Staying ahead of digitalisation curve
The telecommunications industry in Southeast Asia is changing quickly, primarily because more and more people are using mobile devices and becoming interested in digital services.
As per GSMA (Global System for Mobile Communications Association), the implementation of 5G is advancing swiftly in the area, with the estimated number of users surpassing 200 million in Asean by 2025.
At the same time, the digital economy in Southeast Asia is estimated to grow to US$330 billion (RM1.51 trillion) by 2025, offering plenty of chances for lucrative investments.
Telecommunication companies in Singapore, Malaysia, Thailand, and Indonesia, which have already invested extensively in advancing their 5G infrastructure, could potentially face shortcomings if they fail to adjust to the evolving landscape.
By the conclusion of 2022, Singapore emerged as the global pioneer in providing 5G coverage to its entire nation. Meanwhile, Thailand, being amongst the initial countries in the Association of Southeast Asian Nations (ASEAN) to grant 5G spectrum licenses, achieved coverage for 85% of its population.
The mobile industry in Asean experienced a rapid growth due to the Covid-19 pandemic, as numerous enterprises in the area were compelled to transition into a digital economy.
Enterprises and individuals throughout Southeast Asia enthusiastically adopted electronic commercial activities and financial technology solutions, including digital transactions and various internet-based services.
The robust economic foundations of Asean have been supporting the expansion of this growth, thanks to its market of 670 million people, youthful and technologically advanced population, and increasing internet usage.
Countries in the area are starting to realize the significant positive impact that the advancement of digital infrastructure has on economic growth and competitiveness. As a result, they have introduced numerous programs to encourage investments, simplify regulations, and foster collaborations between the public and private sectors.
In the year 2021, Malaysia introduced its MyDigital plan, aiming to transform into a technologically advanced, prosperous nation and a prominent figure in the digital economy within the region.
The plan emphasizes six key areas of focus, which are as follows: promoting the use of technology to modernize the public sector, enhancing economic competitiveness through digitization, developing the necessary digital infrastructure, fostering skilled and adaptable digital professionals, promoting equal access to digital opportunities for all members of society, and establishing a secure and ethical digital environment that inspires trust.
The Jendela 2021-2025 strategy, with a price tag of $4.7 billion, was designed to guide Malaysia on a path towards enhanced digital connectivity. The plan focuses on improving the effectiveness of the country's infrastructure and aims to provide gigabit speed internet to approximately nine million households by 2025.
The Digital Economy and Society Ministry in Thailand has introduced the Digital Economy and Society Development Plan with the goal of utilizing digital technologies to their fullest extent in all socioeconomic endeavors in order to generate wealth, stability, and sustainability. One of the main areas of emphasis in this plan is the improvement of fibre infrastructure, which is expected to reach 75% of households by 2027.
People will experience enhanced knowledge and competence in using digital technology, access to better and well-paying employment, and enhanced quality of life through this shift. Both small and large companies will have increased chances to grow and expand their presence at local, regional, and global levels due to the emergence of new avenues for generating digital income.
Exploiting the upcoming phase of expansion
However, even with the ongoing digital revolution in the Southeast Asian region, telecommunications profits and expenditures of IT companies are stagnating. The present economic situation, characterized by soaring interest rates and the depreciation of currencies, necessitates an extremely efficient approach.
In order to establish a profitable digital foundation, companies require novel possession arrangements, improved technology, and innovative business frameworks. To accomplish this, telecommunication companies in the area will require an extra capital of approximately $40 billion to $60 billion within the upcoming five years.
In today's setting, telecom companies may encounter challenges in financing their own infrastructure. Providers will have to reconsider their asset ownership and business models.
In order to meet the increasing demand of smartphone users in Southeast Asia, it is crucial to improve the mobile internet infrastructure. This task entails expanding the network's reach, enhancing the current infrastructure for quicker data transmission, and embracing the advancements offered by 5G technology.
An additional set of individuals who should see the next five years as their final major chance to construct new structures are the autonomous proprietors and administrators of towers and data centers.
The co-location of data centres, which involves leasing space for servers and other computer equipment, is experiencing a significant boom and is predicted to witness a remarkable 70% surge by 2022 to 2027. During this period, a whopping 20 fresh data centres are anticipated to be established in the area.
Nations like Malaysia and Vietnam, which possess plentiful land resources and offer favorable cost advantages, are now attracting significant investment in the data center industry.
A recent report by Arizton, a research company, forecasts that the data centre industry in Malaysia will surpass the value of US$2 billion by the year 2028. The market is set to experience significant growth due to the substantial investments made by key players like Alibaba Cloud, Google, and Meta in the wholesale co-location sector of Malaysia.
Nations like Vietnam have the advantageous opportunity to enjoy reduced development expenses and access to affordable and dependable sources of power.
Leaders in investment firms should adapt to changes in both the telecommunications and independent data center markets by adopting more adaptable and sophisticated investment strategies.
The days of simply throwing money at big established companies to grow rapidly are over. Factors such as the location, the dependability of the infrastructure, the energy and climate conditions, and the regulatory environment all have a role to play.
The expanding digital scene in Southeast Asia offers remarkable prospects for telecommunications companies, tower companies, and independent operators of data centers. However, in order to seize these opportunities, companies must be open to reevaluating their business models and ownership structures.
In the meantime, investors should incorporate a thorough strategy that utilizes knowledge of the market, analysis of regulations, and expertise in the industry. Through meticulous evaluation of the market's potential, investors can pinpoint the most advantageous prospects to place their bets on.
In today's world, it is more crucial than ever before to acknowledge the possible influence of groundbreaking technologies and innovative business strategies in the telecommunications industry and prepare accordingly to maintain a competitive edge.
The author holds the position of Chief at Arthur D. Little, Southeast Asia. Thoughts and feedback can be sent to [email protected].
