MANILA, The Philippines-Experts expect the cellular industry in the Asia-Pacific region to generally fare better this year than last year. While the telecom industries in Europe and the United States are expected to face difficult years, with markets already overcrowded and requiring consolidation, many Asia-Pacific companies are generating free cash flow, and some are even starting to pay dividends, according to brokerage house Credit Lyonnais Securities Asia (CLSA).
The company predicts Asia Pacific’s mobile-phone industry will by and large remain healthy in terms of financial performance and subscriber growth. Malaysia has a mobile penetration rate of 40 percent, followed by Thailand at 28 percent, the Philippines at 17 percent, China with 16 percent, Indonesia with 5 percent and India at 1 percent, according to CLSA.
CLSA added that aside from generating free cash flow, Asian telecom companies, including mobile operators, are also embarking on share-buyback schemes and are beginning to pay dividends.
U.S.-based research firm Pyramid Research agrees to an optimistic forecast, predicting that by 2006, Asia Pacific will represent 45 percent of the world’s mobile subscribers, and this year 433 million handsets will be sold, of which nearly 35 percent will be attributed to China alone.
With solid mobile subscriber growth in Asia, short message service (SMS) will continue to gain momentum, while multimedia messaging service (MMS) will be nurtured as a main driver of revenue. China is expected to pump in more than 17 billion text messages this year with revenues to reach more than US$700 million, according to CLSA.
By the same token, the Philippines, considered the text capital of the world, will churn at least 18 billion messages, generating more than US$500 million in SMS revenues this year.
Moreover, the rising popularity of mobile banking, m-commerce and customer service applications will further bolster SMS traffic in the region, said Emilio Neri, analyst at Manila-based brokerage house Abacus Securities.
“The volume of global SMS traffic will continue to grow at a faster rate as new and more creative uses for text messaging are found, and as new information services emerge,” said Neri.
Analysts see that MMS will build on the phenomenal success of SMS in the region. However, unlike the U.S. and European markets, the Asia-Pacific mobile market can be described as uneven, with one country’s technology and economic development different from another.
Thus, the adoption of new technologies and services such as MMS will take place at different times and at different speeds, according to a recent statement from U.K.-based research firm Ovum.
Ovum noted that Japan and South Korea will still be ahead of the rest in the region, as they were the first countries in the world to introduce mobile picture and video messaging services. The dramatic growth of SMS in countries, such as the Philippines, Malaysia, China, Taiwan, Hong Kong and Singapore, will spur higher adoption of MMS this year.
“MMS is still in its nascent stage but the consumers’ familiarity with SMS will make it easy for mobile operators and providers to introduce this new technology,” said Neri.
Gartner Dataquest said Asian SMS traffic will peak around 2003 before been overtaken by multimedia messaging traffic. MMS revenue will double from the current US$13.4 billion to around US$22.3 billion by 2006. Other analysts are even more bullish; Ovum said that by 2007, the Asian MMS market will be worth around US$70 billion.
However, Cesar Tolentino, economist at the Manila-based University of Asia and the Pacific, predicts MMS uptake will be slower than expected, as certain obstacles have to be overcome for the technology to rise substantially.
Pricing is a chief catalyst for MMS to be as successful and explosive as SMS. This factor holds true particularly for Filipino and Chinese consumers, who are deemed among the world’s most price sensitive, said Tolentino. The cost of MMS-enabled handsets is still beyond the reach of most consumers. The prospects of MMS in the Philippines would depend on the availability and affordability of handsets in the local market.
“Operators must establish a pricing model that will make consumers less uneasy to try out new and perhaps better technologies,” he said.
Edgardo Bautista, head of the business and product development division of Philippine operator Smart Communications, said the uptake of MMS technology in the Philippines and other less-affluent countries in the Asia-Pacific region, including Malaysia and China, will be slow.
He did not cite specific figures on the rate of MMS adoption, but noted that as a basic indicator, last year about 10,000 MMS handsets were sold in the Philippines.
“The cost of MMS-enabled handsets is still beyond the reach of most consumers. I think its more developed neighboring countries have higher units but not enough to reach critical mass yet,” he said.
Bautista added that countries such as Japan, South Korea, Hong Kong, Taiwan and Singapore will be at the forefront of MMS, as operators in these countries have announced definite plans for MMS-based services. Smart is currently working with developers to come up with more MMS applications.
Moreover, he expects that entertainment applications will continue to dominate the wireless space and will be more popular as the country moves toward MMS. “The youth market of most countries in the region will jumpstart the adoption of MMS since they are the first ones that try new technologies,” Bautista said.
Economist Tolentino agrees that future MMS success lies with the youth. “They will use this in the beginning for fun, such as taking and sending pictures of friends. That was how SMS started before it took off,” Tolentino noted.
For the coming years, operators will intensify their marketing efforts to create more awareness among targeted consumers about MMS. “They will spend a lot of money to educate the public about the new technology,” said Suzi Facundo, president of Fluxion, a Manila-based startup company that offers MMS value-added services.
For MMS to gain mass-market appeal, operators should also ensure interoperability of phones, Tolentino added. “SMS achieved its rapid growth only after operators agreed to allow messages to be sent and received between any network,” said Tolentino.
Unless operators resolve this issue, MMS will suffer the same fate as the Wireless Application Protocol (WAP). GW
