Operators strive to grow B2C revenues in Asia-Pacific

This extract from our new report A roadmap for Asia-Pacific telecoms growth examines the challenges for operators in the region when it comes to diversifying B2C revenues.

Communications service providers (CSPs) in Asia, and more specifically North Asia and Asia-Pacific, were always enthusiastic about the potential for new products and services in B2C markets. Japan and South Korea led the world in the launch of mobile value-added services before their customers were seduced by Google and Apple apps store experiences. And operators across Asia-Pacific were the biggest cheerleaders for expansion into new markets such as mobile TV, games and music.

But the lure of the B2C market has faded. Operators are continuing to invest in their core B2C telecoms businesses – home broadband, for example, is proving a strong growth area in many markets – but opportunities for diversification in B2C services are limited.

Only seven of the 25 operators covered in our report break out B2C revenues (see chart). What’s more, those revenues – and revenue trends – present an extremely mixed picture. Four of the seven operators – Softbank, Spark New Zealand, Telekom Malaysia and Telstra – experienced a decline in B2C revenues over the period. In Softbank’s case this was a function of intense competition in the Japanese market. Spark New Zealand has shifted its focus away from B2C and to new opportunities in B2B. And Telstra has suffered a long decline in its consumer business due to changes in the overall structure of the market driven by regulation.

5G advances

5G services have now arrived in many countries across Asia-Pacific. But hopes that they would generate a sustainable ARPU uplift have largely faded. South Korea provides the best illustration of how 5G adoption and ARPU evolves in consumer markets. All three operators in the country had more than half their total customer base connected to 5G networks at the end of 2022. But they have now stopped distinguishing in terms of revenue between LTE and 5G. Furthermore, two of the three operators – LG U+ and SK Telecom – recorded declines in ARPU between 2021 and 2022.

Indeed, the evolution of 5G ARPU levels seems to be consistent in every market in which services launch. 5G services initially have higher ARPU levels than LTE, but this tends to be because higher-ARPU customers tend to adopt 5G before lower-ARPU ones. As more customers sign up to 5G, the ARPU differential tends to narrow.

For example, Thai operator AIS had 48 million customers at the end of 2022, 6.8 million of which are 5G. These customers had ARPU levels that were 13%-17% higher than other customers in the period April to October 2022. However, overall ARPU levels (all customers) are drifting slowly downwards.

Indian operator Reliance Jio has launched 5G across 134 cities in India and is committed to a pan-India rollout by the end of this year. But its focus – as far as generating new revenues in the B2C market is concerned – is more about using 5G as a fixed wireless access technology.

JioAirFiber is a home broadband service that is essentially a wireless plug-and-play hotspot device. It represents one of the technology options that Jio is deploying as it seeks to roll out high-speed broadband connectivity across India. It will be the preferred technology option where Jio does not believe it will generate the returns from fiber-to-the-home or -building (FTTH or FTTB) to justify the investment. It has set itself a target of selling 100 million JioAirFiber connections.

Another interesting service concept announced by Jio is JioCloudPC, which brings as-a-service business models to PCs and applications that run on PCs. Customers will pay a monthly fee based on their usage of services in the cloud.

Broadband growth

The fixed home broadband market has given Asian telecoms operators a much-needed boost at a time when price competition and market saturation have resulted in stagnation of mobile businesses. Research firm Omdia calculates that the total number of broadband connections in Asia grew by 10.2% in 2021 and 9.4% in 2022. But it is forecasting a sharp slowdown to 3.6% in 2023 and 2.4% in 2024. Fiber is the dominant broadband access technology, capturing 88% of the region’s 801 million fixed broadband subscriptions at the end of 2022, according to Omdia.

5G fixed wireless access (FWA) subscriptions are forecast to grow from 1 million at the end of 2022 to 7 million at the end of 2027, with Japan, Australia, India and the Philippines leading the market. In Europe, a growing base of home broadband customers gave operators a launchpad into the pay-TV market, a customer base to which to sell TV services and a differentiator from competing retail broadband providers. But pay-TV has not been an important part of the operator landscape in Asia-Pacific. Indeed, only one country in the region – South Korea – has a fully-fledged, operator-centric pay-TV sector.

This is down to a number of factors. First, some countries have made a point of separating out the telecoms and TV sectors, and the companies operating in them. In others, a pay-TV market has never truly emerged because services are simply not affordable for the vast majority of the population.

The escalating cost of sports rights is also deterring operators from investing in the TV market. New Zealand operator Spark had considered sports TV coverage as one of its key strategic focus areas until 2021, but made the decision to exit the business at the end of last year, citing the high cost of TV rights and its intention to invest more in B2B and the healthcare ICT services business.

Bundling and reselling

Bundling fixed, mobile and TV services has never been a strong focus for the majority of telecoms operators in the region because of the immaturity of the broadband and pay-TV sectors. However, bundling non-telecoms services with mobile subscriptions is a growing trend.

There are also some limited revenue growth opportunities in partnership agreements. Direct carrier billing (DCB) or direct operator billing (DOB) is the term given to using telecoms operators’ customer and billing relationships to sell other services. For example, both Google and Apple have DOB relationships with many operators in the region. Furthermore, many consumers pay for their subscriptions to video platform services such as Netflix or Disney Plus using their telecoms service account. However, on the whole these are not generating meaningful revenues for CSPs because the revenue shares offered by these companies is relatively small.

B2C innovations

Energy represents an emerging sector for the telecoms industry to tap into – on multiple levels. In B2B, telecoms operators are assessing opportunities in smart grid and mobile private networks (MPNs). But in B2C, a simpler opportunity exists in reselling energy services.

Telstra has set up a business called Telstra Energy, which both secures energy from renewable sources for its own business and retails energy to its customers. Japanese operators NTT and KDDI are also expanding into the energy services sector. NTT Anode Energy is a smart energy business with a focus on developing green power both to help NTT achieve its sustainability targets and to wholesale and retail to third parties. KDDI, meanwhile, has set up au Energy Holdings, which brings together several businesses including auDenki, a retail electricity provider with 3.2 million customers at the end of 2021.

Healthcare is another vertical market opportunity CSPs are looking at across both B2B and B2C. For example, Globe Telecom’s wholly-owned venture capital business in the Philippines, 917Ventures, has two B2C healthcare businesses, KonsultaMD and HealthNow, which provide online medical consultations.

And while most CSPs are watching and waiting to see how the metaverse takes shape, South Korean operator SK Telecom has launched a metaverse service called Ifland for its customers and a metaverse platform which it has now exported to 49 countries. Ifland had 3.7 million monthly active users at the end of 2022 and a cumulative total of 21.3 million downloads of its app.

Read the full report to find out more, including: results from our survey of service providers in the region; service revenue trends for Asian operators; B2B strategies; mobile payments in Asia; and markets profile of South Korea, India and China.