Underserved markets and segments present attractive investment opportunities

The mobile market in South East Asia is forecast to exhibit strong growth well into 2012, with annual growth rate dropping below 5% only in 2013.

Informa projects plenty of room for growth as the rural segment in many markets remain underserved across the region. Leading growth countries between 2010 and 2011 will be Indonesia, Philippines and the countries making up Indochia – Laos, Vietnam and Cambodia. In 2010, combined net additions of these markets will account for roughly 85% of the net additions for South East Asia, and the trend is expected to continue into 2011 and 2012.

Population penetration of mobile service in high growth markets is generally low. At end-2Q09, SIM card penetrations in Indonesia, Philippines, Cambodia and Laos were 59.17%, 80.57%, 30.36% and 27.14% respectively. Even though Vietnam’s penetration reached 96.48% at the end of 2Q09, this has, by and large, been a result of the phenomenal growth in the number of mobile subscriptions in the wake of extreme price competition over the course of the last six quarters. More recently, following the introduction of the new regulation to allow subscribers to legitimately hold three SIM cards with any one operator, it emerged that some 40 million registered users currently own three or more active and inactive SIM cards. This means that actual subscriber penetration is likely to be closer to half that of SIM card penetration, putting actual penetration under 50%.

Low mobile penetration in Indochina coupled with sustained economic growth has made Vietnam, Cambodia and increasingly Laos an attractive hub for new investments. Major operator groups such as Vimpelcom and Hutchison Whampoa have aggressively moved into the region. Vimpelcom has a 40% stake in Beeline’s owner, GTel Mobile, in Vietnam and a 90% shareholding in Sotelco in Cambodia, which also operates under the brand Beeline, while Hutchison has a newly launched GSM network in Vietnam. Local investors are also increasingly taking advantage of the opportunity in the mobile market in these countries and are applying for licenses to provide service.

The liberal attitude of regulators in the region has meant that many have also been granted permission to either operate a mobile network using a local partner’s license or operate as a service provider in partnership with local physical networks. In Cambodia, the number of mobile networks has risen to nine, more than double the count at the beginning of 2008. Meanwhile, in Vietnam, on top of the launch of Vimpelcom’s network “Beeline” in 2Q09, local multimedia company, VTC, and a start-up service provider, Indochina Telecom, have also been allowed to operate as MVNO.

The issue of new 3G licenses in the region also likely to create further opportunities in the mobile data market. In Vietnam, four new 3G licenses were issued to Viettel and Mobifone and jointly to Vinaphone and GTel Mobile and to Hutchison and EVN Telecom. In Thailand, it is expected that four licenses will be awarded by 1H10 with one license reserved for a greenfield operation. Mobile data services will benefit from limited coverage of the existing fixed broadband infrastructure and the high costs associated with expansion. In 2Q09, fixed broadband household penetration was under 15% in Vietnam, and in Thailand this was only approximately 10%.