Mobile broadband has passed the halfway mark in Asia to become the dominant mobile technology in 2016. Ovum’s latest World Cellular Information Service subscription forecasts for Asia highlights a significant shift in 2016 to mobile broadband (MBB), and signals an accelerating decline for 2G from this year.
With a growth rate of 28% last year, Asia’s MBB subscriptions (LTE, W-CDMA, and TD-SCDMA) accounted for over half of all mobile subscriptions, with penetration tipping the scales to end the year at 53%, or 3.9 billion subscriptions.
Growth is coming largely from LTE, which accounts for nine out of every ten MBB net additions for the year. The region’s most populous countries – China, India, and Indonesia –are the biggest drivers of this segment, as young urban consumers connect to 4G networks with new smartphones.
Momentum has shifted to MBB, and 2G subscriptions will begin to decline rapidly, falling from just under half of all mobile connections at the end of 2016 to just 13% in 2021.
There will still be over half a billion subscribers at that time, and many emerging markets will continue to have large portions of their population on 2G. However, the region’s two largest countries – China and Indonesia – will see sub-10% 2G subscriptions in 2021. This, coupled with MBB penetration at 100% or higher, could spur regulators in those countries to approve 2G’s cut-off sooner rather than later, allowing spectrum to be redeployed for data services.
This is already the case with two of Asia’s most advanced markets – Australia and Singapore – which will be shuttering 2G this year to re-farm spectrum to boost 3G/4G network capacity. Operators in developing markets, especially in Indonesia, Myanmar, Vietnam, Sri Lanka, and China, could use Australia and Singapore as models for their own 2G decommissions.
Accelerating 2G’s decline to support burgeoning data growth
While 2G’s decline is inevitable, emerging market regulators are likely to be comparatively stringent with regards to 2G’s cutoff – older technologies remain sticky in these countries, resulting in slower migration and flatter adoption trends. Operators can speed up migration by appealing to price sensitivities of late adopters.
Bundling no-frills 3G feature phones with attractive airtime offers and trade-in bonuses can be an effective way to nudge 2G users into upgrading. A large chunk of new device costs can be offset by operators offering trade-in bonuses for old 2G devices.
In the case of Singapore, prepaid bonuses of S$30 local talk-time were provided with new purchases. The use of bonuses can be effective in significantly lowering total cost of ownership, especially in emerging markets like India, where 3G feature phones sell for just a few dollars more than 2G devices.
Upgrading 2G laggards to smartphones may prove to be more difficult, as handset affordability and a lack of familiarity with smartphones pose barriers. Low-priced smartphones are still more than five times the cost of 2G devices, and additional data costs may not make sense for this smaller segment of typically lower income, rural users – at least initially.
Also, battery life – which was the second most important factor for Indian consumers after price when choosing a device – is likely to continue plaguing smartphones adoption through the medium term, providing additional incentive for laggards to stick to feature phones.
Ultimately, growth of MBB in Asia’s emerging markets raises the urgency with which operators will need to replace 2G networks. Australia and Singapore may indeed be harbingers of what is to come, sooner rather than later.
Written by Charles Moon, Practice Leader, Asia, Ovum