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Asia Pacific Mobile Operator Services Profitability 2010
Frost & Sullivan, Oct 2010
The study documents and examines mobile services profitability margins, drivers and restraints over the years 2005-2009, using data from 32 operators from 10 countries including the US, and in Asia, Japan, South Korea, Malaysia, Thailand, Philippines, Indonesia, China, Australia, Bangladesh and Taiwan. Benchmarks and trends are provided for service revenues and operating expenses and the derived profitability metrics operating income, operating income before depreciation and amortisation, operating income before depreciation and amortisation less Capex. Cross-country data is analysed at a market level to facilitate international comparison. Operator data is compared at lead operator versus average country level.
Research Overview
This Frost & Sullivan research service titled Asia Pacific Mobile Operator Services Profitability 2010 documents and analyzes mobile services profitability margins and their drivers for the mobile markets in the Asia Pacific against regional and country benchmarks. It also documents the trends and develops insights based on profitability metrics for the industry, countries, and operators from 2005 to 2009. The study delivers a consistent time series for various revenues, expenses, and profitability metrics to aid operators in benchmarking and decision-making process. In this research, Frost & Sullivan's expert analysts examine and compare the revenue and cost components of profitability between countries and against those of respective market leaders.
Market Overview
Mobile Industry Characterized by Episodes of Technology-led Disruption
The mobile industry has been characterized by technology-led disruptions such as the transition from analogue to digital and 2G to 3G. The rising importance of data services for growth and build out of fast data networks, discussion of new models for business and value capture, and the entry of new players with potentially disruptive and disintermediating services into the industry value chain represent another disruption. Leading operators appear to take this into account by combining cash flow and capex metrics. Monitoring of cash flow and capex requirements reduces the risk of shortfalls in investment capabilities and permits greater strategic flexibility during technology-led disruptions.
Profit Growth Still Revenue-led
In the majority of markets, the bulk of the operating income before depreciation and amortization (OIBDA) growth comes from revenues rather than expense management. “Voice is still important to revenue growth in Asia Pacific’s developing markets,” says the analyst of this research. “Connections, usage growth potential, and management of voice revenue growth or decline remain an important part of profitability management in all markets.”
Faster Data Networks Enable Revenue Growth
In mature markets such as Australia and the United States that invested early in higher-speed networks, data accounts for an average of 80 and 55 percent of the revenue growth, respectively. Japan and South Korea, with early investments in ‘thinner data’ networks, have shown lower data growth and contributions. Developing markets, where SMS accounts for most of the data, have seen high variance in data’s contributions to growth. “Data revenue growth rates are higher in markets that invested early in fast networks, with the United States showing close to a five-fold increase in revenues and Australia exhibiting more than 200 percent growth,” notes the analyst. “The percentage contribution of non-messaging data is high in these markets.”
Service Costs Increase Noticeably but are Manageable so Far
In leading markets, investments in faster data networks have compressed service margins due to rising capex, depreciation and amortization (D&A), network and selling general & administration (SG&A) charges. However, revenue growth has offset most of these issues and widened services margins. Higher traffic and traffic-driven costs appear manageable to date but realization of the most challenging scenarios such as the migration of fixed broadband usage to mobile cannot be completely discounted. The management of non-service equipment costs, subsidy and commission levels is also important for overall operator margins, particularly in the early phase of the device adoption cycle.
Pricing, new services, and management of investments in data networks to meet customer requirements, are key pivots for market leadership in the next cycle.
Technologies
The following technologies are covered in this research:
- Global system for mobile communications (GSM)/ General packet radio service (GPRS)/ Enhanced data-rates for global evolution (EDGE)
- Universal mobile telecommunications system (UMTS)/ High-speed parallel adder (HSPA)/Long-term evolution (LTE)
- Cellular
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