As the economic crisis in Asia continues, residents there have been forced to find ways to budget their expenses-which could prove a limited boon to the region’s paging industry.
Paging traditionally has been a popular service in Asia, as is evident in the high paging penetration rate the region boasts. China News reported that Taiwan, for instance, enjoys a 22-percent paging penetration rate, much more than cellular service, which commands a mere 4 percent in the country. Only Singapore and South Korea have greater paging markets in the region, with 40 percent and 32 percent, respectively.
This comes as no surprise, since the average monthly paging service costs are one-fifth that of the average monthly cellular costs. It is exactly this cheap service, coupled with less-expensive devices, that may allow paging operators continued prosperity while mobile phone operators struggle with economic hardship.
Analysts said they believe it is possible that low-end cellular subscribers may attempt to cut their budgets by dropping cellular service in favor of the cheaper paging option.
“If you compare paging to the other wireless services, paging is already the cheapest. You may see some churn to paging because cellular may be getting too expensive,” said Mei Huang, director of International Wireless Consulting at The Strategis Group. “I think we are going to see some kind of a substitution effect, but not a lot of it.”
Huang readily admits this likely will be limited to customers with less-expensive service plans. “For low-end personal cellular users, you might see this kind of substitution.”
This budget-cutting maneuver also could affect corporate accounts. Huang said she already has heard of businesses in some of the harder-hit countries switching their work force from cellular service to paging to cut costs. Paging also may prove attractive to customers looking to become first-time wireless customers. “The new users facing the choice between paging and cellular are probably going to consider paging more because it’s cheaper,” she said.
Kari Roe, analyst for the Asian-Pacific region at International Technology Consultants, said the currency crisis in Asia could have several possible effects on the wireless industry there. “There is going to be more fallout and cellular will be labeled a luxury item,” she said. However, she added that it is still too early to know for certain how that would affect subscriber patterns.
She also said the financial turmoil may result in several pending spectrum auctions in various countries being canceled. Also, Asian governments affected by the currency devaluation may start cutting their budgets, and wireless communications could be a casualty.
Huang said she believed there will be fewer orders for infrastructure in the short-run, as governments and companies tighten their belts to deal with currency devaluation. “Most operators are going to cut back on network expansion,” she said.
Motorola Inc. reported sales and earnings for the fourth quarter that were below analysts’ expectations and Asia’s financial predicament was partially to blame. But infrastructure equipment provider Glenayre Technologies Inc. said its business has been minimally affected by the crisis so far, and said it does not anticipate cuts in paging infrastructure in Asia.
“If you have a budget, do you cut the thing with the cheapest deploy cost?” asked Mark Smalley, vice president of investor relations at Glenayre.
