Zen and the art of 3G: winning the mobile race

19 Dec 2003

According to PriMetrica’s ‘Yearbook of Asia-Pacific Telecommunications 2004’, the coming year will be pivotal in the development of third-generation (3G) mobile services. With no fewer than six operational networks already in place – NTT DoCoMo (Japan, W-CDMA launched October 2001), SK Telecom (South Korea, cdma2000 1xEV-DO, January 2002), Vodafone KK (Japan, W-CDMA, December 2002), 3 (Australia, W-CDMA, April 2003), KTF Corp (South Korea, cdma2000 1xEV-DO, May 2003) and KDDI (Japan, cdma2000 1xEV-DO, November 2003) – the region looks best placed to adopt 3G services quickly and on a widespread basis, while users, already turned on to the perceived benefits of advanced data communications services, are seemingly willing to pay more for them. Studies conducted in major Asian markets show that up to a quarter of all cellular phone users are using, or plan to use 2.5G or 3G, and that half of these are willing to pay a dividend of around 20% on their current bill to enjoy extra facilities such as MMS, emails, location-based products and directory services. Meanwhile industry estimates predict that the Asia-Pacific will generate annual advanced mobile data revenues of USD19 million by as early as 2005 and account for 40% of the world total, while more than 600 million mobile data subscribers will have signed up for services in the region by 2010. Moreover, according to the UMTS Forum, at that date annual 3G turnover in the region will top USD118 billion, with ‘customised infotainment’ accounting for 36% of the total, ahead of simple voice (28%), mobile access to the internet and corporate networks (14%) and MMS (13%).

Given such promising projections it is not surprising that a plethora of operators are lining up to introduce commercial 3G services in 2004, including StarHub and MobileOne in Singapore, Hutchison Whampoa-backed 3 and Sunday in Hong Kong and, again, SK Telecom and KTF Corp, which plan to augment their CDMA networks with the rollout of European variant – W-CDMA. To fulfil the latent demand, 3G infrastructure deals are definitely on the increase, with Asia showing strongly in the list of contract awards for base stations in the first ten months of 2003. Total UMTS base station deployments are estimated to reach over 35,000 units by the end of 2003, beating earlier predictions of 32,000, as the industry claws its way back from the precipice that followed the downturn of 2000. Over a third of all contracts awarded in the period under review went to operators in Asia, of which 46% were allotted for 2.5G network equipment and a further 13% for 3G infrastructure.

Asia has bucked the global trend of declining fixed lines and slowing mobile growth in recent years. The total number of fixed lines stood at over 440 million by the end of 2002, while mobile subscribers reached close to 450 million. Nine months on and the latter had grown to over 506 million and by 2007 is predicted to reach 775 million – an annual growth rate of around 12% – with much of the additions coming from nascent markets such as India and China. The former claimed over 18.3 million mobile subscribers at the end of September 2003, more than double the 8.5 million recorded at the same time in 2002, however, cellular penetration stands at a mere 1.74% providing ample room for growth. Similarly in China, only 19.1% of the population own a mobile phone, even though there were over 250 million mobile subscribers by the start of October 2003; by the end of the month that figure had eclipsed the number of fixed lines in service for the first time and there is no looking back.

However, growth will not come purely from under-developed markets. The experience of Japan shows that 2G has been stopped in its tracks as consumers turn their focus to newer technologies. According to figures released in November 2003 by Japan’s Telecommunications Carriers Association (TCA), demand for 2.5G and 3G services has all but killed growth in the 2G market. The figures show that KDDI’s au Group added 457,900 new customers to its CDMA2000 1x network during October to take its total to 10.66 million, while NTT DoCoMo and Vodafone netted 334,000 and 5,000 new users respectively for their W-CDMA services, taking their network totals to 1.38 million and 88,600. Bar one exception, all the 2G players reported a decrease in customers, with au taking the hardest hit, losing 272,000 cdmaOne customers, closely followed by NTT DoCoMo, which saw a 188,000 drop in its PDC customer base.

PriMetrica’s Yearbook of Asia-Pacific Telecommunications 2004