ISSN 1823 - 3724 Shaping a Connected Future Industry Performance Report 2012 MCMC Publication Web Version 1 IPR 2012 Shaping a Connected Future Malaysian Communications and Multimedia Commission (MCMC), 2013 The information or material in this publication is protected under copyright and save where otherwise stated, may be reproduced for non commercial use provided it is reproduced accurately and not used in a misleading context. Where any material is reproduced, MCMC as the source of the material must be identified and the copyright status acknowledged. The permission to reproduce does not extend to any information or material the copyright of which belongs to any other person, organisation or third party. Authorisation or permission to reproduce such information or material must be obtained from the copyright holders concerned. This work is based on sources believed to be reliable, but MCMC does not warrant the accuracy or completeness of any information for any purpose and cannot accept responsibility for any error or omission. Published by: Malaysian Communications and Multimedia Commission Off Persiaran Multimedia 63000 Cyberjaya, Selangor Darul Ehsan T: +60 3 86 88 80 00 F: +60 3 86 88 10 06 Toll Free: 1- 800-888-030 W: www.mcmc.gov.my 2 IPR 2012 Shaping a Connected Future CHAIRMAN’S NOTE 5 EXECUTIVE SUMMARY 8 MODULE 1: ECONOMIC PERFORMANCE OF THE INDUSTRY 12 Malaysian Economic Performance – Overview for the Year 2012 14 Global and Malaysian GDP Growth 14 Communications Services Contribution to Growth 15 C&M Industry Performance – Overview 2012 17 Contribution of the C&M Industry to Bursa Malaysia 17 Bursa Malaysia ACE Market – An Overview of Licensees 20 Holding Companies of Licensees on ACE Market – Market Listing and Financials 21 C&M Industry Financial Performance Overview 23 Telecommunications Companies 25 Broadcasters 25 Trends of C&M Companies Financial Performance 26 Digital Signature 29 C&M Revenue by Services Market Segment 31 ARPU Comparison 33 MODULE 2: INDUSTRY REGULATORY AND DEVELOPMENT 35 Dual Role of MCMC in the Malaysian C&M Industry 37 C&M Industry Open to Investments 37 MCMC Regulatory Role 38 Licensing of the C&M Industry 41 Shareholding Structure 42 Individual and Class Licensee Ownership 43 Technical Regulation in Spectrum Usage 44 Management of Spectrum in Malaysia 44 Long Term Evolution (LTE) 47 Economic Regulation 49 Access Pricing 49 Accounting Separation 49 Consumer Protection and Beyond 54 Mandatory Standards in Consumer Protection 55 Consumer Protection Mechanisms and Market Surveillance 56 Consumer Complaints 57 Industry Forums and Self-Regulation 61 Enforcement 68 C&M Industry Development in Malaysia – Reaping Opportunities 70 Building Foundation for 2020 and Beyond 70 MCMC Development Role 73 Nationwide High Speed Broadband Focus 75 Growth of Broadband Connections 76 Mobile Broadband Services 84 3G Subscriptions 84 Mobile Communications Technology 85 The Use of Small Cell Technology 86 Universal Service Provision (USP) Scope, Targets and Evolving Approach 88 World Broadband Comparatives 91 Studies and Developments 91 MODULE 3: COMMUNICATIONS SERVICES 93 C&M Services Connections 95 Fixed Line Services 95 Wireless Fidelity (Wi-Fi) Hotspots 97 Mobile Services 98 Domain Names 104 Extending IP Addressing Availability 108 3 IPR 2012 Shaping a Connected Future MODULE 4: CONTENT SERVICES 110 Malaysian Scenario Today and Precursors to Future 112 TV Broadcast Landscape 112 Digital Terrestrial TV Service Platform 113 Development of Broadcasters 113 FTA TV Broadcasters 114 Media Prima Bhd 114 Pay TV Broadcasters 116 ASTRO 116 IPTV 116 Cable TV 116 Radio Broadcasters 117 Advertising Expenditure (Adex) 119 Global Adex 119 Adex in Malaysia 120 MODULE 5: POSTAL AND COURIER SERVICES 122 Postal Services 124 Landscape of Change and Advancement 124 Regulation of Postal Services 125 Business Units Services Description 126 Development of Pos Malaysia 126 Business in Strategic Alliance 126 Postal Operations through ICT Innovations 126 International Participation and Development 128 Philately 131 Courier Services 132 Strategic Goals 132 Industry Licensing and Revenue Performance 132 MODULE 6: STRATEGIC TRADE ACT 135 Strategic Trade Act 2010 137 MCMC Licensing Under Strategic Trade Act 2010 137 Malaysia and the Strategic Trade Act 137 Implementation and Enforcement 138 STA Framework 139 Strategic Items 140 Online Applications 140 Permits and STA Applications in 2012 140 Categories of Permits 141 MODULE 7: GOING FURTHER IN CONNECTIONS – AN OUTLOOK 142 Malaysian Economy Supporting Investments 144 C&M Industry Infrastructure and Access 144 Improving Infrastructure Reach 144 Cross Channel in Accelerating Networked Services and Content 145 Reaping Opportunities by Working Together 145 Reinforcing Efforts in Communications Services Provision 146 QUICK REFERENCE ON TERMS 148 LIST OF FIGURES 148 CONTACT US 151 4 IPR 2012 Shaping a Connected Future CHAIRMAN’S NOTE Looking at the industry development so far, the last ten years provides witness to the successful implementation of government policies and private sector investments. The industry revenue has quadrupled to RM51 billion over this period from RM12 billion in the late 1990s on the back of a sound market capitalisation of RM190 billion, which has also grown significantly from RM50 billion. Notably in 2011 and 2012 alone, capex for the telecommunications sector alone reached unprecedented RM9 billion levels. We believe these and also the private-public partnership in building-up infrastructure such as the High Speed Broadband (HSBB) reflects investors’ confidence. On the other hand, the coverage extensions were mitigated with Universal Service Provision (USP) funding which is based on the industry’s contribution and managed by the MCMC. In 2012, an additional 2,489 Kampung Tanpa Wayar were added to make up a total of 3,844 in operation nationwide and a total of 664 towers deployed to provide extended coverage to help close the digital divide. Given the momentum that we saw in the industry during 2012, we are optimistic with the opportunities that are in store for us in 2013, especially innovations in the areas of content and applications, which is crucial to ensure sustainable returns on investment as well as to continue to act as the enabler and catalyst for the economic growth. It may mean doing the basics better. For example, in 2012 we have seen a few success stories relating to rural and urban folks getting their business online, thanks to the accessibility and availability of broadband services. We believe the market will continue to grow with the evolving environment of our industry demands that we constantly challenge, renew and improve our approaches. In the past ten years, mobile devices have become pivotal to the business and our personal lives. Facilitating the new wave of digital lifestyle, there is a major transitional shift from traditional (voice) mobile devices to Internet-enabled smartphone devices. Smartphones are inculcating new habits among users with, on average, 20% starting to use data-intensive applications related to video, TV, maps and navigation since purchasing their device. Research from Strategy Analytics revealed that 1 billion units of smartphones are used or a penetration of 1 in 7 worldwide. For comparison, in Malaysia the penetration stands at 1 in 4. We believe smartphone ownership in Malaysia will reach a critical mass in 2013. This could be partly due to the incentive under Budget 2013 by the Government which allows RM200 rebates for purchase of smartphones to eligible youths coupled with the decline in the price of smartphones worldwide. To a certain extent, this will encourage growth in mobile broadband penetration and also data usage. For the service providers, potential revenue is expected to be multiplied as smartphones are able to generate up to 35 times the level of data traffic that a basic feature phone would use. Going forward, we foresee attractive packages with good Internet access, ability to support applications and coverage in the areas they roam on a daily basis are the main reasons for consumers to subscribe or purchase smartphones. Potentially, service providers may also increase the Average Revenue Per User (ARPU) with the increase in demand for data services. As the industry and nation gather speed to make another leap forward towards 2020, a collaborative focus by all stakeholders working together to build digital lifestyle ecosystems enabling a connected future is critical to reap the many benefits from opportunities arising. This is proven by the ability to achieve broadband penetration rate of 66% of the household and mobile cellular penetration of 142%, with 3G subscriptions gaining ground year on year. 5 IPR 2012 Shaping a Connected Future The efforts in communications service provision needs to be reinforced such that challenges ahead can also be turned to opportune business manoeuvres. Towards this end, the Government has allocated the spectrum for 4G-LTE (Long Term Evolution) in step for the service providers to provide all IP-based 4G services. Going forward, the main focus will be on capacity and the quality of service, hence, the timely rollout of 4G-LTE is scheduled in 2013 with an estimated 10% population coverage, reaching 50% by 2017. More services are expected to be offered at users’ convenience, or on demand, enlisting cloud services and supporting software. Therefore, in order to ensure sustainable and orderly growth of the industry, for the MCMC and other stakeholders, there is much groundwork to cover. This includes paving a sound basis in shaping a connected future in this new decade of growth. Hence, the MCMC’s task remains one of dual role of industry regulator as well as industry growth promoter. From the regulatory perspective, the implementation of the revised Access Pricing for the period 2013 to 2015 and Accounting Separation is the next milestone in enhancing competition in the communications market. Competition itself will promote efficiency, i.e. in terms of technical, productivity and allocation of resources. It is therefore a powerful tool to further enhance the industry performance and attract new investments.