Asian Incumbents Do It Tough: Ovum

According to Ovum’s new report, Asia-Pacific’s Telecoms Overview the average revenues for leading Asian telecoms incumbents fell for the first time in 2009. Besides difficult macroeconomic conditions, price declines and market saturation were responsible for the decline in top-line revenue of 0.8%.

“In 2009, macroeconomic factors had a significant impact on operator performance, making it a financially difficult year for telcos,” said Nicole McCormick, Senior Analyst, Ovum. “In addition, the rapid decline in fixed voice services and the slowdown in both broadband and mobile growth also affected results”.

Despite the decline in revenue, incumbents were able to slightly improve EBITDA margins through operational efficiency and cost-optimisation programs. “A greater focus was placed on these programs in 2009 when economic uncertainty was at its peak, resulting in average operational expenditure falling by 1%,” said McCormick.

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On the other hand, Ovum’s mobile revenue forecasts for Asia-Pacific, predict continued trying times ahead for cellular operators. Ovum expects mobile voice revenues in the region to peak in 2012, before declining to US$176.8 billion by end-2015 as voice continues to commoditise.

“The good news for mobile operators is that data revenues will continue to offset declining voice revenues during the forecast period,” says Nicole McCormick. But mobile revenue growth is predicted to increase by just 1.3% in 2015, compared with 2% growth in 2009.

“Overall voice/data revenues for mobile operators are tipped to increase from $267.1 billion in 2010 to $310.6 billion by 2015,” says McCormick. “By 2015, mobile connections in Asia-Pacific are predicted to top 3.84 billion, or 96% penetration.” However, McCormick warns that unless operators plan to save their way to success, new business models and drivers of growth are essential.

The most common areas being explored for future revenue growth are in adjacent industries such as international investments, IT services, entertainment (especially video), and methods to further monetise broadband access. However, Ovum believes these new initiatives will have a relatively minor impact on incumbents’ overall performance as existing services will continue to provide the bulk of revenue share for some time.