NEW ANALYSIS FROM GSMA INTELLIGENCE:
Asia driving global mobile growth
Mobile operator revenue generated in Asia will cross the $500 billion mark this year, making it the most valuable and fastest-growing regional mobile market in the world. Local operators generated $478 billion in revenue in 2012, an increase of 10.4% year-on-year. This means that today Asia contributes 42% of global mobile revenue – equivalent in size to the North American and European mobile markets combined.
Last year, Asia was the only global region to post double digit annual revenue growth, accounting for almost two-thirds of global growth and underscoring the importance of the region in driving the global mobile market forwards.
Within Asia, mobile revenue growth continues to outpace GDP growth, (which grew by 6.2% in 2012 – aggregate IMF data), highlighting the fact that spending on mobile telecoms is continuing to increase as a proportion of total consumer and enterprise income.
The top four markets in the region combined (China, Japan, India and South Korea) account for 66% of Asia’s population, 60% of Asia’s mobile connections and over 70% of regional mobile income. The region’s mobile financial trends are heavily influenced by factors within these four markets; and, for example, have been boosted by Japan’s recent return to economic growth. The remaining 48 countries in the region are home to 1.5 billion people and account for 40% of connections but only 29% of regional mobile revenue, underlying the vast differences in ARPU levels across the region.
Total mobile revenue and growth by region, 2012 Source: GSMA Intelligence
Regional trends shaped by prepaid and multiple SIM ownership
Mobile revenue trends in Asia are largely influenced by the prepaid segment, which accounts for 80% of total connections in the region. As highlighted in our previous research (Global mobile penetration – subscribers vs. connections), cost-conscious prepaid consumers are key contributors to multiple-SIM adoption , which has a direct impact on ARPU trends. Cost-conscious consumers accumulate prepaid SIM cards depending on the latest voice and data tariffs and promotions, but only use them for a short period of time. Our research found that consumers in Asia use 1.88 SIM cards on average each in Q4 2012.
As we have previously noted (Traditional ARPU distorting consumer mobile spending trends), multiple SIM ownership serves to depress ARPU on a per-connection basis, which in Asia stood at just over US$9 at the end of 2012. By contrast, comparable ARPU on an individual subscriber basis was just under US$20, equivalent to 60% of European ARPU and 43% of ARPU in the Americas.
Multiple SIM ownership appears to be on the increase in some key Asian countries. According to the Chinese regulator (MIIT), local mobile subscriber growth in 2012 was driven by more rural demand in Central and Western China, while growth in the more urban areas in Eastern China slowed year-on-year. Market leader China Mobile highlighted in its Q1 2013 report that “as the number of low usage customers increased, the scenario of ‘one customer with multiple SIM cards’ became more and more popular and the Group had continued to steadily promote tariff adjustment, [and as a result] ARPU continued to decline during the relevant reporting period.”
Monthly ARPU by connection and subscriber and SIMs per subscriber, 2012 Source: GSMA Intelligence
The success of mobile broadband data devices such as dongles, tablets and routers is also feeding the increase in multiple-SIM ownership. According to Ericsson, Hong Kong has the highest level of smartphone and tablet users worldwide with 34% of web users owning a tablet, followed by 31% in Singapore. In China, third-placed China Telecom enhanced its portfolio of mobile data devices and its pricing, which led to an impressive 47% increase in mobile data revenues during 2012 with the company noting that its mobile data business “is becoming our key revenue driver”.
Regional successes … but challenges ahead
China remains the principal driver of growth within Asia. Mobile revenue in the world’s largest single mobile market was up 18.2% in 2012 to $160 billion, accounting for a third of the entire region’s revenue. In Japan, the second-largest Asian market, revenue increased by 8.4% during 2012 to $113 billion, to leave it with a 23.7% share of regional revenues. Whilst Chinese operators have been busy migrating users to 3G services and trialling LTE, Japanese operators are already converting 4G LTE adoption into revenue growth.
Subscriptions to NTT Docomo’s ‘Xi’ LTE service topped 12 million during April, with uptake during the preceding year srogn enough for the operator to revise both its full year and 2015 subscriber targets (the latter rising from 30 to 41 million). This growth underpinned a rise in data revenue, which grew 6% during 2012, as well as smartphone sales, which increased by 51%, and resulted in an 87% increase in the operator’s smartphone user base. Docomo’s own surveys show that migration from a feature phone to a smartphone results in an average data usage increase of approximately 11-fold, and an ARPU uplift of approximately $20.
Mobile connections growth in Asia is slowing, falling from a 15% (CAGR) in Q4 2011 to 8% in Q4 2012 and 6.5% in Q1 2013. Regional mobile operators point to more challenging times ahead.
In Q1 2013, China Mobile highlighted that it was facing “various difficulties and challenges arising from the increasing mobile penetration rate, unprecedentedly intense market competition and the more apparent substitution of traditional communication business by new technologies and new businesses”.
There are similar warnings in Japan. NTT Docomo’s President and CEO Kaoru Kato echoed China Mobile’s concerns by claiming last March that “with respect to our core mobile phone business […] the circumstances remain severe with churn rate deteriorating due to larger-than-expected MNP outflows”. Strong competition within the Japanese market continues to drive ARPUs downwards, with Docomo citing “significant negative impact from the “Monthly Support” discounts” that it offers, while “the impact from the growing adoption of free voice applications (VoIP) is beginning to appear in the form of a reduction in billable MOU”.