Today, the Asia-Pacific telecom sector is quickly transforming to stay connected amid a rapid innovation pace. APAC telcos connecting to 5G, in particular, could enable a conducive APAC 5G technology environment. This will help APAC telecommunication service providers to make meaningful monetization opportunities in industrial and enterprise use cases a reality rather than prospects.
In light of the current transformation status, Mei Lee Quah, Director, Frost & Sullivan, has a message for the telecom sector in the APAC region.
In a recent interaction with CEO Insights Magazine, Quah said, “Overall, there is industry consensus that a way forward for mobile operators lies with the successful transformation from telco to techco to stay relevant, generate revenue, and show growth in the future”.
At the same time, she indicated that mobile operators seem more conservative, with concerns that many of them lack the capability, resources, and stakeholder support to undertake the journey from telco to techco.
Southeast Asia's telecom sector is observed to be changing quickly, mainly due to rising mobile device penetration and demand for digital services.
How are the Statistics Looking?
In support of that, the trade association GSMA predicts that by 2025, there will be more than 200 million 5G customers in ASEAN due to the region's rapid 5G rollout.
An Exponential 5G Growth
The Asia Pacific area is undergoing exponential 5G growth, with next-generation connections expected to account for 41 percent of all mobile connections by 2030, according to the GSMA's latest Mobile Economy APAC 2023 report. Additionally, in the same year, 5G will boost the local economy by $130 billion.
Factors Fueling 5G’s Growth
The GSMA listed several other significant trends that are driving 5G's expansion in the area, such as the emergence of generative AI, the move toward circularity in telecom to cut waste, high levels of telco consolidation in the APAC region, a rapidly expanding fintech sector driven by mobile, and what it refers to as the "growing monetization imperative."
COVID-19 Accelerated the Pace, But There Are Other Factors Too
The reason for the quick pace is the COVID-19 pandemic has forced numerous companies in the region to shift to a digital economy. It led to a lot of Southeast Asian consumers and businesses having to adopt fintech and e-commerce solutions, including online services and digital payments. Other factors like strong economic fundamentals in ASEAN, with a market size of 670 million, a youthful, tech-savvy populace, and increasing internet penetration, are also driving this expansion.
Yet Revenue and IT Spending Remain Stagnant
However, telecom revenues and enterprise IT spending are stagnating despite the digital change that is sweeping through ASEAN.
Only Major Mobile Operators to Turn Fully Digital
Quah added, "By 2027, 82.2 percent of major mobile operators in APAC will remain as telcos with 25 percent likely to exit or become MVNOs assuming three-player markets. Only 17.8 percent of major mobile operators in APAC will become techcos".
Quah further assured, “The outlook for 5G SA is positive as more countries embark on their 5G rollout plans and devices that support 5G SA become available”.
But the telecom sector is still facing obstacles to expansion from all directions, including low subscriber growth, revenue, investment, high-interest rates, weakening currencies, and other factors that call for a hyperefficient paradigm.
Inadequate Funds
Businesses require new asset ownership structures, improved technology, and innovative business models to develop the digital backbone successfully and sustainably. Telcos in the area will require an extra $40–60 billion in funding over the next five years to do this.
A Lot of Renovation Required in Many Areas
Telcos may find it challenging to finance the infrastructure independently in the current scenario. Operators will have to update their business plans and asset ownership. To serve Southeast Asia's expanding smartphone user base, mobile internet infrastructure needs to be strengthened. This entails implementing 5G technology, improving current infrastructure for better speeds, and extending network coverage.
The Bar is High on Performance Expectations
According to Quah, there are not many expectations for expansion, particularly in the area of connectivity. The pandemic and other causes have made the world more digital and hyperconnected, raising the bar for performance from digital enterprises. Change is happening faster, with more agile software companies contributing to the difficulty levels and markets becoming more competitive. The current situation is worsening for mobile carriers; although the pandemic has forced them to deploy some digital solutions, the majority are still in the process of going totally digital and digitally first. Moving from consumer logic to growth logic is a challenging shift that will likely take another one to two years to finish, and not all mobile operators will be able to accomplish it.
The industry could whisk its efforts on data center colocation, a growing trend that involves renting space for computers and other technology, such as servers.
Make Do with What You Have
With an abundance of land resources that could offer economic competitiveness, nations like Malaysia and Vietnam have emerged as desirable locations for data center investments.
Build Data Centers on Available Land
According to research firm Arizton, Malaysia's data center business is actually predicted to grow to a value of over $2 billion by 2028. Contributions from providers like Google, Alibaba Cloud, and Meta will help the Malaysian wholesale colocation sector expand. Low-cost, dependable electricity resources and reduced development costs are advantages for nations such as Vietnam.
Change the Way of Making Investment Strategies in These Data Centers
Investment company decision-makers could respond to the changes in the independent and telco data center markets by adopting more adaptable and smart investment strategies. They can also take a holistic strategy that makes use of industry knowledge, regulatory analysis, and market insights. Investors can find the most attractive possibilities and place the proper bets by carefully evaluating the market potential.
If companies are prepared to change their ownership and business models, Southeast Asia's expanding digital market offers enormous potential for independent data center operators, telecom providers, and tower companies.
To stay ahead of the curve, it is more important than ever to recognize the potential effects of disruptive technologies and business models in the telecom industry and to make plans appropriately.