The Asia Pacific Mobile Observatory

By John Kurtz
Partner

Asia Pacific is the world’s largest mobile market. Since 2003, the Asia Pacific market has more than tripled in size; adding over a billion connections and growing at 26% CAGR to reach 1.7 billion connections in 2008 (see below)¹ . As the global mobile market grows beyond 4 billion connections, 2009 is expected to be a landmark year for Asia Pacific as it crosses the 2 billion connections mark for the first time. Over the next five years, an additional 1 billion connections are expected to be added as the Asia Pacific market is projected to exceed 3 billion connections in 2013.

The mobile ecosystem contributes heavily to the Asia Pacific economy. The economic contributions of the Asia Pacific mobile ecosystem, comprising the 17 largest countries (AP17), amounts to approximately $368 billion, or 2.82 percent of aggregate GDP². The mobile ecosystem contributes more than $100 billion in public funding and employs more than 10 million people.

The Asia Pacific mobile market is developing along two parallel paths. One development path is bringing mobile access to the next billion consumers at the bottom of the pyramid. The other path, in developed markets, is taking mobile services to the next frontier. Roughly 2 billion consumers in emerging countries—primarily China, India, Indonesia, Pakistan and Bangladesh—still do not have a mobile connection. This presents an opportunity for mobile operators to serve a significant untapped market, although doing so will require innovative business models and relevant products and services.

A number of challenges remain in addressing the unconnected market. First, the cost of mobile ownership and usage still needs to be reduced further. Lower cost handsets and more innovation on mobile services can help, but policy makers also need to carefully consider the impact they have on the total cost of ownership. Second, network coverage needs to be extended into ever more marginal areas. The mobile industry will continue to find ways to achieve coverage in remote areas that often lack basic infrastructure. Through spectrum policy, infrastructure sharing policy, universal service funds and the provision of basic infrastructure, policy makers again have a significant influence on the ability and cost-effectiveness for industry to bring services to these remote areas. Third, mobile services and applications that meet the unique requirements of individuals at the bottom of the pyramid need to continue to be developed. There remains significant opportunity to create social and economic value through mobile; however, new approaches will be needed for this value to be realized.

In parallel, a society of highly-advanced mobile users in developed markets is continuously finding new ways to use mobile phones, fuelled by innovations from mobile operators and the greater ecosystem. By doing so, they are truly propelling the mobile industry to the next frontier. In developed markets across Asia Pacific, mobile phones are beyond just a basic communication tool: they are an indispensable part of individuals’ lives. People in developed markets in Asia view mobile devices as:

• A device with which to organise their busy lives, making them more productive and efficient;
• A central platform for entertainment (gaming, pictures, video, music);
• A more convenient means for accessing products and services;
• A personal extension that embodies and documents their lifestyle and allows for intense personalisation and self-expression.

The mobile industry is increasingly making a positive impact on environmental sustainability and social development in the region. Operators in Asia Pacific are taking an increasing role in mitigating the effects of climate change. To reduce emissions, mobile operators and vendors in Asia Pacific are finding new ways to improve energy efficiency by designing low-energy base-station sites, deploying base-stations powered by renewable energy, implementing infrastructure optimization and sharing, and reducing mobile-device lifecycle emissions through design and recycling. The industry is also acting as a catalyst for other sectors, enabling further reductions through the use of Machine-to-Machine (M2M) mobile technologies to deliver ‘smart solutions’. Mobile operators are also having a profound impact on social development, employing innovative corporate social responsibility (CSR) programmes largely focused on education, health and community development.

Regulators have a critical role to play to ensure that Asia Pacific continues to grow and deliver value for customers, employees and society. Governments and regulators must create an environment that allows the mobile industry to further innovate and create value for consumers. Four key regulatory issues are likely to be important in the Asia Pacific region: 1) the need for transparent, predictable and consultative regulatory regimes; 2) reducing mobile-specific taxation and fees to drive penetration; 3) embedding incentives to drive universal access, and 4) reviewing spectrum management policies and accelerating harmonised spectrum allocation.

John Kurtz is a partner based in A.T. Kearney’s Jakarta office. The perspectives in this commentary were derived from The Asia Pacific Mobile Observatory Report, a study conducted by A.T. Kearney for the GSM Association.