Malaysia Telecommunications Report Q4 2009

Malaysia's government continues to make progress on the deployment of a national high-speed broadband (HSBB) network, as part of plans to improve economic growth and create jobs. Telekom Malaysia, which is running the 10-year long project, estimates that it will add 0.6% to GDP and create 100,000 jobs by 2017. Furthermore, the government - through regulatory authority the Malaysian Communications and Multimedia Commission (MCMC) - plans to build 58 community broadband centres in Sarawak by 2010 as part of a US$118mn project funded by the country's Universal Services Provision (USP) programme.

The state is targeting a broadband household penetration rate of 50% by 2010, up from the current rate of 30.7% (Q109), which BMI believes to be overly optimistic. We are forecasting a rise to 38% by 2010. By the end of our five-year forecast period in 2013, we believe that the broadband household penetration rate will still be below 50%, at around 47%. This relates to a low level of PC penetration, and the continued high costs of broadband subscriptions.

Mobile broadband subscriptions are the primary driver behind the take-up of broadband in the country, accounting for a quarter of the country's broadband access in Q109. The prevalence of mobile subscriptions, with penetration in excess of 100%, has been a major reason behind the popularity of mobile broadband, while bundled data packages and wide-ranging handset models have also provided support.

Although this should be viewed as good news in terms of greater revenue growth for operators, the dominance of the prepaid market, accounting for 79% of the market total in Q109, has meant that ARPUs have continued to decline. This trend has also been encouraged by the heavy promotions made by mobile operators, offering bundled minutes and SMS prepaid packages at low cost.

According to BMI's newly introduced ARPU forecast table, which looks at the market average of Malaysia's mobile operators, blended ARPU in 2008 reached MYR56.82. This was down from MYR62 in 2007. Over our five-year forecast ending in 2013, we predict that ARPUs will continue to decline, falling to MYR44.45. Despite the growth of postpaid subscriptions in the country, which far outstripped prepaid growth in the year ended March 2009, this will not be sufficient to offset the overall decline in ARPUs.

Malaysia saw an improvement in its rank to 4th from 6th place in BMI's Business Environment Rankings. The country reported a rise in telecoms market maturity, due to the strong growth of mobile subscriptions aided by promotions, together with government efforts at deploying broadband services and the continued investment of WiMAX operators such as Packet One (P1). However, this was marginally offset by the country's higher country risk rating, which was due to continuing corruption, a slowing economy, simmering ethnic tension and the threat of a revival of the influence of hardline Islam.