Asian Markets Boost Cell Phone Sales

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Some 573 million mobile phone subscribers are expected to join from Asia's emerging markets by the end of 2012, according to analysts at Frost & Sullivan.

The number of subscribers in Bangladesh, Cambodia, India, Indonesia, Laos, Pakistan, Sri Lanka and Vietnam, will then breach the one billion mark to close that year at an estimated 1.06 billion subscribers. This is according to Frost & Sullivan's study Asia Pacific's Final Wireless Growth Frontier.

In 2007, these emerging markets were home to some 487 million mobile users, accounting for 37.1 percent of Asia-Pacific's total mobile subscriber base.

The report indicated that the mobile services sector in eight countries earned revenues of US$33.27 billion in the same year. With a compound annual growth rate of 10.7 per cent, the market size could grow to US$61.35 billion by end-2013.

According to Frost & Sullivan industry analyst Jeff Teh, more than half of the world's mobile networks are believed to exist in emerging markets. "Most mature markets in Europe, the Americas and even Asia are fast reaching saturation, adding fewer connections and offering fewer growth opportunities.

Asia's rural sectors

"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," said Teh.

However, the flip side of the coin is that "the inherent characteristics across these emerging markets are that they are generally lower-income, hence low average revenue per user (ARPU) segments, with blended ARPU as low as US$3.90 per month in some countries", warned Teh.

Also, these subscribers are largely inclined towards prepaid services, with 86 to 97 per cent of the mobile users in these markets being prepaid, he added.

The challenge for mobile operators and foreign investors is to introduce new business models and flat-rate pricing plans to appeal to these price-sensitive consumers. "Much of the uptake for mobile services will be limited to basic services such as voice calls and text messaging in the near term," Teh said.

"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," Teh added.

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 fiber-optic cables to install landlines.

"Competition from fixed-line services therefore is almost non-existent,"

Teh said, adding 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," observed Teh. "Over time however, we expect market consolidation as mobile penetration rates increase and sustaining operations prove tricky for the smaller operators."

Buy more phones

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.

Teh believed 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.

"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," he said. "But for now it remains a game of managing risks for potential high returns."

This story, "Asian Markets Boost Cell Phone Sales" was originally published by CIO.

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