Signs of revenue growth beyond connectivity in Asia

As telcos strive to diversify service revenues and expand into new areas to drive growth and counter stagnation in traditional connectivity income, the latest financial reports from some of the operators in Asia make for interesting reading.

Asian operators are not alone in pursuing businesses beyond their traditional telco roots, particularly in B2B, but some have started to show progress by breaking out revenue for these non-core lines of business. Looking at operators in China, Japan, Malaysia, and the Philippines offers a snapshot of this shift in how telcos report earnings to flag diversification.

According to Mark Newman, Chief Analyst at TM Forum, "Telcos in Asia are leading the way in terms of creating new lines of business in B2B, non-traditional areas such as managed cloud services and, more broadly, digital transformation solutions particularly for SMEs."

Operators in other parts of the world can look to their peers in this region to see "the value of experimentation and innovation - trying, failing and moving on," he said.

China Mobile rides “second curve”

China Mobile refers to digital transformation services as the “second curve” that will continue to drive growth. For the full year ending 31 December 2022, the telco’s operating revenue grew 10.5%, compared to the previous year, and telecom service revenue grew 8.1%. While the world’s largest operator continued to add mobile and Internet of Things connections in the last year, digital transformation services accounted for 25.6% of service revenue. These newer services also contributed to 79.5% of incremental service revenue.

China Mobile’s digital transformation revenue, which grew by 30% in 2022, includes new services across consumer and enterprise businesses, such as Mobile Cloud Drive cloud storage, smart home services, IoT, ICT, and industry cloud services.

Globe Telecom highlights “non-telco” growth

Philippines-based Globe Telecom said growth in data services and “non-telco businesses” drove a 2% increase in service revenues in the quarter ending 31 March 2023. The operator described “robust performance” in new business units, which accounted for 3.6% of the Group’s total service revenue and 4.2% of income before tax.

Globe’s non-telco businesses include ECPay (e-payment service), AdSpark (digital and mobile marketing solutions), Asticom (shared services for business staffing), and Yondu (IT solutions). Revenue from these areas grew a whopping 80% in the first quarter of 2023, compared to the previous year.

The telco has placed strategic importance on expanding into new areas and transitioning from a telco to a techco. Ernest Cu, President and CEO of Globe Telecom, said the operator had made “significant strides as a digital solutions platform” and describe the Group as a “family of tech companies at varied corporate life stages” in the operator’s 2022 Integrated Report.

Cu also flagged examples of the sectors where the telco now has a presence, namechecking “fintech through GCash, health tech through KonsultaMD, adtech via Brave Connective, edutech with Edventure and KodeGo, climate tech, e-commerce, manpower services, IT, media, entertainment, and more.”

NTT DOCOMO shines a light on Smart Life

For the fiscal year ending 31 March 2023, NTT DOCOMO returned to growth in both revenues and profit for the first time since full-year 2018, driven by strong growth in enterprise and Smart Life services while consumer communications continued to decline. Operating revenue was up 3.2% year-on-year and operating profit increased by 2%.

The Smart Life business was the star performer for revenue growth with a 16% increase to ¥1.1 trillion (US$7.8 billion) compared with the previous year. Enterprise revenues grew 5% to ¥1.8 trillion in the period. By 2025, DOCOMO is aiming for the Enterprise and Smart Life businesses, together, to account for more than half of its total revenue.

The Smart Life portfolio of applications and content has been developed by DOCOMO and its partners in the areas of entertainment, finance, payments, insurance and healthcare. The operator continues to expand the services, such as a recently launched retail electricity business. It aims to leverage its “d Payment” app to support other financial services. In entertainment, the telco relaunched its Lemino video streaming service, setting a target to reach 20 million monthly active users “as soon as possible,” and established a content production business called NTT DOCOMO Studio & Live.

DOCOMO’s parent NTT has also recently restructured its domestic and international businesses to create a one-stop shop for enterprises. It plans to leverage 5G and add more partnerships with enterprise software and systems integration providers to meet enterprise needs.

Mixed digital results for Axiata

While Malaysian operator group Axiata saw “accelerated digitalisation” among consumer and business customers, there were mixed results from two of its key digital businesses in full-year 2022. For example, the operator’s Boost fintech business, which offers financial services across seven countries in Southeast Asia, reported an 87.5% year-on-year revenue hike in 2022, driven by “offline payments” and higher loan disbursement. The number of Boost Life e-wallet users increased by 7.4% to 10.4 million.

However, for the operator’s analytics, data, advertising (ada) subsidiary, which provides integrated digital, analytics and marketing solutions in ten markets in the region, revenues were down 1.7% in 2022 due to lower spending on digital marketing solutions. The operator noted “strong growth” in customer engagement and e-commerce solutions, but this only partly offset the drop in media spending.

Read our recent report A roadmap for Asia-Pacific growth to find out more.