until 2006. When it completes its acquisition of AT&T Wireless Services Inc., it will inherit a nationwide wireless data network offering speeds slightly faster than a strong dial-up connection.

For now, Asia remains ahead of the curve with souped-up phones. In Japan, working parents use video-enabled phones from DoCoMo to look in on their children at day-care centers. Some can view bulky Microsoft Corp.'s Word documents and Excel spreadsheets on phone screens. SK Telecom works with 11 Korean banks to allow customers to check bank balances or withdraw cash by pointing their phones at ATM machines.

More than 21 million of Japan's 83 million mobile-phone users now have 3G models. Korea's No. 2 mobile carrier, KT Freetel Ltd., wonders why anyone even needs a computer anymore. A promotional video depicts a computer monitor half-buried in swirling sand, like an ancient relic. "Even if you left your computer on your desk, you would still be connected through your mobile phone," a narrator intones.    -    WALL ST JOURNAL    21 Oct 2004

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