WiMAX Forges Ahead in Emerging Markets---Malaysia P1 operation analysis

Despite various doubts last year, WiMAX gained a significant momentum in 2009, and it has started to open the doors for emerging markets as a substitute for fixed networks. In many emerging markets, especially Russia, Malaysia, India, Pakistan, several WiMAX operators have reached a series of new milestones. Undoubtedly, Packet One (P1 for short) is one of those bright stars in WiMAX industry, because of its impressive growth in the past year. P1 has become a good example which demonstrates how WiMAX operators move forward in emerging markets. The question which strikes our mind is “What are the key factors that drive P1 to get success?”. This article will reveal the mystery.

1. Suitable market environment

Malaysian market is very suitable for broadband development in the following aspects.

Ø　　 Low broadband penetration, higher PC penetration and fast broadband growth rate

Ø　　　　　　 More than half of the households were uncovered by fixed line. The lack of wireline has already become the bottleneck of broadband growth.

Ø　　　　　　 Due to a comparatively high GDP per capital in emerging markets, most of the residents can afford the broadband service.

Ø　　　　　　 Customers’ wireless broadband requirement is already in the mature stage.

By the end of 2008, Malaysia had a low broadband penetration (6%) but a high PC penetration (27%). The BB/PC ratio is only 20%, and broadband grows fast. It is a promising market which is very suitable for WiMAX. There are still a large number of PC users without broadband access due to limited fixed line and lack of competition in the fixed broadband field. Malaysia has higher GDP per capital (6300USD/year) as compared with other emerging markets and the dominant broadband price is only 25USD/month, which means the annual broadband expenditure only accounts for 4.7% of people’s revenue. This means most of Malaysians can afford broadband connection.

The fast broadband growth rate indicates that there is indeed high interest and potential in high-speed broadband service offerings. Wireless broadband gradually becomes the first choice of new subscribers instead of using wired broadband. From Q4 2008 to Q2 2009, wireless broadband users accounted for 70% of the new broadband users. Customers’ trust in wireless broadband has established a close bond which has resulted in a positive push towards WiMAX development.

Good macro environment is the natural soil for P1 success.

2. Quick network deployment

Network coverage is the most important factor for service launch. Fast deployment and scale effect are the main two key factors.Within one year, P1 has quickly covered 9/12 states in West Malaysia and with ambitious target to achieve 35% population coverage (by using over 900 sites) by the end of 2009. Although there is a definite gap as compared with the leading HSPA operators, most of the densely populated areas have been covered, like Klang Valley and large-to-medium cities and towns. P1 is also expected to roll out its WiMAX service in Sarawak and Sabah (East Malaysia) by the first quarter of 2010. In October 2009, Malaysia's telecommunications regulator has fined three of the country's four WiMAX licensees for failing to meet the required network coverage. Only P1 met this high target.

Powerful network coverage enhances the strength to compete with leading operators.

 3. Effective WiMAX positioning and flexible packages

Enlarging network coverage is just the first step, while effective product positioning is critical for consumers to be determined to choose its service. WiMAX as a 4G technology can be flexible to support different business models, for example wireless DSL, laptop-based nomadic and mobile broadband, mobile handset-based broadband and Internet of Things. Wireless DSL and laptop-based nomadic and mobile broadband are the best choice in the market where broadband demand cannot be met. P1 adopts a differentiated competition strategy against competitors. For 3G/HSPA operators, P1 positions WiMAX as a 4G technology that is superior to current HSPA or 3G technologies, with 10 Mbps download rate which is much higher than current 3.6 Mbps of HSPA operators. For the incumbent DSL operator, P1 considers WiMAX as a wireless technology with flexible, convenient and economic features. Consumers do not have to pay for a fixed-line package — and young people are not interested in fixed lines and their associated costs anyway.

Furthermore, P1 designs some smart tariffs which take full account of the situation of Malaysian Internet expenditure. On the one hand, P1 offers a RM99 package as the dominant package for the users whose monthly Internet spending is between RM60 to RM90. The segment is the mainstream group for Internet access, which accounts for 50% of all users. This offer can maintain the average ARPU at a considerable level. On the other hand, P1 offers a “stimulus package”: RM49 per month for those users whose monthly Internet spending is below RM50, which significantly reduces the market entry, and has a strong appeal to low-end customers and light users. The offer aims to enlarge the subscribers scale.