Recent Study: Malaysia Telecommunications Report Q4 2013

Malaysia's telecommunications sector enjoys high levels of service penetration, owing to highly focused investment in advanced broadband infrastructure and supporting services and solutions. Wireless and wireline non-voice services account for an increasingly large proportion of operators' revenues, and this is encouraging them to reinvest heavily in next-generation infrastructure, including fibre-to-the-home and 4G LTE. However, this emphasis on broadband means falling demand for traditional voice telephone services has accelerated while operator-provided mobile voice and messaging services have come under threat from network-agnostic over-the-top (OTT) competitors. As BMI has already noted, this has hit operator financial performance. Tackling the issue will be critical for operators over the medium term.

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Key Data

* Operator and regulatory data showed that the mobile market expanded within BMI's expectations in H112. We have not needed to amend our forecasts for the overall mobile market, but we have adjusted our mobile ARPU forecasts owing to a small acceleration in ARPU erosion seen in H113. By 2017, the weighted industry average blended mobile ARPU should reach MYR41.20 (US$0.30).
* Usage of wireless broadband services has been falling since Q412, most likely because customers are increasingly turning to HSPA-enabled smartphones rather than wireless modem-equipped mobile computers. This relates to increased HSPA coverage outside the principal cities, but also to the launch of 4G LTE services. Our broadband forecasts have been amended accordingly, with slower growth seen in the short- to medium term before accelerating markedly in the latter part of our 2013-2017 forecast period.

Key Trends & Developments

The roll-out of LTE-based services remains a key trend in Malaysia's telecoms sector. Maxis was the first to market, launching in January 2013, followed by Celcom in April. DiGi expects to launch in Q313, while U Mobile will likely leverage its roaming agreements to facilitate its entry into the LTE arena. The other four licensees have yet to discuss their plans regarding LTE, but spectrum sharing agreements suggest that they will - like U Mobile - focus less on their own infrastructure for their nascent offerings and instead position themselves as service providers.

Telekom Malaysia has indicated that it may leverage 4G LTE spectrum to facilitate the promotion of its high-speed broadband services into underserved regions of the country. The move would take advantage if its extensive fixed broadband infrastructure and services, which already cover almost 1.4mn premises across the country.

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