Asia-Pacific telcos refocus for growth this year

After years of strong growth, the Asia-Pacific telecommunication industry has been going through an unsettled period in the last 12 months.

          After years of strong growth, the Asia-Pacific telecommunication industry has been going through an unsettled period in the last 12 months. Deregulation and increasing competition in the sector have forced telecommunication companies to focus on data and corporate business if they are to prosper in a potentially bumpy 2002, according to analysts and industry executives.

          The telecommunication services market in the Asia-Pacific region is expected to grow by 18.7% in 2002, to $US148 billion, almost twice the size of the region's IT market, according to figures from International Data Corporation (IDC) Asia-Pacific. The market will grow to be worth $US239 billion by 2005, IDC says.

          The recession and increased competition have brought plummeting margins in the voice business and lean demand in the consumer market. The top priority for most telecommunication carriers in the region is to prepare for a rebound in 2002 by offering bundled services that their customers are willing to pay for, analysts say.

          "As more bandwidth started to come online in the Asia-Pacific region, and the local economic situation worsened, telecommunication customers have grown more frugal,” says Lain McNeill, senior analyst at IDC Asia-Pacific. Regional and local telecommunication players, while maintaining large subscriber bases, now have to contend with shrinking margins, he says.

          As a result, Asian telecommunication carriers have started looking for new ways to turn a profit. The shift in focus to data communication and the beginning of the internet-protocol (IP) network have allowed operators to offer services such as enhanced second-generation (2.5G) and third-generation (3G), while integrating multiple services such as voice, video and data in a single network, according to Sung Sio Ma, former chairman and chief executive officer of Singapore Telecom International (STI).

          In the corporate data market, vendors will continue to push IP-VPNs (internet protocol -- Virtual Private Networks) offering cost reductions for connecting different corporate campuses and partners, and providing remote access for workers. Over the last 18 months telecommunication companies have also started bundling offerings such as fixed, wireless and internet services as a way to drive increased revenues and maintain profit levels. Integrating applications such as Unified Message Service will also become important, McNeill says.

          “All of the incumbent players are very active in the enterprise market already…(and) a tremendous share of their revenue is often driven by the enterprise market,” he says.

          “Corporate customers have always been number one because they are high-margin businesses,” says Andrew Chetham, telecommunication and internet senior analyst at Gartner. And in a tough economic climate, telecommunication companies are going to “target the market where there’s most fat,” he says.

          Even telecommunication infrastructure companies such as Level 3 Communications and Global Crossing, that were originally looking to service telecommunication carriers with high bandwidth capacity, are now looking to target enterprise markets directly because that’s where the profits lie, says McNeill.

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