Monday, December 9, 2013

As data traffic surges, Malaysian telcos opt to watch costs instead of improving service

Malaysian Insider, 10 December 2013

Mobile operators are looking to reduce their cost structure rather than improve services as network congestion occurs due to Malaysia’s high mobile data demand, said Frost & Sullivan in a report yesterday.

The report by the global consulting firm revealed that demand for internet access surged with 3G subscriptions surpassing 14.5 million in 2012, charting an annual growth of 41%. Subscriptions for 2013 are expected to reach 18.4 million by the end of this month.

“However, the increased data demand and spikes in geographies are leading to network congestion/outage,” said the report.

“To cope with increasing diverging cost and revenue market realities due to surging data traffic, service providers are focusing predominately at reducing cost structure rather than top line improvements,” it added.

Malaysia’s mobile penetration rate reached 146% in the third quarter of 2013, with 3G subscriptions amounting to more than 17.4 million of the total of 43.6 million mobile subscriptions. In 2012, there were only 14.5 million 3G subscriptions out of 41.3 million subscriptions.

Mobile operators are dealing with the surge by sharing facilities, thus cutting operational costs to handle the massive flow of data.

“For example, take Maxis and REDtone’s arrangement to share its 4G (LTE) infrastructure. Infrastructure sharing allows defrayment of cost, risk sharing… enabling parties to meet regulatory obligations with reduced financial burden,” said Ajay Sunder, senior director of telecoms, Frost & Sullivan Asia Pacific.

However, Sunder noted the current mechanism employed by operators is not sustainable when they are forced to consider “lowering the overall cost of network and maintain a scalable network”.

Judging by the rapid growth of mobile subscriptions that is expected to hit 50 million in two years, operators would expect an annual growth rate of 6% even as the market reaches saturation.

The increase is attributed to the current trend of consumers owning a second device, be it a smartphone or a tablet. Another factor is the government’s Youth Communication Package (YCP), a plan that offers a RM200 rebate to those aged 21-30 with a monthly income of RM3,000 and below.

The increasing demand for smart devices in Malaysia saw shipments shoot up to 49.6% out of the total mobile phone shipments made in the first half of 2013, according to International Data Corporation (IDC) Asia/Pacific Quarterly Phone Tracker. The jump was only 31.8% for the same period last year.

IDC credited the increase to vendors bringing in low-cost smartphones that encouraged sales to grow.

“The rebates brought about a surge in shipments of low-cost smartphones during the first half of 2013 as vendors launched more than 25 new sub-RM600 models in Malaysia,” said Ryan Lai of IDC Asia/Pacific in an article by Digital News Asia. 

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