The Asia-Pacific region is home to some of the largest and most successful telecoms operators on the planet, many of which are working hard to lay the groundwork for the rollout of 5G services. But while their end goals are similar, recent market developments reveal that some are in better health than others.
Hot on the heels of the publication of Total Telecom’s Global 100 report comes the ‘Asia 32’, a ranking of the largest operators across the Asia-Pacific by revenue. As has become the norm, the Chinese and Japanese giants dominate, claiming the top six places in the table, each one retaining its position compared with the previous report*.
The fun starts in seventh position, which is now occupied by KT, the South Korean operator having hopped over Australia’s Telstra to gain a place in the ranking.
Taking the numbers at face value, the change is primarily the result of a forex issue. In Australian dollar terms Telstra’s revenues were essentially flat compared with the previous report – and indeed the intervening year – but in euro terms that translated into a decline of over €1 billion. Meanwhile, KT shed less than half a billion euros from its top line, a decline of 2.76% compared with a 2.89% slide in reporting currency terms.
However, when it comes to mood, and more importantly to market sentiment, there is a veritable gulf between KT and Telstra.
Last week saw Telstra make a major move to overhaul its business when it presented its latest strategy update, dubbed Telstra2022. Amongst other things, the telco plans to cut 8,000 staff, that’s around a quarter of its workforce; sell off A$2 billion worth of assets; spin off its infrastructure business as InfraCo; and radically simplify its service offering by eliminating its 1,800 consumer and business plans and replacing them with just 20.
It expects to cut an extra A$1 billion in costs, on top of a previously-announced A$1.5 billion target, through the various initiatives, but its balance sheet will suffer in the short term: it will book additional restructuring costs of around A$600 million in the 2019 financial year (the 12 months to the end of June 2019). Telstra also warned that the reduction in the number of tariff plans will shave up to A$500 million from service revenues per year for the next three years. That revenue loss alone should not affect Telstra’s ranking in the Asia 32, but there are a number of players in the wider Global 100 snapping at its heels.
Telstra noted that the new InfraCo unit will not include its mobile network assets, including spectrum, towers, RAN equipment and some backhaul, since these will provide an important differentiator for Telstra as it works to launch 5G.
“We will be network ready in the first half of FY19 with full rollout to capital cities, regional centres and other high demand areas by FY20,” Telstra CEO Andrew Penn announced.
By contrast, KT was in jubilant mood last week as South Korea’s Ministry of Science and ICT announced the results of the country’s 5G mobile spectrum auction. KT secured 100MHz of 3.5GHz spectrum for 968 billion won (€753 million) and 800MHz of 28GHz frequencies for KRW207.8 billion. Rivals SK Telecom and LG Uplus also won spectrum in both bands, the process raising KRW3.62 trillion (€2.8 billion) in total.
As usual, the world expects Korea and Japan to be in the vanguard of 5G rollout, and the issue of spectrum will certainly help Korea in that regard. KT plans to launch commercial 5G services in March next year – whether or not devices and chipsets are ready by then remains to be seen – having carried out a successful and high-profile trial at the PyeongChang Winter Olympics in February.
But let’s not forget that, like many of its counterparts elsewhere in the world, KT is battling declining revenues and it will doubtless hope that its heavy investment in the next generation of mobile technology reverses this sadly familiar trend.
Across the sea
Japan still dominates the Asia 32, its three ranked operators together generating 36.7% of the total revenues, but its share has shrunk by 0.7 percentage points since the last report. This is no small part linked to the loss of €1.5 billion from NTT’s revenues. The Japanese giant increased revenues by 2.6% over the period, but forex fluctuations impacted its numbers in euros, and it was a similar story for domestic rivals Softbank and KDDI.
NTT is among the growing number of international telcos to have carried out various 5G technology trials over the past year or so. And earlier this month government ministers from Korea, Japan and China met in Tokyo and agreed to collaborate on 5G standardisation. China’s three mobile operators, incidentally, have increased their revenue share in the Asia 32, accounting for 34% of the total, up from 33.4%.
India contributes the most operators to the Asia 32 table with five representatives, but its revenue share is just over 5%, down slightly on the previous report. As detailed in the full Global 100 report, India’s telcos are experiencing more than their fair share of difficulties, with Reliance Communications and Tata Communications both pulling out of retail telecoms on the back of fierce competition from newcomer Reliance Jio Infocomm. Jio will also be a newcomer to the Global 100 in the next report. It generated revenues of 239.16 billion rupees in the year to the end of March 2018, which equates to around €3 billion and would afford it 22nd place in the current Asia-Pacific ranking and 65th in the full Global 100.
There was a newcomer to the current Asia 32 table in the form of Malaysia-based Axiata, which ranks 17th in the Asia-Pacific and 51st in the overall Global 100. There were previously just 31 representatives of the Asia-Pacific region in the Global 100.
The region’s overall revenue total came in around €1 billion higher than in the previous ranking, with the Asia 32 together generating €502.3 billion. The Asia-Pacific accounted for 36% of total Global 100 revenues, down from 38% two years earlier.
*Ranking changes refer to the companies’ positions in the table two years earlier, when the last full set of figures was analysed. For more information on the methodology of the Global 100, please download the full report. – Total Telecom