Telecoms in Asia: challenges faced in 2009

In the wake of the financial market turbulence, Ovum expects 2009 to be a challenging year for the Asian telecoms industry.

'Telcos in the Asian region were already facing many challenges,' said David Kennedy, Ovum Research Director (Asia-Pacific), 'but the financial crisis will add a new element of uncertainty'.

'Ovum does not expect the crisis to hit Asia as hard as the US, but declining US domestic demand will certainly affect Asian exporters and hence the rest of the economy. That includes telcos,' said Kennedy. The impact on the telco sector will be mixed. Slowing economies will hit revenue growth, increasing short-term pressure to cut costs. 'We expect many planned infrastructure projects to be delayed or cancelled in 2009,' advised Kennedy.

'But it is also time for telcos without a clear transformation programme to start planning their pathway to a permanently lower costbase. This will require more spending on IT systems and new network technologies in the medium term. Telcos will need to generate clear business cases for investment and develop strong execution skills.'

'The good news is that transport budgets are likely to be an early target for cost-cutting across the economy. This could mean growing demand for national and international telecoms services, especially in the enterprise sector. Advanced telecoms services like mobile and broadband, once regarded as discretionary by consumers, are increasingly regarded as essential.'

These pressures will drive several new trends in the Asian telecoms market:

• an accelerated shift towards customer-focused strategies and structures. As customers tighten their belts they will be looking for better value for money. This will require telcos to target their product development and pricing strategies more carefully to address different customer segments
• accelerated multi-play strategies. Telcos that have not already done so will accelerate the introduction of multi-play products to lock in choosy and price-sensitive consumers
• faster integration and synergisation of international investment strategies. Higher hurdles for telco investment and rapid exchange rate movements will make it harder to expand international investment strategies. The focus will shift towards exploiting synergies to maximise the benefits of existing investments
• slower handset replacement cycles. In mobile, handset replacement cycles will lengthen and higher-end models will potentially be passed over for cheaper alternatives. This will have the effect of slowing the growth of mobile data traffic.

- Ends -

For further information

For more information or to speak with David Kennedy about this comment, please contact Tanisha Kuckreja, Public Relations, Tanisha.kuckreja@ovum.com, +613 9601 6723 or a member of our global PR team listed below.

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Ovum is a global advisory and consulting firm. Its primary activity is providing value-added advisory services and consulting to retained and project clients. The company acts as a well-respected and trusted source of industry data, knowledge and expertise on the commercial impact of technology, regulatory and market changes. Ovum engages in continuous research and industry analysis to determine market dynamics in its specialist sectors.

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