Southeast Asia Telecoms Market will Remain Resilient in 2009, says IDC

Bangkok, Jakarta, Manila, and Kuala Lumpur, 26 February, 2009 – Despite the global economic slowdown, IDC predicts that the telecom market in Southeast Asia (SEA), which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, will remain resilient in 2009. While market players and end users will exercise extra caution in their spending on telecom products and services, certain technology areas will sustain momentum and pockets of opportunities will emerge from the crisis.

"The global economy heavily influences IDC's predictions for 2009 of the Southeast Asia telecom markets. The global downturn will impact many telecoms sectors. Nonetheless, IDC sees bright spots in the Southeast Asia telecom market that will yield great opportunities for both market players and end users in 2009", says Karen Rondon, Research Manager, Communications Research, IDC.

The following are IDC's 2009 predictions for the telecommunications market in Southeast Asia.

1. Southeast Asia Telecom Spending will Remain Resilient in 2009

IDC projects the combined telecom services market of Indonesia, Malaysia, the Philippines, Singapore and Thailand, to reach US$35.7 billion in 2009, which is 10% higher than its 2008 performance. Telecom services encompass mobile services, Internet access services (IAS), corporate data services and fixed telephony. Malaysia, the Philippines, Singapore and Thailand are expected to show modest growth at a 4% to 6% range. Vietnam and Indonesia, each expecting double-digit expansion rates, will be the higher growth markets as they are at the early stages of the technology adoption curve and currently addressing the digital divide in their markets.

2. Telecom Operators Will Rethink Strategies in the Downturn and Prepare for the Upswing

The global economic slowdown will affect the SEA telecom sector, but to a lesser extent than the IT markets. IDC anticipates that telecom market players in this region will be reassessing their strategies and reconsidering CAPEX plans, marketing strategies and product focus. Incumbents with healthy balance sheets will be able to focus CAPEX on enhancing core and backhaul networks and be farther ahead of their competitors once the economy recovers. Consumers or enterprise tier two operators, on the other hand will have to focus on investments that will see faster returns. Meanwhile, the economic situation will present opportunities for operators with facilities and funds available to begin diversifying into higher value consumer and business services.

3. SME 2.0: Small and Medium-Sized Enterprises to Become the Main Focus of Incumbent Service Providers

IDC anticipates renewed interest among SEA telecom incumbents in the small and medium-sized enterprise (SME) segment that will bring forth the second wave of SME-centric marketing and product development initiatives by these players. The financial crisis will dampen any prospects of growth within the large corporations in 2009 and possibly in 2010 as well. Any recovery that happens is always through the SME sector first. Hence, 2009 will be a good time for incumbents to invest in marketing of products and services targeted to the SME segment.

4. Affordable Alternatives Will Be on the Rise

With the tightening of budgets, IDC expects end users will seek alternative telecoms devices and services in 2009. The selection of what is affordable and beneficial may range from choosing the better service option, to picking out the more practical telecom products and services. Broadband and mobile subscribers will find affordable ways to stay connected. Purchases of mobile devices with steep price tag will be delayed until the end of 2009. End users will select low-end and mid-end mobile devices over high-end familiar brands. There will be added interest in new brands that provide cheaper options.

5. Internet Market Will Ride the Mini-Notebook Wave

The broadband market is expected to benefit from the rise of mini-notebooks in many SEA countries, particularly Indonesia, the Philippines, and Thailand. Due to the limited processing power and storage in these devices, users will be heavily dependent on internet connectivity. . Hence, usage of these devices will spur demand for Internet access services. Partnerships between mini-notebook vendors and Internet service providers (SPs), whether fixed or mobile, will proliferate in these countries, with devices sold with internet service bundles.

6. Wireless Broadband Will Roar: Another Year Bites the Cord

Wireless broadband will be one area that will withstand the economic condition in 2009. Strong demand and continuing marketing efforts from SPs have led to the growth in wireless broadband within the metro area and its surrounding cities in SEA countries. With the advancement of new technologies like 3.5G, the impending launch of WiMAX in some countries, and the entry of new SPs, the wireless broadband market is expected to maintain its vibrancy during the year.

7. 3G/3.5G and WiMAX: The Show Will Go On

Before the global economic meltdown, SEA countries were at different stages of rolling out emerging telecom technologies, notably 3G/3.5G and WiMAX. IDC believes that the market will continue to see investments in these technology areas in 2009, particularly from major SPs that can continue to afford investments in strategic long-term technologies. Similarly, milestones set for these technologies will likely be achieved in 2009, for example, awarding of 3G licenses in Thailand and Vietnam, WiMAX licenses in Thailand, and the commencement of commercial services availability in the Philippines.

8. IP Surveillance Will Come to Town

The need for security, public safety, and cost efficiency during the financial decline will be drivers for enterprises and institutions to consider the adoption of IP surveillance. In Thailand, a major IP surveillance project aiming to monitor the nation’s capital and selected key areas is anticipated to begin in 2009. Even though major institutions such as the government usually fund these deployments, IDC expects that IP surveillance solutions providers in SEA will mold and package these products to cater to other segments in the market. Whether the solution providers' approach is customized by company size or by vertical industries, in partnership with hardware vendors or going solo, IDC believes opportunities and indications of actual interest in IP surveillance will arrive in 2009.

9. Internet Datacenter Model Will Get a Second Chance

Enterprises are increasingly faced with various datacenter issues ranging from physical land constraints, extra applications added onto existing networks, increase in the number of branch offices being spread across the region, to environmental issues with power consumption and cooling. As the economy tightens, enterprises in the SEA region will fundamentally rethink their datacenter strategies in 2009, and consider the managed services option in order to drive cost down. This trend is expected to be most pronounced in Vietnam, where a number of new datacenters have been planned in 2009.

10. The "F" Word: Are Femtocells the Answer to Some of the Incumbent Operators' Troubles?

IDC sees femtocells to be a huge buzzword in the SEA mobile telecom industry for 2009, with mobile operators and vendors looking into the technology. While the technology has its drawbacks and limitations, it does offer mobile operators the opportunity to address a number of challenges such as declining net additional subscribers and average revenue per user (ARPU), and increasing network congestion and subscriber churn. In 2009, mobile operators are expected to conduct trials in order to understand the benefits and limitations of femtocells deployments. Trials and initial deployments are expected to be limited to the more developed markets such as Singapore and Malaysia, while other countries in the region may follow suit.

IDC’s annual Predictions for the Telecoms markets in the Southeast Asia region draws upon latest IDC research and a worldwide brainstorming exercise among IDC’s 900+ analysts. This was followed by an extensive regional review to weigh in on key industry events, user trends, vendor strategies and economic measures, that promises to uniquely define the technology trends which would impact and drive the Southeast Asian telecoms market for 2009. Across the globe, following the release of IDC’s global top ten and IDC’s APEJ top ten, geographic and technology teams will be releasing their own specific predictions in the up coming months. Visit http://www.idc.com.sg/Predictions09/ often for updates.