Infrastructure development in the Asian telecommunications market

Strong growth in the Asian telecommunications market has seen a correspondingly strong development of infrastructure. Research and Markets have conducted an in-depth examination of the telecoms infrastructure in each of the region’s economies.

Governments have long realised – some earlier than others – that private sector investment needed to be encouraged if demand for investment capital in the telecoms sector was to be met. This strategy could not rely on local investment alone, meaning that a substantial level of foreign investment would be required. Although this is a widely acknowledged reality, many governments have resisted opening the telecoms sector to foreign investors and as a consequence the level of encouragement has been variable.

The changing nature of the telecom market has also had a major impact on the approach to investment in infrastructure. With shifting revenue patterns across the market segments and falling ARPUs on many services, operators have been more selective about what they actually invest in. Telecom operators throughout Asia have been increasing investment levels on the back of carefully considered investment strategies. This has seen companies shifting business focus, looking for new ways to add value to existing revenue streams; it has also seen a strong desire to leverage new value from infrastructure that is already in place.

Over a number of decades the economies of Asia have progressively built substantial fixed-line national networks followed by national mobile networks. In many of the developing nations of the region, the building of fixed-line infrastructure was not far advanced before it was overwhelmed by the introduction of mobile infrastructure. This has created the phenomenon of substitution in many of the markets of Asia (where mobile services perform the function of the non-existent fixed services.) Nevertheless, despite the unevenness in disposition, fixed infrastructure remains an important component in the overall development of the regions telecom sector. By June 2009, Asia had infrastructure in place supporting a total of more than 2.4 billion telephone subscribers; of these, around 570 million were fixed-line subscribers, the remainder of course being mobile subscribers.

More recently the focus of infrastructure building has shifted to the upgrading of domestic telecoms networks to Next Generation Networks (NGNs). This process is seeing large scale investment by Asia's leading telecoms markets in new-generation IP-based telecommunications networks. Those countries that have government backing for NGN roll-out are the ones that are setting the pace. Even some of the lesser-developed markets are pushing hard on this front.

In addition to the national networks, international connectivity remains central to the overall effectiveness of the regions telecommunications services. Submarine cable routes criss-cross the Asia Pacific area, providing both intra-regional and inter-regional networks. This sector of the market has been characterised by fluctuating supply and demand, which in turn has seen somewhat erratic investment strategies. Over-supply of capacity has been a phenomenon in the market. More recently it has been recognised that investments need to be more focused on growth and less speculative.

Starting in 2007 and continuing on into 2009, a series of new submarine cable projects were being proposed and installed throughout the region, mainly trans-Pacific networks aimed at a particular predicted shortfall in capacity between Asia and the US as Asia's broadband usage started to rapidly increase. However, it was not certain that all these projects would come to fruition, as their respective business cases underwent close scrutiny. The impact of the 2008/09 global financial crisis also needed to be assessed by prospective investors.

As the demand for wholesale services has continued to rise in Asia, still driven in the short term by voice services, but in the longer term by data services, there has been a boom in IP-based services, with the volume of international Voice over Internet Protocol (VoIP) traffic into and out of Asia increasing at a rapid rate at the expense of the traditional International Direct Dial (IDD) traffic. In the short term this has distorted the demand for bandwidth. However, in the longer term, this will inevitably lead to demand for more optical fibre networks to support the necessary increased bandwidth.

Key developments in infrastructure 2008 – 2009:

Asia had networks and infrastructure supporting a total of more than 2.4 billion telephone subscribers by June 2009; of these, an estimated 570 million were fixed-line subscribers and just under 1.9 billion were mobile subscribers;

Asia's developed markets were starting to move quickly into building their NGNs, with IP shaping as the primary delivery platform for telecom services across the region;

After annual growth of close to 30% in the regions mobile market in 2008, by mid-2009 growth was still up around 20%, despite the general economic uncertainty prevailing in the region;

Most significantly, there was considerable pressure on operators to expand infrastructure to support their growing subscriber bases and usage levels;

The roll-out of 3G networks in particular saw 3G commercial networks operating in 17 countries across the region by June 2009 for around 170 million 3G subscribers by that stage.

It is estimated that Asia needs to invest at least US$1 trillion in new infrastructure over the next ten years to meet projected demand;

Asia's submarine cable market has witnessed a new round of investor interest as the previous over-supply problem seems to have dissipated; increasing demand for bandwidth is putting new pressure on capacity;

With a number of serious system outages fresh in the minds of operators, redundancy also become a critical issue for submarine cable systems in the Asia-Pacific region and beyond; this has provided an additional incentive for investment in this form of infrastructure;

The region continued to see new satellite launches in 2008/09 and more launches were scheduled in 2009/10; this market segment appeared to have adopted a more balanced approach to growth.

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