The telecommunications companies of Asia are sitting on a gold mine, but must re-tool and reinvent themselves if they are to benefit from the explosive growth in consumer spending that is expected to accompany the rise of some one billion Asians into the middle class by the end of this decade, according to a report issued by the research group, the International Data Corporation (IDC). The IDC says telecommunications firms stand to make over $1 trillion from some of the larger opportunities that will emerge in the Asian market by 2016 alone.
The big question, according to the IDC, is whether telecommunications service providers in the Asia are savvy enough to modernize and transform themselves in order to gain an edge in a consumer driven economy.
Five areas of opportunity
The IDC expects major opportunities for revenue growth and expansion in five areas, in particular. These are Xcommerce, consumer mobility, smartphones, digital content, and internet and mobile advertising.
The organization believes telecommunications firms in Asia can reap some $540 billion in revenues from Xcommerce alone by 2016. At the same time, the firm says telecom companies can earn another $313 billion from consumer mobility services; some $188 billion from smartphone sales; around $88 billion from digital content services; and an estimated $29 billion from internet and mobile advertising.
The IDC asserts that the rapid growth in the spending power of the Asian consumer is a story that could play out for half of this century. “Telcos need to reinvent themselves to accommodate the Asian consumer,” says Adrian Dominic Ho of IDC, adding that telecommunications companies had prospered from previous increases in Asian consumer spending. “The radical change in the Asian consumer has translated to the emergence and rise of what is called the digital market economy,” Ho explains.
Preparing for future growth
This early, analysts say that Asia has already established a massive presence in the global mobile and broadband market. The region is home to nearly half of the world’s mobile subscribers. There were some 2.9 billion mobile subscribers in Asia by the end of 2011, and — with mobile growth estimated at 10 percent each year — experts had anticipated mobile subscriptions to exceed three billion last year. This is after a period when mobile growth rates in the region were well in excess of 50 percent a year.
In all, mobile and broadband penetration in Asia had reached an estimated 76 percent by the middle of 2012, according to research analysts Peter Evans and Paul Budde. The figure suggests ample room for growth. More than 18 countries in Asia had mobile penetration rates in excess of 100 percent going into 2012. Two of these countries — Macau and Hong Kong — had mobile penetration rates of over 200 percent.
Developed markets in Asia such as Japan, Hong Kong, South Korea, Singapore and Taiwan are already well-positioned to benefit from the mobile data and broadband wireless boom forecasted by the IDC. “In fact, through the leadership of these markets, Asia makes a strong claim to be setting the global benchmark when it comes to the development of mobile broadband internet access,” say Evans and Budde.
Need for new partnerships, deeper pockets
Meanwhile, the IDC says more and more Asian telecommunications companies and phone service providers(read more) have begun re-tooling their strategies and business models to take advantage of what could be a period of unprecedented and sustained high growth. Ho stresses, however, that an enormous amount of work lies ahead as new partnerships are required to turn opportunities into actual revenue growth.
The IDC believes Asia’s telecom firms should begin looking into content, new media relationships, and innovative solution bundling in preparation for the massive expansion of the Asian telecommunications market. “In addition, some deep pockets in the form of venture capital investments and seeding investments will also be required,” Ho added.