Disrupt: LTE can boost ARPU, but will take time

• Korean mobile operators were able to increase their ARPU with LTE
• However, Korea is unique and won’t be easy for Malaysian celcos to emulate it

ALTHOUGH it’s still early days for 4G-LTE (Fourth-Generation/ Long-Term Evolution) in Malaysia, industry experts believe that the high-speed wireless technology could be the key to boosting mobile operators' ARPU (average revenue per user) in the long run.
 
Malaysian mobile operators, which were awarded 4G spectra in late 2012, started rolling out LTE services to customers as early as January 2013.
 
The technology, still relatively new in Malaysia, has been widely deployed in developed markets such as the United States, South Korea and Japan.
 
In fact, South Korean mobile operators, which launched 4G-LTE services as early as July 2011, have been able to use 4G-LTE technology as a catalyst to boost their ARPU.
 
“Based on my understanding, South Korea is the only country the region – and perhaps the world – where operators managed to increase their ARPU, driven by LTE,” said Nipun Jaiswal, a Singapore-based telco analyst at UK firm Analysys Mason.
 
“If done properly, Malaysian operators can increase their ARPU too, but South Korea, as a market, is difficult to emulate. The potential is there for Malaysian operators, if they monetise data properly,” he said at the June 25 edition of the monthly Disrupt panel discussion and networking session organised by Digital News Asia (DNA).
 
In South Korea, the mobile devices market was initially controlled by the telecommunications incumbents. Prior to May 2012, South Korean consumers wanting a new device had no choice but to go to one of the three carriers – KT, SK Telecom, or LG U+ – to purchase or activate their phones.
 
New industry regulations that went into effect on May 1, 2012 allowed non-carrier retailers to sell mobile devices to customers. These regulations were aimed at stabilising mobile device pricing in the country.
 
Even though the devices market has been opened up, mobile operators are still allowed to offer US$251.32 worth of subsidies per subscriber.  Experts believe that these excessive subsidies were a key factor that led to the high smartphone adoption in the country.
 
As of end-2013, South Korea had a smartphone penetration rate of 73%, while LTE coverage reached 62% of population.
 
The Disrupt discussion – with the theme LTE – Long Term Earnings? – was held at the new headquarters of the National ICT Association of Malaysia (Pikom) in Petaling Jaya, with DNA founder Karamjit Singh moderating.
 
At the discussion, Nipun’s fellow panellist, DiGi.Com Bhd chief operating officer Albern Murty (pic) agreed that mobile operators in Malaysia could monetise LTE and use it as a differentiator.
 
“The way it has started now, the mobile players who have launched it have not differentiated their LTE offerings in terms of pricing.
 
“However, I think in the future, mobile operator could price LTE by speed, by quota and by content,” he said.
 
This means that in the future, consumers may get ‘unlimited data’ at a specific download/ upload speed, at a certain price point.
 
However, consumers hungry for higher bandwidth may need to pay more. Singapore’s StarHub has been toying with the idea of charging customers for 4G usage. Customers who do not want to pay for the additional bandwidth will need to switch back to older 3G technology.
 
However, this is certainly not a sign that Malaysians should start panicking about a possible price increase or a change in pricing plan.
 
“I believe that pricing, at the end of the day, will be driven by competition and not so much by technology,” said Nipun.
 
Besides allowing customers to download content at a significantly faster speed, some operators are looking at transferring their traffic for Voice over LTE (VoLTE) networks. VoLTE is expected to be available for US-based Verizon Wireless’ customers sometime this year.
 
A long-term game

DiGi’s Albern said it would take a while before Malaysian mobile operators would be able to monetise their LTE rollouts, either via top-ups for an additional data quota, for additional speed, or even for services such as VoLTE.
 
He said that the LTE phone penetration may need to hit at least 20% and the LTE population coverage hit at least 50% before it would be viable for service providers to consider such options.
 
This may take a while for Malaysia then: According to the latest Ericsson Mobility Report, fewer than 2% of the 40 million Malaysian mobile subscribers in 2013 were on LTE, while 55% and over 43% were on GSM and HSPA respectively.

The journey has certainly begun though. Nipun said that it would be vital for mobile operators to ensure that the customer experience is good when on LTE.