The Regulatory

1
The Regulatory Competitive Telecom Market In
The Asia-Pacific RegionIST-2001 Conference

• Teheran, Iran
• September 1-3, 2001

Page 1 September 1-3
2
Why Review the Regulatory Telecom Trends in
Asia-Pacific?

• Fixed Line Revenues Are Expected To Overtake
  Europe, And Grow From 134 Billion in 2000 to
  208 Billion in 2005
• According to the ITU, Over 1 Billion Additional
  Users Will Have Access to Fixed or Mobile
  Services by 2010
• Growth in Telecom Purchasing Power Is Therefore
  Expected to Come From the Asia-Pac Market in the
  Next 3-5 Years Leading to Large Scale
  Installation of State-of-the-Art Technology

Page 2 Sept 1-3, 2001
Source Gartner/Dataquest
3
Why Review the Regulatory Telecom Trends in
Asia-Pacific?

• Populations of Western Europe, the US and Japan
  Are Graying
• Asia-Pac Countries Have Youthful Populations,
  More Prone to Being Internet Cohorts As
  Telecommunications Becomes Available Prices
  Decline
• Asia-Pac Has Varied Market With Trend-setters
  Like Australia New Zealand to Laggards Like
  China Indonesia
• An Appropriate Model for Iran

Page 3 Sept 1-3, 2001
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Page 4 Sept 1-3, 2001
Source ITU 1999 Data
5
Deregulation in the Asia-pacific Region

• What Is Deregulation?
• Ending the State Monopoly of the PTT and Allowing
  Other Telephone Companies to Offer Services
• What Are the Advantages of Deregulation?
• More Competition Thus Cheaper Rates for
  Consumers
• More Ubiquitous Services Customers No Longer
  Have to Be Wait-Listed For Basic Services

Page 5 Sept 1-3, 2001
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Deregulation in the Asia-pacific Region
Advantages

• Higher Revenues For All Telecom Entities
  Including the PTT
• There Is A Widely-Held View That Those Asia-Pac
  Countries Bounced Back From the 1997 Economic
  Crisis Which Introduced Competition Early On
• Deregulation On Hold in Economically-Challenged
  Countries Like Malaysia, Thailand, Indonesia,
  The Philippines

Page 6 Sept 1-3, 2001
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Deregulation in the Asia-pacific Region

• What Has the Been the Driving Force Behind
  Deregulation Especially in the Asia-Pac Region?
• The Pressures of the World Trade Organization,
  Requiring Deregulation As a Prerequisite to
  Membership
• WTO Mandates
• Establishment Of An Independent Regulatory
  Authority
• Introduction of Cost-Based Pricing
• Technology-Neutral Regulations
• Rights of Interconnection

Page 7 Sept 1-3, 2001
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What Are The Steps In The Deregulation Process?

• Establishment of A Regulatory Body
• Privatization of the PTT OR
• Licensing to Foreign or Domestic Entities
• One-Time License Fee
• Revenue Sharing Model

Page 8 Sept 1-3, 2001
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What Are The Steps In The Deregulation Process?

• Who Are the Potential Domestic Entities?
• National Conglomerates Such as the Bharti Group
  in India
• Prominent Business Owners or Politicians Such As
  The Shin Corp in Indonesia
• Property Owners as In Hong Kong or Time.Com in
  Malaysia
• Railway, Gas Utility Companies Constructing
  Fiber Optic Networks Indian Railways, Indian
  State Electricity Company, New Zealand Electric
  Utility, China Unicom, etc.

Page 9 Sept 1-3, 2001
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Deregulated Services Have A Predictable Order

• International Services
• Mobile Services
• Internet Services
• Fixed Line Services

Page 10 Sept 1-3, 2001
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Deregulation International Services

• International Services Are The Most Lucrative
• In Korea 12 Licenses Have been Issued for
  International Long Distance Via Satellite
• Hong Kong has 40 Operators Offering International
  Long Distance
• India Ended Exclusivity of VSNL Two Years Earlier
  Than Planned

Page 11 Sept 1-3, 2001
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Deregulation Internet Services

• One of the Most Critical Areas for Deregulation
• Five of the Worlds Top 10 Internet User Markets
  Japan, China, Korea, Australia, Taiwan
• Due to the Open Nature Of The Market Growth Has
  Been Substantial
• In Malaysia the Number of Internet Users is
  Doubling Every Six Months
• China has over 10 million Internet Users 60
  ISPs, but Content is Controlled

Page 12 Sept 1-3, 2001
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Deregulation Internet Services

• ISPs Have Been Easily Licensed
• India Has Issued 150 Licenses to ISPs.
  Constructing a National Internet Backbone
• Taiwan Has 60 ISPs
• In Thailand, ISPs Have to Be Partially-Owned by
  CAT Has Held Back the Industry Created Higher
  Prices
• ISPs Have Trialed Free Internet Access
• Supported by On-line Advertising Revenue
• Carriers Hope To Offer Bundled Services

Page 13 Sept 1-3, 2001
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Deregulation Mobile Services

• Cellular Subscribers in the Asia-Pac Region Grew
  52 at the End of 2000 Reaching 230 Million Users
  Growth Rate Is Expected at 5-10 Per Annum
• In Korea, Japan, Singapore, Taiwan and Hong Kong
  Mobile Users Currently Surpass Fixed Line Users.
  China Is Expected To Follow

Page 14 Sept 1-3, 2001
Source Gartner/Dataquest
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Deregulation Mobile Services

• Main Drivers For Growth
• Improved Prosperity
• Improved Government Policies
• Increased Competition
• Lower Terminal Prices Service Packages
• Rapid Adoption of Prepaid Services

Page 15 Sept 1-3, 2001
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Deregulation Mobile Services

• Strong Competitive Market
• 65 Of Mobile Operators Are New Entrants
• Taiwan Which Was a Monopoly in 1997 Now Has Six
  Operators Mobile Ownership Has Risen From 7 to
  Over 60
• Malaysia Has Five, Hong Kong Has Six
• Globe Telecom of Philippines Is Fastest Growing
  and Offers SMS Mobile Chat
• India Which Is One of the Least Deregulated
  Markets Has 22 Mobile Operators
• Consolidation Expected To Occur Amongst Mobile
  Operators

Page 16 Sept 1-3, 2001
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Deregulation Fixed Line Services

• Last Area To Be Deregulated
• Chungwha Telecom Granted Three Fixed Licenses in
  Late 2000 (LMDS Fiber to the Building)
• Hong Kong Has Granted Five WLL Licenses For
  Fixed Line Service
• Singapore Brought Forward Full Deregulation Two
  Years To Become Regional Hub in Asia

Page 17 Sept 1-3, 2001
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Deregulation Fixed Line Services

• In India, Additional Licenses Will be Granted For
  Underserved Areas As Well As For Domestic Long
  Distance Market
• Thailand has TOT TelecomAsia
• New Regulations in Indonesia Will End Telkoms
  Monopoly Over Local Calls in 2002 and Over
  Domestic LD in 2003

Page 18 Sept 1-3, 2001
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What Are the Issues Surrounding Deregulation?

• Fear of Loss of Control and Revenues by the
  Incumbent PTT
• Bureaucratic Delays Telecom Revenues are The
  Bread Butter For National Treasuries
• Foreign Ownership
• Privatization

Page 19 Sept 1-3, 2001
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Foreign Investment/Ownership

• Political Issues Relating to Deeply-Rooted Values
  of Sovereignty and National Security
• More Palatable in More Deregulated Countries Like
  Australia, New Zealand and Singapore
• Becoming Increasingly More Acceptable With
  Foreign Ownership of Mobile Companies and ISPs
• Asia-Pac Countries Are Increasingly More Open
  Than Middle Eastern Countries

Page 20 Sept 1-3, 2001
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Foreign Ownership

• Increasing Teledensity Requires Massive Capital
  Infusion From Private Sector
• Taiwan Allows 60 Foreign Ownership vs. the
  Previous 20 Ceiling. Korea Looking for Foreign
  Partners
• Indonesian Government Considering Selling
  Majority Stakes in Indosat and PT Telkom to
  Foreign Investors
• Even China is Opening Up Its Mobile Paging
  Operations to 30-50 Foreign Ownership
• Main Source of Foreign Capital in China Is
  Overseas Chinese. India Is Looking to Its
  Expatriates in Silicon Valley

Page 21 Sept 1-3, 2001
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Privatization

• 53 of Countries in Asia-Pac Have Privatized
  Operators. Europe Has 63, Americas 74, Africa
  35, Arab States 29
• Still Culturally Questionable for Some
  Asia-Pacific Countries
• Labor Movement Usually Against the Strategy

Page 22 Sept 1-3, 2001
Source ITU
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Privatization

• Usually More Palatable to Those PTTs Who Have
  Chosen Not to Have Foreign Partners
• China Unicom Successful in a 4.92 Billion IPO in
  Late 2000
• Indias VSNL Is Listed on American Stock
  Exchanges
• Advantages
• Gives the PTT The Ability To Sell Shares To The
  Public, Be Listed on Foreign Exchanges Raise
  Funds
• Use the Funds to Provide More Services Compete
  More Effectively

Page 23 Sept 1-3, 2001
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Privatization

• Lack of Liquidity in Global Equity Markets Will
  Hinder Privatization Efforts
• 30-40 Drop in Market Value
• Efforts in Korea, Taiwan Even Turk Telecom Have
  All Hit Obstacles
• Both Korea Taiwan Had Privatization Plans By
  Selling 59-66 Stake in Their State PTTs

Page 24 Sept 1-3, 2001
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What Are the Remaining Issues Even With
Deregulation?

• PTTs Lack of Willingness to Unbundle the Local
  Loop Due to High Costs New Zealand China
• PTTs Still Have Total Control Over Telecom
  Infrastructure Charge High Interconnection Fees
• China Unicom Could Not Use China Telecoms
  Infrastructure Even With A License
• PTTs Still Have Lions Share of the Local Market
• Even in Australia, Telstra still dominates 100
  of the Local Market

Page 25 Sept 1-3, 2001
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What Are PTTs Doing to Fight Off Competition

• PTTs With Longer History of Deregulation Are
  Moving Up the Value Chain Providing Higher
  Value Services Solutions
• DSL Services
• IP-Based Infrastructure Chungwah Telecom Has
  Transformed Itself From a PSTN-based Voice
  Service Provider to an IP-based Data-Service
  Provider
• Expand Into International Markets by Investing in
  Mobile Internet Ventures Unlike Europes
  Strategy

Page 26 Sept 1-3, 2001
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What Are the Competitors Doing?

• Initially Competitors Require Significant Time
  Resources To Install Alternative Infrastructure
• Wireless Local Loop in India, Indonesia,
  Thailand, New Zealand, Hong Kong, Korea Even In
  Deregulated Markets Like New Zealand
• India Also Considering CDMA Short Distance
  Technology As a Substitute for Fixed Local Loop

Page 27 Sept 1-3, 2001
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Conclusion What Is the Overall Impact of
Deregulation?

• Creates Similar Goals For Both the PTT
  Competitive Carriers
• Advent of New Technologies Especially IP Data
  Services
• Global IP Telephony expected to grow 67/year
• Asia-Pac IP Telephony Will Grow from 11.2 of
  Revenues in 2000 to 16 in 2003
• Service Convergence Merging Mobile, Cable
  Internet Operations

Page 28 Sept 1-3, 2001
Source Tekplus
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www.etinium.net
Telecom Consulting Market Research
Firm Specializing in International Wireless,
Wireline IP Technologies
Page 29 Sept 1-3, 2001