Underserved areas to drive Asia's telecom growth

The booming economies of China and India, plus a few more developing countries, are fueling the red-hot demand for telecommunication services in the Asia-Pacific region.

New analysis from consulting firm Frost & Sullivan revealed that the Asia-Pacific telecommunication services market -- covering 12 major economies excluding Japan -- earned revenues of $181.4 billion in 2006, and is estimated to reach $298.2 billion by end-2012.

Mobile services accounted for the bulk of telecom revenues in 2006 at 61.3%, while fixed, Internet, and data communications services accounted for 25.4, 8.9, and 4.4%, respectively, the report said.

Fixed telephony subscribers in Asia-Pacific totaled 402.2 million in 2006, and is forecast to grow at a compound annual growth rate (CAGR) of 2.7% from 2006 to 2012, driven mainly by the subscriber growth in China and India, the study added.

'While the number of fixed-line subscribers are already on a steady decline in most Asia-Pacific countries, markets such as China, India, Indonesia, and Thailand, which have large populations and low household penetration rates, continue to experience growing subscriptions,' said analyst Karpagam Palaniappan in a statement.

Asia-Pacific has remained one of the few surviving high-growth mobile markets at a time when the cellular industry is fast approaching saturation globally, the report stressed. In 2006, the cellular subscriber base was 819.5 million and is forecast to reach 1.68 billion by end-2012, at a CAGR of 10.8% (2006-2012). The region's robust growth is fueled by China, India, and Indonesia.

It noted, however, that mobile operators in China, India, and emerging markets such as Indonesia and the Philippines are now moving into the untapped rural areas to take advantage of the low penetration rates and sustain growth.

The report said the telecom industry in Asia-Pacific is challenged by deregulation, economic conditions, inadequate awareness of emerging technologies, low household penetration levels, and service quality issues. 'This negatively impacts both consumers and service providers,' it said.

'A case in point is the huge success of IP telephony globally and its relatively low impact in Asia-Pacific due to regulatory uncertainty, lack of bandwidth, interconnection, and quality of service issues,' said Palaniappan.

'Similarly, technologies such as 3G, WiMAX and FTTx (fiber-to-the-exchange), which are rapidly gaining popularity worldwide, are only just emerging in Asia.'

Intense competition and market consolidation coupled with innovations and investments in emerging technologies, as well as improving the quality of customer service, are likely to be the key factors shaping the growth of the telecom industry, the report added.