South East Asia's smartphone explosion
Smartphone ownership is exploding across Southeast Asia, so what does this mean for the region's telecommunications industry?
Smartphone ownership and usage has well and truly boomed across Southeast Asia and is showing no signs of slowing down. For many people across the region, their smartphone is their primary means of accessing the internet.
Back in 2011, global market research firm Nielsen released survey data which showed that almost half of online consumers in Southeast Asia who did not own a smartphone said they planned to buy one over the next 12 months.
It seems they have been true to their word, with sales of smartphones across the region having exploded and the developed markets of Singapore and Malaysia coming close to saturation point in terms of the number of people who own one.
In the less developed nations the growing affordability of smartphone handsets is propelling take-up, and since penetration in markets like Indonesia, Thailand and the Philippines is nowhere near saturation level, there is space for huge future growth.
So what does this mean for the telecommunications industry in Southeast Asia? Can it keep up with the soaring demand? And how will it make sure that consumers in developed markets are getting the services and the performance they want and need.
Data released last month by market research group GfK showed that sales of smartphones in Southeast Asia reached 18 million in the first quarter of 2014, which represents growth of 43 per cent on the same period last year. Overall, 55 per cent of phones in the region are smartphones.
However, technological advancement varies greatly across Southeast Asia. For example, Singapore and Malaysia are highly advanced, and in terms of smartphones these markets are almost saturated. Figures released last year by Nielsen showed that smartphone penetration had reached 87 per cent in Singapore and 80 per cent in Malaysia.
This means that more people in these two Southeast Asian countries own smartphones than in many developed Western nations. In the UK penetration was 72 per cent, in France it was 64 per cent and in the US is was 60 per cent. Of course, the figures may be even higher now.
On the other hand, Indonesia, Thailand, the Philippines, Cambodia and Vietnam are still very much developing. In these countries, smartphone ownership is still very low, and this is where much of the recent sales growth is coming from. GfK's figures show that Indonesia, Vietnam and Thailand were the top three markets according to sales volumes in Q1.
And the growth looks set to continue. A recent report by communications technology provider Ericsson shows that smartphone subscriptions across Southeast Asia and Oceania are expected to grow fivefold over the next five years
What is driving smartphone take-up?
According to the June 2014 Mobility Report from Ericsson, there are a number of factors driving the take-up of smartphones across Southeast Asia, and they vary from country to country.
As mentioned, in the less developed markets growth is coming from improved affordability, with more and more consumers now able to get their hands on earlier handsets for a fraction of the price of the latest devices. They may not have the same functionality as the newer handsets, but they are substantially more sophisticated than basic mobile phones.
Some smartphone manufacturers have actually responded to the desire for smartphones in developing countries and have introduced their own budget models to meet demand. They are also offering affordable data packages to match.
High rates of adoption among a tech-savvy youth keen to get their hands on the latest devices, as well as the latest apps and services, are also propelling growth in the smartphone market across the region, particularly in Singapore and Malaysia. In addition, multiple handset ownership is playing a major role in these two markets where penetration, as we've seen, is almost at saturation point.
And finally, there are the efforts being made by mobile operators to expand and improve wireless networks, most notably 4G/LTE networks, which provide much faster data speeds than the previous generation 3G/UMTS networks are able to.
The potential challenges for the telecoms industry
Smartphones are the primary device for internet access across Southeast Asia, and with more and more consumers upgrading their basic mobile handsets to these internet-enabled devices, mobile data traffic is booming.
And it's not just people browsing the internet. The region's consumers are using their smartphones to engage with social media, stream high quality video, download and run bandwidth-hungry apps and play online games, and they're doing so 24 hours a day.
The Ericsson report predicts that by 2019 mobile data traffic in the Southeast Asia and Oceania region will have increased tenfold on current levels, which means traffic will grow twice as fast as mobile subscriptions.
"This means there is a need to create high performing networks to keep up with more complex user demands and support increasing mobile data consumption," said Arun Bansal, the company's head of Southeast Asia and Oceania.
Another challenge, which is particularly pressing in those markets that have reached saturation point in terms of smartphone ownership, is how to engage consumers and maintain revenue growth in a world where phones are used less for voice calls and more and more for apps and web access.
According to Digital News Asia, the International Data Corporation (IDC) has predicted in its latest Mobile Service Tracker that, in Malaysia at least, mobile data revenue will surpass revenue from voice services for telecoms firms in the country by 2017.
This will present new challenges for mobile operators. According to Alfie Amir, research manager for telecommunications at IDC Malaysia, it will mean being proactive when it comes to leveraging emerging technologies such as big data, social media and cloud computing in order to remain competitive and experience further growth.
"Mobile operators may also need to revisit their spectrum strategy in order to maximise network capacity and enhance user experience," he added.
In terms of network capacity and performance, countries such as Singapore and Malaysia are already making strides in this area, with 4G/LTE and 4G/WiMAX becoming increasingly widespread. Other countries are playing catch-up and are still struggling to get full 3G coverage, but efforts are definitely being made.
At the end of 2013, Tech in Asia released an article on the state of 4G across Southeast Asia, noting that 4G is available in Thailand, the Philippines, Brunei and Cambodia, but on nowhere near the same scale as Singapore and Malaysia. Indonesia was said to be working on 4G infrastructure, while in Laos and Myanmar 4G is still a way off.
Clearly, if smartphone ownership and use continues to boom in these developing markets, then telecoms companies will need to step up their game. The developed markets will also need to keep moving forward if they are to cope with the continued growth in mobile data traffic.
It's one of the reasons why Singapore is releasing its regulatory framework for TV white space, with the aim of supporting greater capacity and data connectivity for wireless and mobile devices. It will make approximately 180MHz of spectrum available for use. We could see similar initiatives in other markets in the months and years ahead.
It's clear that while there are some big challenges for the telecommunications industry in Southeast Asia, there are also plenty of opportunities. Smartphone use and the demand for new apps and services shows no sign of slowing, and in some markets the boom is only just beginning.
Singapore and Malaysia, which are forging ahead in the smartphone race, are evidently exciting places for telecoms professionals to be right now. The potential in these countries is huge, and with skills shortages prevalent, the hunt for overseas talent may well intensify as telecoms companies look to explore new revenue streams and give consumers the kind of services they are demanding.