In Malaysia, a cautious rollout
EDWIN YAPP, Contributing writer
KUALA LUMPUR -- Malaysia was among the first in Southeast Asia to introduce fourth-generation mobile technology when service plans appeared in January 2013.
But over a year later, coverage remains patchy and industry watchers say that telecommunications companies will continue to hold back investments until a sustainable business model emerges.
In fact, Malaysian telecom companies are being so cagey that since 4G licences were awarded in December 2012, only four out of the eight licence holders have launched the service.
Only Maxis, DiGi, Celcom and U Mobile, are offering 4G services, which are restricted to major urban areas.
Naveen Mishra, a telecom industry expert at consultancy Frost & Sullivan Asia Pacific, said LTE networks only cover 15% of Malaysia's population, compared with 80-90% coverage by 3G networks. This is unusual for a relatively mature market.
Malaysia is one of the most developed mobile telecom markets in the region. Mobile penetration stands at 143.6%, with half the population of 29 million having more than one phone, according to figures from the Malaysian Communications and Multimedia Commission. Nearly a third of the population are 3G subscribers, which is higher than the penetration rate in neighboring countries.
Industry players say operators are still unsure whether there is enough demand to justify heavy 4G investments now. They are also nervous about cannibalizing their 3G business.
There is no publicly available data on Malaysian 4G cellphone subscribers but industry experts estimate that they make up no more than 5-8%.
As of the end of 2013, the top mobile networks in Malaysia were Celcom, with 13.1 million subscribers, Maxis with 12.9 million and DiGi with 11 million. Even though 3G services were launched in the country around nine years ago, aggressive price cuts and promotions only started around three years ago due to tougher competition.
"When 3G was first launched, everyone went to town with their 3G marketing and promotions but that backfired," said an industry executive on condition of anonymity. The executive said the lack of apps back then meant that subscribers were disappointed by available services and complained about the lack of coverage.
That experience, said experts, taught operators not to be too aggressive with 4G rollouts. Instead, they have decided to take time working out service plans and applications that would help 4G become lucrative.
The MCMC, which hands out 4G licences, is not as patient. It has told operators to expand LTE services to cover at least 50% of the population by 2017. Operators who do not comply will have to pay unspecified fines.
But telcos continue to focus on 3G expansion. DiGi plans to spend the bulk of its 900 million ringgit ($282 million) in capital expense on expanding its 3G network this year. "We plan to expand 3G coverage, currently at 80%, to 86% of the population by the end of 2014," said COO Albern Murty.
U Mobile is spending just 100 million ringgit on its 4G infrastructure, compared with the two to three times more allocated to its 3G network this year. Similarly, Celcom is only planning to spend 20% of its 1 billion ringgit in capital expense on LTE this year.
Even Altel, a newcomer with no existing infrastructure, is only spending a conservative 1 billion ringgit over the next five years to build its future 4G network, even though the regulators had high hopes for it.
MCMC awarded the lion's share of available LTE spectrum to Altel's parent company Puncak Semangat, owned by Malaysian tycoon Syed Mokhtar, which had no experience in mobile telecom. But there is no launch date for Altel's LTE service yet.
An industry executive expects that investment on LTE per year would likely increase to 30-40% of total capital expense by 2015, when there are more LTE subscribers.
With internet apps such as WhatsApp causing a sharp decline in voice and SMS traffic and revenues, Mishra said operators should make use of LTE to offer high-speed, interactive apps that would suffer from latency on slower connections.
But Jeffrey Tan, head of regional telecommunications at Malaysia's RHB Research Institute, said LTE is not expected to be a game changer any time soon.
Strangely, there is little difference today between LTE and 3G pricing tariffs in Malaysia. Standard plans for smartphone users range from 38 ringgit to 150 ringgit for both.
To be able to better monetize LTE services, there would have to be a shift towards pricing based on quality of service and away from a flat-rate model, Tan said, but operators have yet to figure this out.