Malaysia: Mature market drives strategic change

Melbourne, 20th October 2009. According to Ovum, global analyst and consulting firm, the mobile market in Malaysia will continue to mature, and players must adjust strategies accordingly. Nathan Burley, Analyst suggests mobile operators focus on maintaining existing subscribers and growing customer spending, while continuing to meet individual customer requirements. “Operators need to focus investment in growth areas while remaining cost-conscious and driving efficiencies through their business”.

Ovum believes that mobile broadband is the key area that will drive growth in the Malaysian market over the next few years – operators would be wise to invest here.

With the Malaysian mobile market reaching maturity, operators are positioning accordingly. Cost efficiency programmes are occurring across operators – for example, Celcom has announced a company-wide restructure. “Key emphases in operators’ strategies include subscriber loyalty/retention, segmentation/micro-segmentation, leveraging customer data and expansion into non-traditional areas (especially broadband)”, says Nathan Burley, analyst based in Melbourne.

However, strategic initiatives do not necessarily come cheap; there can be high costs associated with loyalty programmes. Margin pressure is also occurring as the operators add large numbers of mobile broadband customers.
Mobile broadband is providing a new wave of growth in Malaysia. With limited fixed broadband options,, wireless accounts for a significant proportion of broadband connections and will continue to do so, despite the government-sponsored fixed high-speed broadband (HSBB) initiative. As a result, mobile broadband is now the focus of 3G competition among the operators. “However, other wireless technologies such as WiMAX from operators such as Packet One are achieving strong broadband connection growth. We see significant growth potential for operators as they meet broadband demand in Malaysia”, adds Nathan Burley.

Yet there are significant challenges in wireless broadband provision such as backhaul, which operators are working together to overcome. Spending requirements to support mobile broadband growth are significant and we foresee potential profitability issues. The quality of HSPA services is already under threat from under-provisioned networks. Operators must be prepared to invest for the long term rather than reap short-term gains at the expense of their brands.

Mobile population penetration in Malaysia passed 100% in March 2009, although due to multiple SIM ownership we estimate real user penetration of closer to 75%. Accordingly, we are now seeing slow organic growth in mobile voice. In addition to mobile broadband, which will drive growth include postpaid services, especially in enterprise, and mobile data.

Ovum forecast total Malaysia mobile connections to reach 41.2 million by 2014.