Malaysia Telecommunications Report Q3 2012

This quarter's update of BMI's Telecommunications Report on Malaysia utilises the latest available data from the country's leading fixed-line, broadband and mobile network operators as well as the national regulatory authority. For the most part, the most recent data available for analysis related to the fourth quarter of 2011, though DiGi was the only organisation to have reported Q112 data at the time of writing.

While the mobile market grew within expectations during 2011, 3G adoption slowed markedly in Q411 according to regulatory data. Meanwhile, the rate of fixed-line decline accelerated in the second half of the year and mobile broadband became increasingly important to consumers. Therefore, adjustments to our forecasts this quarter are relatively few and mostly reflect the somewhat subdued Q411 results.

We still expect to see the mobile market reach 38.7mn subscribers by the end of 2012, despite the lacklustre Q411 performance reported by market leader Maxis. By 2016, we expect the mobile market to be supporting 41.73mn subscribers, yielding a penetration rate of around 134%. Although the regulator now believes that the 3G segment of the mobile market grew faster in 2010 than previously thought, 2011 data show that 3G uptake rates slowed. We have therefore factored this development into our forecast suite and now expect there to be 12.9mn 3G subscribers by 2016, up from 11.2mn in 2012. The three principal operators are hoping to launch so-called 4G services, using LTE technology, by 2013. As many as six other LTE networks could also be launched, as nine LTE licences were issued in 2011; however, we do not expect all licensees to launch. Depending on the speed and number of network launches, our longer-term outlook for 3G could yet be revised significantly.

As for broadband - which includes 3G and WiMAX-supported mobile broadband services - the marked slowdown in broadband uptake in Q411 suggests that much work remains to be done in extending services into underserved areas and that cost may still be an issue for many Malaysian families and businesses. Telekom Malaysia's introduction of IPTV services in 2010 should have provided an excellent catalyst for growth, but seems mostly to have cannibalised its own existing customer base. Meanwhile, the company continues to deploy fibre and wireless as part of its ambitious high-speed broadband (HSBB) commitments and collaborative network sharing. Wholesale service provisioning agreements with its rivals should reinvigorate the broadband market in 2012. We expect there to be 6.54mn broadband subscribers by the end of 2012, a figure that will rise to 8.18mn by 2016.

The fixed-line market continues to contract, reaching 4.091mn connections by the end of 2011. Replacement of fixed lines with mobile and wireless internet connections was already a major issue, but the trend seems to have accelerated in the last 18 months and, reflecting this development, BMI believes there will be 3.87mn fixed lines in service at the end of 2012 and that this figure will have fallen to under 3.6mn by 2016.

These downgrades to our forecasts have had only a small impact on Malaysia's Risk/Reward Ratings scores this quarter and the country remains in seventh place relative to its neighbours. Malaysia continues to score highly due to the competitive and open nature of its telecoms sector and relatively robust economy.