Mobile operators in Malaysia must address consumer dissatisfaction in a highly competitive market July 2016 Harsh Upadhyay The Malaysian telecoms market has characteristics of telecoms markets in both emerging and developed Asia– Pacific. Malaysians quickly embrace new services and networks, but they are very price-sensitive and prone to churn. U Mobile has put price pressure on the incumbent mobile network operators (MNOs), and the entry of new players (the recently launched YTL Communications and the forthcoming webe) will intensify the price competition. This article discusses operator activities, recent market developments and suggested best practices for operators in Malaysia. The telecoms market in Malaysia has experienced intense price competition Incumbents, MVNOs and new entrants have been lowering their tariffs since 2014. Mobile ARPU declined from MYR46.3 per month in 2013 to MYR44.1 by the end of 1H 2015; and it is expected to decline to less than MYR40 by 2017.1 Operators are investing to improve quality of service, networks and customer experience, but promotional and customer acquisition activities are helping customers to get more for the same or lower prices. Despite this, consumer loyalty to operators is quite low in Malaysia – the Net Promoter Score for operators in the country is in the range of –10 to –50.2 The newer operators are trying to increase their subscriber bases while incumbents are focusing on revenue growth The top telcos have lost users to the fast-growing U Mobile and other niche-focused MVNOs. U Mobile has been disruptive (in pricing and packaging) since its launch and has been fairly successful in attracting data- consuming young people and members of the working population. The operator has consistently increased its subscriber and revenue numbers, and is now focusing on improving profitability, which seems to be a logical step. MVNOs such as Merchantrade, REDtone International, Tune Talk, XOX Com and others have attracted subscribers from particular user segments (for example, students, immigrants and tourists). Tune Talk reached 1.5 million subscribers by 3Q 2015, which is a considerable proportion of the market. XOX launched an innovative referral-based postpaid plan in 2015, which rewarded users with payments in return for referring friends or family member to the operator’s services. However, competition between MVNOs has intensified too. YTL Communications (Yes) has been working to re-launch itself in the market. The company is moving beyond just WiMAX mobile broadband and announced the launch of its LTE network with VoLTE on 30 June 2016. 1 For more information, see Analysys Mason’s Emerging Asia–Pacific telecoms market: interim forecast update 2015–2020. Available at www.analysysmason.com/EMAP-interim-Jun2016. 2 For more information, see Analysys Mason’s Connected Consumer Survey 2016: mobile services and devices in emerging Asia–Pacific. Available at www.analysysmason.com/cc-mobile-emap-mar2016. © Analysys Mason Limited 2016 July 2016 Mobile operators in Malaysia must address consumer dissatisfaction in a highly competitive market | 2 Yes has collaborated with Samsung and launched a ‘free LTE enabled SIM and 30GB data bundle promotion with Galaxy J series handsets’. The company has not got significant investment plans in the next few years and its net debt has reduced, which gives it flexibility to be disruptive in pricing. Such disruptive pricing also fits with the company’s mobile broadband background and its position as a late entrant for LTE on handsets. The top-three incumbent operators have adopted various strategies to sustain their market position. Some of the strategies include: forming partnerships with various OTT providers (Spotify, YouTube, WhatsApp, etc.) to provide free data, music and video streaming bundles offering more data at the same price under various promotional activities expanding 4G networks to new areas of the country migrating 3G customers to 4G in order to increase the average data consumption per user building attractive bundles with the right mix of voice and data. Maxis focused on bundling and improving postpaid share of revenue through its MaxisONE plan. The operator attracted high-ARPU customers and foreign workers with its plans. Maxis recorded annual growth of 3.8% in service revenue and 2.7% in core postpaid revenue in FY2015 (according to its annual report). Digi increased its subscriber base from 9.7 million in 4Q 2014 to 10.3 million in 4Q 2015, by strengthening retail channels, improving 4G networks and launching attractively priced digital services and value-added service (VAS) plans. The operator achieved 6.9% year-on-year growth in its postpaid subscriber base and 3.4% growth in postpaid service revenue in FY 2015 (according to its annual report). Celcom kept its focus on business transformation, and is aiming to reduce customer churn and add new users by providing superior customer experience. Prices are falling but consumers are dissatisfied: the incumbents must understand users’ concerns Falling prices are a key reason for declining ARPU for telecoms operators in the last few years. However, customers are increasingly dissatisfied, which suggests that operators must make a concerted effort to understand this dissatisfaction. Our Connected Consumer Survey 2016 established that Malaysians are unhappy about poor data speeds, high prices and poor coverage. Incumbent MNOs will continue to try to defend their revenue share – partnerships with MVNOs could be valuable because they would help MNOs to earn revenue from particular niches – while the other players will focus on increasing their subscriber bases. Therefore, we expect competition to be intense in the next 2–3 years. After that, competition will plateau when MVNOs start to focus on profitability rather than gaining new subscribers or when the market begins to consolidate. Even the disruptive and new operators need to sustain profit in the long run and hence are likely to adjust their strategies over time. © Analysys Mason Limited 2016 July 2016 .