© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Research Forecast Report The developed Asia–Pacific.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Research Forecast Report The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 March 2013 Tom Mowat, William Hare, Katrina Bond and Satvik Singhania

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Contents [1] 8.Executive summary 9.Retail revenue in developed Asia–Pacific will remain roughly flat in nominal terms between 2012 and 2017 10.The shift towards mobile services will continue in developed Asia– Pacific: mobile broadband will account for 39% of broadband connections in 2017 11.Smartphones will account for the majority of handsets by 2013, while 4G SIMs will account for 63% of mobile connections in 2017 12.The penetration of fixed voice connections will decline, but fixed broadband will grow to 34% – nearly half of which will be FTTH/B connections 13.Key findings and implications 14.Key findings and implications: mobile telecoms services [1] 15.Key findings and implications: mobile telecoms services [2] 16.Key findings and implications: fixed telecoms services 17.Significant changes since previous forecast – Australia 18.Significant changes since previous forecast – Hong Kong 19.Significant changes since previous forecast – Japan 20.Significant changes since previous forecast – Singapore 21.Significant changes since previous forecast – South Korea 22.Significant changes since previous forecast – Taiwan 2 23.Market definition and methodology 24.Geographical coverage 25.Key forecast assumptions [1] 26.Key forecast assumptions [2] 27.Forecast methodology: our comprehensive telecoms forecast model is supported by a sound knowledge of markets 28.Forecast methodology: we base our forecasts on reported metrics, and insight into market and competitive dynamics 29.Data series definitions: mobile 30.Data series definitions: fixed 31.Forecast: developed Asia–Pacific region 32.Six countries account for 98% of developed Asia–Pacific’s population of 239 million, and 97% of its telecoms revenue 33.Telecoms revenue will decline during 2012–2017, but mobile broadband data revenue will partially compensate for declining voice revenue 34.Retail telecoms revenue growth will lag considerably behind GDP growth during the next 5 years 35.Mobile penetration had reached 115% at the end of 2012, and will grow to 133% by the end of 2017 36.Growth in mobile connections will come mainly from the addition of new, non-handset-based mobile broadband subscriptions Slide no.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Contents [2] 37.The region already has a high rate of 3G penetration, and 83% of its population will have 4G by 2017 38.Smartphones will become the most common type of handset during 2013 39.Growth in revenue from mobile handset data services and mobile broadband will outweigh the decline in mobile voice revenue 40.Voice services’ share of mobile service revenue will decline to less than half during the forecast period 41.Growth in demand for mobile voice services will no longer compensate for declining tariffs 42.Despite high fixed broadband penetration rates, considerable growth potential remains – particularly in more-sparsely populated countries 43.Fibre will be the dominant technology for fixed broadband connections in the region reaching almost half of all connections by 2017 44.The number of fixed voice connections will increase little in most countries, and will continue to steadily decline in Japan and South Korea 45.Total fixed voice traffic will fall, driven by continued declines in MoU per fixed voice connection 46.In the fixed telecoms market, slow growth in broadband revenue will fail to compensate for the decline in voice revenue in most countries 47.Forecast: individual countries 48.Australia’s mobile market will continue to outpace fixed, but the National Broadband Network (NBN) will provide important growth opportunities 3 49.4G in Australia will be driven by smartphones and mobile broadband, but will be limited by coverage in the short and medium term 50.Australia’s mobile broadband connections are high and growing, but fewer will substitute for fixed broadband as fibre is rolled out nationwide 51.Handset data services will overtake messaging and broadband as Australia’s second-largest source of mobile revenue after voice 52.Australia’s National Broadband Network promises to significantly improve the availability of fixed broadband 53.Growth in the Hong Kong telecoms market will be dominated by mobile data products, as fixed consumer revenue faces saturation 54.Mobile penetration in Hong Kong is among the highest in the world, because of the intense competition and a dynamic population 55.Mobile broadband SIMs are the main driver of subscriber numbers in Hong Kong, but smartphone take-up is a more significant trend 56.Handset data will provide the most important source of revenue growth for operators in Hong Kong for the next 5 years 57.Hong Kong has a strong fixed-line market, and the high take-up of fibre broadband will encourage the move towards VoBB 58.Mobile handset data services will account for 40% of Japan’s telecoms service revenue by 2017 59.Japan’s mobile operators are promoting LTE as one of several responses to congested 3G networks Slide no.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Contents [3] 4 60.Japan is shifting from advanced, operator-controlled feature phones to more-standardised smartphones based on Android and Apple iOS 61.Handset data services now account for more than half of Japan’s mobile retail service revenue and is forecast to grow further 62.Japan’s fixed voice penetration rate will continue to decline, while fixed broadband penetration will grow only slightly 63.Service innovation in Singapore’s mature telecoms market will drive growth in handset data and fixed broadband revenue 64.LTE has been launched by all three operators in Singapore, and all are expected to have nationwide LTE coverage by the end of 2013 65.Singapore’s mobile operators have heavily subsidised smartphones in order to drive the penetration rate and take-up of data services 66.Singapore’s mobile retail revenue will flatten, but handset data revenue will grow thanks to smartphone penetration and service innovation 67.Singapore’s Next Generation National Broadband Network is shifting broadband access and fixed voice connections towards fibre 68.South Korea has a mature broadband market and an advanced mobile market that rapidly adopts new (often home-grown) technologies 69.South Korea has the highest penetration of LTE services in the world with more than 15 million subscribers at the end of 2012 70.Growth in the number of mobile connections in South Korea will be primarily from mobile broadband 71.Growth in handset data revenue will offset the decline in voice revenue, but overall growth in total revenue will be low 72.South Korea has a highly penetrated broadband market, but growth continues in penetration, speeds and IPTV take-up 73.Taiwan’s retail revenue could fall if declines in voice and messaging revenue outweigh growth in broadband and mobile handset data 74.Mobile broadband will continue to have a small impact in Taiwan, but smartphone take-up will become significant 75.Voice revenue is declining in Taiwan, but increased use of data services on handsets and other data devices will compensate in the short term 76.Mobile penetration has ample scope for growth in Taiwan, and although 4G will be late on the scene, take-up will be swift 77.Fixed voice access is near-universal in Taiwan, but lines and revenue will continue to increase, as will fixed broadband, particularly FTTH/B 78.About the authors and Analysys Mason 79.About the authors [1] 80.About the authors [2] 81.About Analysys Mason 82.Research from Analysys Mason 83.Consulting from Analysys Mason Slide no.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 List of figures [1] Figure 1: Retail revenue by service type, developed Asia–Pacific, 2008– 2017 Figure 2: Broadband connections by type, developed Asia–Pacific, 2008– 2017 Figure 3: Outgoing voice traffic by network of origination, developed Asia– Pacific, 2008–2017 Figure 4: Mobile SIM penetration rates by device type, developed Asia– Pacific, 2008–2017 Figure 5: Mobile SIM penetration rates by generation, developed Asia– Pacific, 2008–2017 Figure 6: Fixed penetration rates by service type, developed Asia–Pacific, 2008–2017 Figure 7: Countries covered in this report Figure 8: Key factors influencing forecast assumptions Figure 9: Key metrics for historical and forecast data Figure 10: Metrics for the six countries modelled individually in developed Asia–Pacific, 2012 Figure 11: Retail revenue by service type, developed Asia–Pacific, 2008– 2017 Figure 12: Growth rates of retail revenue by service type, developed Asia– Pacific, 2008–2017 Figure 13: Year-on-year and forecast growth rates of connections by type, developed Asia–Pacific, 2008–2017 Figure 14: Growth rates of retail revenue and GDP by country, developed Asia–Pacific, 2012–2017 5 Figure 15: Mobile SIM penetration by country, developed Asia–Pacific, 2008–2017 Figure 16: Mobile connections by device type and proportion of mobile broadband connections, developed Asia–Pacific, 2008–2017 Figure 17: Mobile connections by generation, and penetration, developed Asia–Pacific, 2008–2017 Figure 18: Smartphones as a proportion of mobile handsets, by country, developed Asia–Pacific, 2008–2017 Figure 19: Mobile revenue by type and non-voice services’ share of mobile revenue, developed Asia–Pacific, 2008–2017 Figure 20: Mobile revenue by type, and mobile ARPU and ASPU, developed Asia–Pacific, 2008–2017 Figure 21: Outgoing mobile voice minutes by country, developed Asia– Pacific, 2008–2017 Figure 22: Mobile average retail revenue per minute (ARPM) by country, developed Asia–Pacific, 2008–2017 Figure 23: Fixed broadband penetration by country, developed Asia–Pacific, 2008–2017 Figure 24: Fixed broadband connections by type, developed Asia–Pacific, 2008–2017 Figure 25: Fixed broadband revenue by type, developed Asia–Pacific, 2008–2017 Figure 26: Fixed voice connections by country, developed Asia–Pacific, 2008–2017

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 List of figures [2] Figure 27: Fixed voice penetration by country, developed Asia–Pacific, 2008–2017 Figure 28: Outgoing fixed voice minutes by country, developed Asia–Pacific, 2008–2017 Figure 29: Outgoing mobile and fixed voice minutes, developed Asia–Pacific, 2008–2017 Figure 30: Fixed retail revenue by type, developed Asia–Pacific, 2008–2017 Figure 31: Retail revenue by service type, Australia, 2008–2017 Figure 32: Growth rates of retail revenue by service type, Australia, 2008– 2017 Figure 33: Growth rates of connections by type, Australia, 2008–2017 Figure 34: Mobile connections by generation, and mobile penetration, Australia, 2008–2017 Figure 35: Mobile connections by device, Australia, 2008–2017 Figure 36: Mobile retail revenue by service type and ASPU, Australia, 2008– 2017 Figure 37: Fixed connections by type and fixed penetration, Australia, 2008– 2017 Figure 38: Fixed retail broadband revenue by technology and ARPU, Australia, 2008–2017 Figure 39: Retail revenue by service type, Hong Kong, 2008–2017 Figure 40: Growth rates of retail revenue by service type, Hong Kong, 2008– 2017 Figure 41: Growth rates of connections by type, Hong Kong, 2008–2017 6 Figure 42: Mobile connections by generation, and mobile penetration, Hong Kong, 2008–2017 Figure 43: Mobile connections by device, Hong Kong, 2008–2017 Figure 44: Mobile retail revenue by service type and ASPU, Hong Kong, 2008–2017 Figure 45: Fixed connections by type and fixed penetration, Hong Kong, 2008–2017 Figure 46: Retail fixed broadband revenue by technology, and ARPU, Hong Kong, 2008–2017 Figure 47: Retail revenue by service type, Japan, 2008–2017 Figure 48: Growth rates of retail revenue by service type, Japan, 2008–2017 Figure 49: Growth rates of connections by type, Japan, 2008–2017 Figure 50: Mobile connections by generation, and mobile penetration, Japan, 2008–2017 Figure 51: Mobile connections by device, Japan, 2008–2017 Figure 52: Mobile retail revenue by service type and ASPU, Japan, 2008– 2017 Figure 53: Fixed connections by type and fixed penetration, Japan, 2008– 2017 Figure 54: Retail fixed broadband revenue by technology and ARPU, Japan, 2008–2017 Figure 55: Retail revenue by service type, Singapore, 2008–2017 Figure 56: Growth rates of retail revenue by service type, Singapore, 2008– 2017

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 7 List of figures [3] Figure 57: Growth rates of connections by type, Singapore, 2008–2017 Figure 58: Mobile connections by generation, and mobile penetration, Singapore, 2008–2017 Figure 59: Mobile connections by device, Singapore, 2008–2017 Figure 60: Mobile retail revenue by service type and ASPU, South Korea, 2008–2017 Figure 61: Fixed connections by type and fixed penetration, Singapore, 2008–2017 Figure 62: Retail fixed broadband revenue by technology and ARPU, Singapore, 2008–2017 Figure 63:Retail revenue by service type, South Korea, 2008–2017 Figure 64: Growth rates of retail revenue by service type, South Korea, 2008–2017 Figure 65:Growth rates of connections by type, South Korea, 2008–2017 Figure 66:Mobile connections by generation, and mobile penetration, South Korea, 2008–2017 Figure 67:Mobile connections by device, South Korea, 2008–2017 Figure 68:Mobile retail revenue by service type and ASPU, South Korea, 2008–2017 Figure 69: Fixed connections by type and fixed penetration, South Korea, 2008–2017 Figure 70: Retail fixed broadband revenue by technology and ARPU, South Korea, 2008–2017 Figure 71: Retail revenue by service type, Taiwan, 2008–2017 Figure 72: Growth rates of retail revenue by service type, Taiwan, 2008– 2017 Figure 73: Growth rates of connections by type, Taiwan, 2008–2017 Figure 74: Mobile connections by device, Taiwan, 2008–2017 Figure 75: Mobile retail revenue by service type and ASPU, Taiwan, 2008– 2017 Figure 76: Mobile connections by generation, and mobile penetration, Taiwan, 2008–2017 Figure 77: Fixed connections by type and fixed penetration, Taiwan, 2008– 2017 Figure 78: Retail fixed broadband revenue by technology and ARPU, Taiwan, 2008–2017

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 8 Executive summary Key findings and implications Market definition and methodology Forecast: developed Asia–Pacific region Forecast: individual countries About the authors and Analysys Mason

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Retail revenue in developed Asia–Pacific will remain roughly flat in nominal terms between 2012 and 2017  Retail telecoms revenue in the developed Asia–Pacific (DVAP) countries will experience a small decline from USD217 billion in 2012 to USD213 billion in 2017. This represents a CAGR of –0.4%.  Mobile networks accounted for 60% of telecoms retail revenue in 2012, and their share is forecast to increase to 65% in 2017.  Data services – in particular mobile handset data, mobile broadband and fibre services – will partially compensate for falling voice revenue. However, they will fail to produce overall growth in telecoms retail revenue except in Hong Kong where we forecast modest growth.  Voice revenue will decline on fixed and mobile networks.  Japan, Singapore, South Korea and Taiwan will experience declining total revenue between 2012 and 2017, at CAGRs of between –0.2% and –0.9%. Australia’s revenue is forecast to decline at a CAGR of –1.3%.  The decline in revenue is driven by falling revenue from fixed voice and narrowband services and more-rapid-than- expected declines in mobile voice revenue because operators are coming under pressure from IP voice and OTT services. 9 Figure 1: Retail revenue by service type, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 The shift towards mobile services will continue in developed Asia–Pacific: mobile broadband will account for 39% of broadband connections in 2017  In the broadband market, mobile broadband’s share of connections will increase from 21% in 2012 to 39% in 2017, and its share of broadband retail revenue will grow from 18% in 2012 to 29% in 2017. 2 For the first time, most of the broadband connections in Hong Kong and Singapore will be mobile, as is the case in Australia already.  Mobile networks will increasingly dominate the voice market during the forecast period in terms of traffic and number of connections, but not necessarily in terms of revenue because the average revenue per minute will decline.  Mobile networks will account for 73% of voice traffic in 2017 (68% in 2012) with its share of retail revenue at 69% (60% in 2012). However, mobile’s share of retail voice connections will increase by only about two percentage points, reaching 67% in 2017.  More than 70% of voice traffic will be carried on mobile networks in most countries by 2017 with the exception of Hong Kong. 10 Figure 2: Broadband connections by type, developed Asia–Pacific, 2008– 2017 [Source: Analysys Mason, 2013] 2 Analysys Mason’s definition of mobile broadband includes PC, laptop, netbook, e-reader, mobile game console or tablet PC connections via a USB modem or datacard. It excludes handset-based Internet access or use of the handset as a modem. Figure 3: Outgoing voice traffic by network of origination, developed Asia– Pacific, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Smartphones will account for the majority of handsets by 2013, while 4G SIMs will account for 63% of mobile connections in 2017  Mobile penetration in developed Asia–Pacific is forecast to grow from 115% at the end of 2012 to 133% by the end of 2017. Most of this growth is expected to come from mobile broadband. Mobile broadband accounted for just 7% of mobile connections at the end of 2012, but will account for 16% by the end of 2017.  Mobile handset penetration was 107% of the population at the end of 2012 and is forecast to increase to 112% by the end of 2017.  Smartphones represented 42% of handset SIMs at the end of 2012 (up from 28% the previous year) and this proportion will grow to 84% by 2017. Operators throughout the region are actively encouraging smartphone adoption in order to increase mobile handset data revenue.  In both the mobile handset and overall mobile markets, 3G peaked at 86% of connections in 2011. 4G will account for 63% of total mobile connections by the end of 2017. Commercial LTE offerings are available in all developed Asia–Pacific countries except Taiwan, and Japan and South Korea already have large numbers of subscribers. 11 Figure 4: Mobile SIM penetration rates by device type, developed Asia– Pacific, 2008–2017 [Source: Analysys Mason, 2013] Figure 5: Mobile SIM penetration rates by generation, developed Asia– Pacific, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 The penetration of fixed voice connections will decline, but fixed broadband will grow to 34% – nearly half of which will be FTTH/B connections  Fixed voice connections will decline from 138 million at the end of 2012 to 131 million at the end of 2017. This trend will be largely driven by declines in Japan, while the penetration of connections will be relatively stable in most other countries in the developed Asia–Pacific region growing at a CAGR of between –1% and 1%.  Fixed broadband subscribers will grow from 75 million at the end of 2012 to 81 million by the end of 2017. Fixed broadband connections (including both residential and business) already exceed the number of households in Hong Kong and Singapore, where population density is extremely high.  FTTH/B will grow from 42% of the region’s fixed broadband connections at the end of 2012 to 48% at the end of 2017. The most rapid growth will be in Australia and Singapore, where fibre accounted for less than 1% of fixed broadband connections at the end of 2010. National broadband network projects could increase this to 13% and 46% respectively by the end of 2017.  Driven by the move to FTTH/B in the fixed broadband market, VoBB will account for 51% of fixed voice connections at the end of 2017, up from 35% at the end of 2012. 1 Figure 6: Fixed penetration rates by service type, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 12 1 Analysys Mason’s definition of VoBB includes paid-for native VoIP services that use a broadband access connection, and VoIP services included in a paid-for bundle that includes broadband access. It excludes peer-to-peer applications, such as Skype.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Key findings and implications: mobile telecoms services [1]  Penetration of mobile handsets is near saturation, and mobile voice revenue is expected to decline during the forecast period.  Mobile handset penetration exceeds 100% and future growth in the number of handset connections will not compensate for declining rates of voice ARPU. We forecast that handset voice ARPU will decline at a CAGR of –4.1% from 2012 to 2017 and handset voice retail revenue will decline at a CAGR of –3.2%. Growth in the number of handset SIMs at a CAGR of 1.0% in the same period will leave a significant shortfall.  Mobile network operators in the region will increasingly focus on encouraging take-up of mobile data services.  We expect mobile (handset and broadband) data services to account for just over 62% of total mobile service revenue in 2017, up from 53% in 2012. Hong Kong and Japan already derive more than half of their mobile retail revenue from data services, as will Australia and South Korea by the end of the forecast period, aided by a high take-up of mobile broadband services and growth in handset data usage. Integrated operators will encourage consumers to choose bundles of mobile, fixed voice and broadband services.  Most new mobile connections in the region will come from mobile broadband (non-handset).  Mobile SIM penetration averaged 115% across the developed Asia–Pacific countries at the end of 2012, and will increase to 133% by the end of 2017. During this period, 73% of mobile net additions will be mobile broadband connections. As the range of connected devices expands to include tablets, consoles, etc., operators will explore innovative data pricing models for different devices.  Take-up of 4G will vary significantly between countries.  We estimate that 11% of mobile connections were 4G at the end of 2012, and this has been driven by the extraordinary growth in South Korea (as well as steady growth of LTE connections in Japan since launch in 2010), the majority of which has been driven by handset subscriptions. Taiwan has yet to launch services, while South Korea had 29% of subscribers using LTE at the end of 2012. By the end of 2017, we expect 63% of all mobile connections will be 4G. 14

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Key findings and implications: mobile telecoms services [2]  Mobile data services will play a significant role in compensating for declining mobile voice revenue.  Both mobile broadband and mobile handset data revenue will grow significantly during the forecast period, although messaging revenue will decline. The already large contribution of handset data services can be attributed to high levels of usage for such services in the region’s two largest markets – Japan and South Korea – where SMS and MMS have been less popular than elsewhere. The increase in the number of smartphones in the region will lead users to favour Internet-based communications over SMS and MMS in other countries too.  Take-up of 3G and 4G will be an important element of this: 3G accounted for 80% of connections (mobile handset and mobile broadband) at the end of 2012, having already had their market share eroded by 4G, which will account for 63% of mobile connections by the end of 2017. We expect around 62% of handsets, and most smartphones, will be 4G by the end of 2017.  4G network roll-out will provide a major push for generous mobile data packages as operators look to capitalise on network assets. Integrated service providers will start to bundle mobile broadband with fixed broadband services, but will need to take care not to limit the revenue potential of such services and compromise network performance by providing unlimited low- cost data.  Promoting smartphone take-up will be a key feature of mobile operators’ tactics for increasing usage of, and revenue from, mobile handset data services, while declining smartphone prices will drive penetration.  We forecast smartphones will account for 84% of active handsets by the end of 2017, up from 11% at the end of 2010 and 42% at the end of 2012. More than 55% of mobile handsets were smartphones in Singapore and South Korea by the end of 2011, aided by handset subsidies. It is expected that these countries will continue to lead the adoption of smartphones in the region, and that more than 95% of mobile handsets will be smartphones in these countries by the end of 2017.  As the most popular smartphones become available from multiple operators in each country, operators will compete on tariffs and on innovative services to differentiate. Ensuring good user experiences (with devices, services and networks) will be crucial. 15

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Key findings and implications: fixed telecoms services  While mobile retail revenue will increase slightly, we expect fixed retail revenue to contract.  We forecast a CAGR of –3% for fixed retail revenue from 2012 to 2017, compared to 1.3% for mobile retail revenue. This will place growing pressure on fixed service providers to provide integrated service offerings including mobile services. SingTel, for example, is offering mobile broadband services as a low-cost add-on to its fixed broadband service packages. However, operators will need to balance the desire to attract customers, with the need to generate revenue.  We forecast growth in fixed broadband penetration, despite already high levels in the region.  Fixed broadband connections are forecast to increase at a CAGR of 1.7% from 2012 to 2017, reaching 81 million by the end of 2017. The region had 75 million fixed broadband connections at the end of 2012.  Operators of fixed broadband networks will seek cost-effective ways of serving areas with lower population densities, and will increasingly attempt to differentiate their services based on network speeds and reliability.  However, in countries where network operation is separated from retail services, the focus will be on providing differentiated service bundles, which may include VoBB, TV or mobile services. The market will shift in this way in Australia and Singapore because of the structure of their national broadband network projects.  FTTH/B will become the dominant fixed broadband access technology, accounting for 48% of all fixed broadband lines by the end of 2017.  Broadband services providers will compete to capture and monetise a growing number of fibre-optic broadband customers. In addition to connection fees, IPTV will be an increasingly important part of the service portfolio.  DSL service providers will need to actively manage customers’ migration to fibre to ensure market share is not lost. DSL will be the most displaced fixed broadband connection type as FTTH/B becomes more popular. 16

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Significant changes since previous forecast – Australia 17  Smartphone adoption in Australia has accelerated rapidly. New data points obtained for Australia lead us to estimate that smartphone growth in the second half of 2011 was more rapid than we had previously estimated.  We revised upwards our estimate of smartphones’ share of active handset connections in Australia for the end of 2011 and 2012. We now expect that 55% of handsets in Australia were smartphones by the end of 2012 (previously forecast 37%). However, our forecast for 2016 is up only slightly to 75% (previously 73%).  In line with these revisions, we have increased our mobile handset data revenue forecasts through to 2014.  Australia’s NBN is rolling out more slowly than initially planned. Instead of targeting 93% of premises passed with FTTH/B by the end of 2017, that target has shifted to mid-2021. It is now planned that roll-out will be completed or commenced for 3.5 million premises by mid-2015.  We now forecast FTTH/B will account for just 9% of fixed broadband connections by the end of 2016, instead of around one half of fixed broadband connections by that date.  Mobile broadband connections growth has slowed. Australia’s already very high mobile broadband penetration rate did not expand as quickly as anticipated in the second half of 2011 and the first half of 2012. This could be related to the slowing Australian economy and may be counter-balanced by delays in fixed broadband roll-out in the medium-term.  Our estimate of mobile broadband population penetration for the end of 2011 and 2012 have been revised downwards to 23% and 26% respectively, compared to our previous forecast of 25% and 28% respectively. However, we still expect mobile broadband population penetration to reach 35% by the end of 2016, aided by delays in the National Broadband Network (NBN) roll-out.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Significant changes since previous forecast – Hong Kong 18  Commercial LTE offers have proliferated in Hong Kong driving additional growth. All of the major operators are now offering LTE services with a wider range of handsets and tariffs. China Mobile has launched the world’s first LTE network featuring both TDD and FDD standards.  Hong Kong’s LTE take-up has been disappointing, particularly when compared with Japan and South Korea. The slow take-up can be attributed to low competition, poor device availability and a lack of interest by the majority of players in the market to push LTE at the end of 2011 and for the first half of 2012.  We now expect that this situation will change significantly, and as a result have doubled our original forecast for LTE subscribers by the end of 2016 to just over 7 million.  Cable broadband will retain most of its market share. Our previous assumptions were that the FTTH products in Hong Kong would affect DSL and cable broadband products on an almost equal level. Further information has suggested that DSL will suffer most.  Cable broadband offerings in Hong Kong provide download speeds that are broadly competitive with fibre, and selected information on recent performance implied that we had underestimated the resilience of this product. This may be partially due to the customer loyalty that comes with the bundling of cable-TV services.  We forecast that cable broadband’s market share will remain stable throughout the forecast period, and increased expected volumes by the end of the period from roughly 150 000 to just over 400 000.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Significant changes since previous forecast – Japan 19  Operators are accelerating their LTE plans in an attempt to address 3G network congestion.  NTT DOCOMO expects its LTE network to reach 70% population coverage by March 2013 – two years earlier than previously stated – and has increased its March 2015 coverage target to 98%. The operator has also increased its March 2016 target number of LTE connections from 30 million to 41 million.  Given that smartphones are a major contributor to network congestion, and the target of operators’ efforts to reduce congestion, we have increased our forecast of 4G’s share of the mobile handset market from 38% to 63% for 2016.  Our forecast of 4G’s share of handset and mobile broadband connections combined increased from 3% to 8% for 2012 and from 42% to 65% for 2016.  Fixed broadband connections have been growing strongly, particularly for fibre and WiMAX.  In the 6 months to June 2012, Japan added around 614 000 FTTH/B connections, but only lost around 473 000 DSL connections, causing us to revise upwards our estimate of both FTTH/B connections and total fixed broadband connections for 2012 and subsequent years.  UQ Communications has rapidly added WiMAX connections since its launch in 2010 and had 3.6 million subscribers by September 2012. We estimate the total number of BFWA connections in Japan reached 4 million by September 2012, which exceeds our previous forecasts.  Our forecast fixed broadband penetration rate for 2016 has increased from 30% to 32% of the population (73% to 80% of households), but persistent price competition means that we have increased our forecast of fixed broadband revenue less than proportionately from JPY1.9 trillion (USD24.4 billion) to JPY2.0 trillion (USD25.4 billion) for 2016.  We now expect FTTH/B to account for 17.1 million fixed broadband connections by 2016, up from our previous forecast of 16.4 million.  We forecast the number of BFWA connections to fluctuate between 6.5 million and 7 million from 2014 onwards. Our previous forecast of BFWA connections was much less optimistic.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Significant changes since previous forecast – Singapore 20  Mobile voice retail revenue is declining. It fell 1.2% in 2011, which was sooner than we had forecast mobile voice revenue would start to decline.  We have therefore revised our mobile voice retail revenue forecast downwards, and now expect a CAGR of –2.3% from 2011 to 2016; previously we had forecast net zero growth in mobile voice revenue for that period.  The outlook for fixed broadband access and IPTV revenue has improved. Preliminary 2012 results show that fixed broadband providers have increased their combined network access and IPTV revenue, contradicting our expectation that declining access ARPU would cause a short-term dip in this revenue stream.  Our forecast for fixed broadband revenue is more optimistic. We now forecast fixed broadband retail revenue of SGD925 million (USD740 million) for 2016, up 18% from our previous forecast.  Fixed broadband connections have been moving towards FTTH/B more quickly than expected. By September 2012, fibre accounted for 17% of fixed broadband connections in Singapore. Both DSL and cable connections have suffered as a result.  Growth in VoIP connections is no longer outpacing disconnections for PSTN. PSTN connections fell much more quickly than expected in the first 9 months of 2012, resulting in a net loss of fixed voice connections in 2012.  We have slowed our forecast rate of growth for VoIP connections and accelerated our forecast rate of decline in PSTN connections. As a result, our forecast growth in fixed voice connections between 2011 and 2016 is now a CAGR of 0.3% (previously 1.9%).  We have increased our estimate of fibre’s share of Singapore’s fixed broadband connections for 2012 from 14% to 20%.  We continue to expect FTTH/B will account for 43% of fixed broadband connections by the end of 2016.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Significant changes since previous forecast – South Korea 21  Good coverage, competitive pricing and the availability of desirable handsets has produced explosive growth in LTE. SK Telecom announced its 7 millionth LTE subscriber in December, meeting its revised targets set earlier in the year.  South Korea had more than 15 million 4G subscribers at the end of 2012, exceeding even the forecast observations and targets set by the operators themselves at the beginning of the year. We have increased our long term forecasts for both LTE penetration of the population and number of LTE subscribers – we now expect 65% more subscribers by the end of 2016.  LTE subscribers have driven additional growth in smartphone numbers. The majority of new additions to LTE services are handsets (which by definition are smartphone connections), which has significantly cut the feature phone volumes in South Korea. In addition, KT switched off of its 2G network, and migrated around 200 000 subscribers to 3G or 4G services providing a one-off increase in the number of smartphone users.  We have increased our long-term forecast for smartphone numbers. We now forecast an additional 10% of smartphones, increasing the number from 47 million at the end of 2016 to 51 million.  LTE subscribers have driven growth in handset data revenue. LTE users will be significant users of handset data, and the revised forecasts for the number of users significantly increases both the amount of data we expect to travel over South Korean networks and the revenue derived from it.  We have increased our handset data revenue forecast to reflect the additional usage expected, but we expect some additional price pressure given the competitive nature of LTE services in South Korea. We have therefore increased our forecast for handset data revenue by 42% by the end of 2016 (compared with the 65% increase in LTE subscribers).

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Significant changes since previous forecast – Taiwan 22  Smartphone take-up has increased more rapidly than we previously thought, but is still below the regional average. New data obtained from operators has enabled us to revise our 2011 and 2012 smartphone estimates.  We have increased our estimate of smartphones’ share of active handsets in Taiwan from 17% to 23% for the end of 2011, and we are now forecasting a smartphone share of 35% (previously 31%) for the end of 2012.  Mobile retail revenue has increased thanks to large increases in revenue from non-messaging handset data services. Taiwan’s downward trend in mobile retail revenue was reversed in 2011 when revenue from handset data services grew 78%. This enabled overall mobile retail revenue to grow 2% in 2011, and preliminary figures suggest further positive growth rates for 2012.  Our outlook for mobile handset data revenue is much more optimistic, with a forecast CAGR of 22% from 2011 to 2016, compared to a previously forecast CAGR of 15% for the same period.  After accounting for minor adjustments to other mobile revenue streams, the net effect on forecast overall mobile retail revenue for Taiwan in 2016 is up 9% to TWD208.7 billion (USD7.1 billion).  LTE continues to be delayed by lack of available spectrum. The Taiwanese government is planning to start the LTE licensing process in 2013, issue licences by the end of that year, and enable commercial launches in 2015.  We are less optimistic about the prospects for spectrum to be repurposed to enable LTE to be launched ahead of the new spectrum licensing process. Therefore, we forecast LTE take-up from 2015 onwards, instead of commencing on a small scale in 2013.  Nevertheless, when LTE becomes available, we expect adoption to be quick because of an abundant supply of devices. Therefore, we still expect 20% of mobile connections to be 4G by the end of 2016.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Geographical coverage 24 Figure 7: Countries covered in this report [Source: Analysys Mason, 2013] ■ Countries modelled individually  The following countries are modelled individually:  Australia  Hong Kong  Japan  Singapore  South Korea  Taiwan.  The following countries were modelled as part of the developed Asia–Pacific region as a whole:  Brunei  French Polynesia  Guam  Macau  New Caledonia  New Zealand  Northern Mariana Islands. Japan Australia Singapore Taiwan South Korea Hong Kong

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Key forecast assumptions [1]  The increasing average age of the population and rising GDP per capita will provide some growth in the addressable market for telecoms services, except in Japan where the size of the population is declining.  The world’s challenging economic conditions will directly affect the open, market-based economies of the developed Asia–Pacific countries, and could constrain growth in the short term. The region’s economies have shown signs of recovery following the 2009–2010 crisis, but economic uncertainty has continued in 2012 and will do so into 2013, particularly in Australia, Japan, Singapore and Taiwan. However, even as GDP growth in the region recovers, the fact that most of the telecoms markets in the region are mature means they are not expected to grow as quickly as GDP. As a result, telecoms revenue will fall as a proportion of GDP during the forecast period.  Growth in GDP will be the main driver of revenue growth in business network services in all countries in the region.  Mobile handset penetration is high, constraining potential growth in the number of handsets and driving down retail mobile voice revenue. Mobile voice revenue is expected to decline in 2012 in all six countries profiled in this report.  Retail fixed voice revenue is declining throughout the region, and this trend is likely to continue as VoBB services provide even greater competition. This trend will be particularly strong in Australia, where the roll-out of a national fibre network is occurring at the same time as the decommissioning of the incumbent’s copper network and the separation of its wholesale and retail businesses.  Separation of wholesale and retail services for the national broadband networks being rolled out in Australia and Singapore will encourage even greater competition in those countries’ broadband markets.  Broadband penetration is high and broadband markets will become increasingly competitive as penetration rates increase. As a result, fixed broadband ARPU will decline, despite higher average ARPU for fibre compared with that for other access technologies. The largest decline is expected in Hong Kong, where total retail revenue from fixed broadband is also expected to decrease. Demographic and economic considerationsCommercial and competitive assumptions 25

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Key forecast assumptions [2]  Mobile operators will upgrade networks to 4G with LTE technology to compete on network capabilities and to continue to expand mobile data services, including for mobile broadband connections. Japan was the first to launch commercial LTE services in the region, and others have since followed. However, spectrum constraints are delaying the launch of LTE in Taiwan.  The proliferation of mobile-enabled mid-screen devices such as tablets and e-readers will help to expand the market for mobile broadband beyond laptops, but will also reduce average revenue per mobile broadband connection.  Mobile operators will strongly promote smartphones in an effort to increase mobile handset data usage and revenue, and aggressive handset subsidies will assist this cause. Hong Kong, Singapore and South Korea will have the highest rates of smartphone penetration in the region.  Fibre connections will dominate fixed infrastructure during the forecast period. This has implications for the types of broadband connections available in the region, and will also drive a shift from traditional fixed voice services to VoIP services.  National fibre-optic network projects will significantly expand the availability of fibre in Australia and Singapore. The impact can already be seen in Singapore where we expect FTTH/B to account for 20% of fixed broadband connections by the end of 2012, up from just under 1% at the end of 2010. In Australia, progress has been less rapid and the timescales for the NBN project have been extended; it now aims to make fibre available to 93% of premises by mid-2021. Overall fixed broadband penetration in Australia is also low, largely because of the country’s sparse population. Technological considerations 26

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Forecast methodology: our comprehensive telecoms forecast model is supported by a sound knowledge of markets  All our forecasts are prepared and reviewed by analysts who are deeply familiar with the underlying technologies and services we are forecasting, and with the commercial and regulatory characteristics of the markets being modelled.  The forecasts are intended to predict outcomes and expected market development, rather than to model market opportunity.  The key assumptions in our forecasts take into account potential commercial and regulatory developments in particular markets, as well as technology developments and evolution. As part of the process, we also solicit opinions on market developments from major players.  We are happy to discuss our key assumptions in more detail with clients.  Estimates for 2012 are preliminary and based on part-year data available at the time of writing. 27 Figure 8: Key factors influencing forecast assumptions [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Forecast methodology: we base our forecasts on reported metrics, and insight into market and competitive dynamics  We forecast fixed and mobile services in relation to each other, not in isolation. The major (interrelated) dynamics in the market are:  substitution (fixed–mobile, mobile–fixed)  complementary usage.  Our general approach to forecasting telecoms markets is econometric. The key assumptions that underpin our forecasts are:  usage trends  pricing trends.  Services covered include fixed and mobile voice, fixed and mobile broadband and mobile messaging and non-messaging data. 28 Figure 9: Key metrics for historical and forecast data [Source: Analysys Mason, 2013] HistoricalForecast = Price elasticity of demand Retail revenue Traffic Price per unit Traffic Retail revenue Inputs from which we derive: Forecasts from which we derive:

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Data series definitions: mobile  Active subscribers: refers to handset and mobile broadband SIMs active within the past three months, rather than to the number of customers. These include MVNOs’ retail subscribers, which are allocated to the hosts’ networks.  Subscriptions are split by:  type: prepaid and contract  device: handsets and mobile broadband (M2M connections are not included in this report)  generation: 2G, 3G and 4G (corresponding to the highest technology supported by the device and networks in the country).  Further detail on device type:  handsets: all voice devices, either non-smartphones or smartphones  mobile broadband: non-voice devices, such as USB modems, either mid-screen mobile broadband or large-screen mobile broadband devices. 29  Service revenue is composed of:  retail revenue: all end-user revenue, exclusive of direct equipment sales  termination revenue: all inter-operator revenue, inclusive of roaming-in revenue.  Revenue is split by service type:  messaging: SMS and MMS, by definition on handsets only  handset data: non-voice, non-messaging services on handsets, including use of the handset as a modem.  ARPU is service revenue accrued during the period divided by the average number of subscriptions, while ASPU is the equivalent measure for retail revenue.  Voice usage (minutes) – mobile-originated or outgoing traffic: all traffic generated by operators’ and MVNOs’ end users.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Data series definitions: fixed  Connections are split by service type:  voice: supported by either PSTN/ISDN or VoIP  fixed broadband: see further technology split below.  Multi-play accounts are counted as many times as the number of services they take.  Fixed broadband connections are split by technology:  DSL  cable modem  FTTH/B (all residential fibre-to-the-home (FTTH) lines, plus fibre-to-the-building (FTTB) where in-building transport is provided by structured cabling (for example, Cat 5) or fibre. It does not include FTTB where in-building transport is provided by coax or VDSL, which are categorised as cable modem and DSL respectively)  broadband fixed wireless access (BFWA) (any wireless transmission technology that delivers from a fixed hub to distributed fixed points, including technologies such as WiMAX and CDMA). 30  Service revenue is composed of:  retail revenue: all end-user revenue, exclusive of equipment sales, made up of revenue from:  voice retail services (PSTN/ISDN or VoIP)  fixed broadband retail services (including access and IPTV, but not cable TV services)  business network services (unmanaged and managed wide area data network services, including retail point- to-point leased lines, layer 2 and 3 VPNs, and legacy public data services such as ATM and frame relay, but excluding equipment sales, rental, hosting charges or management)  wholesale revenue: all inter-operator revenue.  ARPU is service revenue accrued during the period divided by the average number of subscriptions, while ASPU is the equivalent measure for retail revenue.  Voice usage (minutes) – fixed-originated or outgoing traffic: all traffic generated by the operators’ end users. We do not include fixed-terminating traffic.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Population (million) GDP per capita (USD thousand) Telecoms retail revenue Fixed broadband population penetration (%) Mobile SIM population penetration (%) 3G share of mobile SIMs (%) Total (USD billion) Per capita (USD) Share of GDP (%) From mobile services (%) Australia23692611401.7%54%26%124%74% Hong Kong73679862.7%45%36%191%58% Japan1264713310582.2%62%30%106%89% Singapore55147621.5%68%25%143%84% South Korea5023285592.4%64%39%110%70% Taiwan2321135442.6%55%25%128%74% DVAP 1 239422179052.2%60%31%115%80% Six countries account for 98% of developed Asia–Pacific’s population of 239 million, and 97% of its telecoms revenue  Australia has the highest GDP per capita, but its telecoms retail revenue accounts for only 1.7% of its GDP.  Hong Kong is fourth-largest in terms of GDP per capita, but has the highest mobile penetration rate and is third and second respectively in terms of telecoms spend per capita and fixed broadband penetration.  Singapore has the second-highest mobile SIM penetration rate, but spends a much lower proportion of its GDP on telecoms than Hong Kong. This partly reflects its strong GDP per capita, which is similar to that of Japan. Figure 10: Metrics for the six countries modelled individually in developed Asia–Pacific, 2012 [Source: Analysys Mason, 2013]  Japan accounts for 53% of the region’s population and 61% of its telecoms retail revenue. It leads in terms of 3G penetration (with Singapore) and percentage of mobile revenue derived from non-voice services.  South Korea is the second-largest country in terms of population, but its GDP per capita is one of the lowest – only Taiwan’s is lower.  Taiwan also has the lowest telecoms spend per person. 32 1 The regional total also includes the countries: Brunei, French Polynesia, Guam, Macau, New Caledonia, New Zealand and the Northern Mariana Islands.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Service USD billion CAGR 2008–12 CAGR 2012–17 20122017 Mobile voice 59.450.4–8.7%–3.2% Mobile messaging 5.34.50.9%–3.5% Mobile handset data 58.069.012.8%3.5% Mobile broadband 8.015.138.8%13.5% Fixed voice and narrowband 36.022.4–5.4%–9.1% Fixed broadband 36.537.64.3%0.6% Business network services 13.213.7–1.0%0.6% Total 216.5212.6–0.2%–0.4% Connections Million CAGR 2008–12 CAGR 2012–17 20122017 Mobile handsets2552673.9%0.9% Mobile broadband205246.8%20.6% Fixed voice1381320.4%–1.0% Fixed broadband75815.1%1.7% Figure 12: Growth rates of retail revenue by service type, developed Asia– Pacific, 2008–2017 [Source: Analysys Mason, 2013] Figure 13: Year-on-year and forecast growth rates of connections by type, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 33 Telecoms revenue will decline during 2012–2017, but mobile broadband data revenue will partially compensate for declining voice revenue Figure 11: Retail revenue by service type, developed Asia–Pacific, 2008– 2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Retail telecoms revenue growth will lag considerably behind GDP growth during the next 5 years  Telecoms retail revenue will decline through the forecast period, but we forecast that GDP will grow at an estimated 3% CAGR.  Growth in the fixed retail revenue will be lower than that for mobile services, and will decline in all markets apart from Singapore.  Overall telecoms retail revenue will decline because the increase in mobile revenue will not compensate for the extent of decline expected in fixed voice revenue. A more granular view shows declines in mobile voice revenue in the face of competition, both between operators and with disruptive OTT technology.  Hong Kong will be the only market to experience growth in telecoms retail revenue, even though it already has the highest mobile penetration rate and a very highly penetrated fixed broadband market. This growth is driven by the fact that the highly competitive Hong Kong market already has very low ARPU values and that the competitive pressure affecting other markets in the region will not have the same effect. As such we believe that ARPU will be resilient in Hong Kong, and the connections and handset data growth will drive revenue upwards ahead of the other markets. Figure 14: Growth rates of retail revenue and GDP by country, developed Asia–Pacific, 2012–2017 [Source: Analysys Mason, 2013]  34

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Mobile penetration had reached 115% at the end of 2012, and will grow to 133% by the end of 2017  Japan and South Korea have the lowest mobile penetration rates (106% and 110% respectively at the end of 2012), even though they are among the most advanced mobile markets in the world. Their relatively low penetration rates are attributed to low rates of prepaid usage and multiple-SIM ownership.  Mobile broadband (non-handset) will account for almost all forecast growth in mobile connections in South Korea (recent growth in 4G handsets has been primarily substitutive).  Mobile broadband will also drive growth in Japan’s mobile penetration rate, but penetration rates for mobile handsets will not grow significantly – net additions will fall as low as 100 000 in 2017.  Hong Kong had the highest mobile penetration rate in the region at the end of 2012 (191%). The market is still experiencing growth in prepaid and mobile broadband connections, which could increase its mobile penetration rate to 212% by the end of 2017. Similarly, we expect prepaid users and mobile broadband to drive growth in mobile penetration rates in Taiwan, although less dramatically. Figure 15: Mobile SIM penetration by country, developed Asia–Pacific, 2008– 2017 [Source: Analysys Mason, 2013] 35

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Growth in mobile connections will come mainly from the addition of new, non-handset-based mobile broadband subscriptions  Mobile broadband will account for 73% of net additions to mobile connections between 2012 and 2017.  Mobile broadband will account for 16% of mobile connections by the end of 2017, up from 7% at the end of 2012.  Even in Japan, South Korea and Taiwan – where mobile broadband accounted for somewhat less than 10% of mobile connections at the end of 2012 – we expect it to account for 8% to 18% of mobile connections by 2017.  Drivers that will promote mobile broadband throughout the region include the faster speeds of LTE and the increasing diversity of devices connected to mobile networks, including mid-screen devices such as tablets and e-readers, in addition to large-screen laptops.  In Singapore, growth in the number of mobile broadband connections will be encouraged by operators such as SingTel bundling mobile broadband with fixed broadband. However, Wi-Fi provides a compelling alternative in many public areas.  In Australia, we expect the number of mobile broadband connections to continue to grow, because the take-up of new high-speed fixed broadband services is lower than previously expected. However, growth in mobile broadband connections is slowing; it is expected to account for more than half of net additions in Australia in 2013, but only 31% in 2017. Figure 16: Mobile connections by device type and proportion of mobile broadband connections, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 36

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 The region already has a high rate of 3G penetration, and 83% of its population will have 4G by 2017  3G accounted for 86% of mobile connections in the region at the end of 2011 and had fallen to 80% by the end of 2012 primarily because of high LTE growth in South Korea.  As with 3G, NTT DOCOMO in Japan was first in the region to launch 4G; it launched LTE in December 2010. 1 Some other operators throughout the region began commercial LTE services in 2011, but many delayed until at least 2012.  Only Taiwan does not have a commercially launched LTE service.  The faster-than-expected take-up of LTE on handsets in South Korea means that 82% of LTE devices in the region were handsets at the end of 2012. We do not expect this proportion to change during the forecast period, because increasing availability of handsets in other markets will enable them to follow this trend. Figure 17: Mobile connections by generation, and penetration, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 1 Hong Kong’s CSL also launched 4G services in late 2010, but only for a limited number of customers until commercial launch in August 2011. 37

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Smartphones will become the most common type of handset during 2013  Smartphones are quickly penetrating the mobile handset base.  Operators are heavily promoting smartphones, often with handset subsidies, as a way of increasing mobile handset data revenue.  Only 28% of mobile handsets in the region were smartphones by the end of 2011, but this rose to 42% by the end of 2012. Smartphones will account for 65% of mobile handsets by the end of 2014 and 84% in 2017.  Hong Kong, Singapore, South Korea are leading the region in terms of smartphone adoption. Smartphones accounted for more than 50% of mobile handsets in these countries by the end of 2012 and are expected to account for more than 80% by the end of 2017.  The availability of highly functional feature phones will mean the demand for smartphones in Japan will be slightly weaker than in Singapore and South Korea. However, all three countries are typically quick to adopt new technology. We expect 82% of Japan’s mobile handsets to be smartphones by the end of 2017.  Smartphone penetration in Australia, will be strong but below the regional average by 2017 because 2G will persist. We also anticipate lower population coverage rates for LTE in Australia compared to more densely populated countries. Figure 18: Smartphones as a proportion of mobile handsets, by country, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 38

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Growth in revenue from mobile handset data services and mobile broadband will outweigh the decline in mobile voice revenue  Mobile data services will grow to 62% of mobile service revenue by 2017. Mobile handset data services and mobile broadband will be the main contributors to this growth, compensating for a decline of –3.2% CAGR in mobile retail voice revenue from 2012 to 2017.  Handset data services accounted for 43% of total mobile service revenue in the region in 2012, and this will grow to 48% in 2017. This proportion is even higher in Japan and South Korea, because of lower revenue contributions from mobile broadband services in both countries and from messaging services in Japan.  Increasing smartphone penetration and service innovation will drive usage; a handset user will spend USD21.5 per month on handset data services in 2017 (USD19 in 2011).  Revenue from mobile broadband services will almost double between 2012 and 2017. The number of mobile broadband SIMs will more than double because of the demand for SIMs in connected mid-screen devices, tablets and e-readers.  Messaging revenue will decline (at a CAGR of –3.6%) because competition will continue to erode prices, and smartphones will make it easier for users to replace SMS with email, social networking and other web-based messaging applications. Figure 19: Mobile revenue by type and non-voice services’ share of mobile revenue, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 39

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Voice services’ share of mobile service revenue will decline to less than half during the forecast period  Retail revenue from mobile voice services is declining, and will account for only 36% of mobile service revenue by 2017, as growth in the number of mobile handsets slows and becomes insufficient to compensate for falling voice ASPU.  This trend is observable in all of the major markets tracked in this report.  Growth in revenue from non-voice mobile services particularly handset data and mobile broadband, will compensate for lost voice revenue. Non-voice services accounted for 55% of total mobile service revenue in 2012, but will account for 64% by 2017.  Japan has the highest proportion of mobile retail revenue obtained from non-voice services – more than 50% as of 2011. Voice services will account for only 30% of mobile retail revenue by 2017. Figure 20: Mobile revenue by type, and mobile ARPU and ASPU, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 40

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Growth in demand for mobile voice services will no longer compensate for declining tariffs  Mobile markets across the region are very competitive and average revenue per minute has declined since 2009.  We expect the decline in revenue per minute to continue, and in several cases accelerate, as operators compete for a market that is growing less and less quickly.  At the same time, demand (in terms of minutes of use) is becoming less responsive to falling effective prices. The number of mobile-originated minutes is forecast to grow at a CAGR of 2.1% from 2012 to 2017. However, this will not fully compensate for falling prices. ARPM will decrease at a CAGR of –6.8% in Hong Kong and –8.5% in Australia from 2012 to 2017.  Australia is experiencing substantial fixed–mobile substitution and is not only forecast to have the greatest year-on-year percentage decline in mobile revenue per minute, but also the highest CAGR for average mobile minutes of use.  Hong Kong has the lowest rate of growth for mobile minutes for the forecast period. A relatively high proportion of traffic in Hong Kong is international, and this has been particularly vulnerable to cannibalisation by OTT VoIP services such as Skype. Figure 21: Outgoing mobile voice minutes by country, developed Asia– Pacific, 2008–2017 [Source: Analysys Mason, 2013] Figure 22: Mobile average retail revenue per minute (ARPM) by country, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 41

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Despite high fixed broadband penetration rates, considerable growth potential remains – particularly in more-sparsely populated countries  Fixed broadband penetration was 31% of the region’s population at the end of 2012, and is forecast to reach 34% at the end of 2017.  We expect fixed broadband connections to grow at a CAGR of 2% from 2012 to 2017.  When expressed as a percentage of households, fixed broadband penetration rates appear to be correlated with population density.  The highest fixed broadband penetration rates (when expressed as a percentage of households) are in the most densely populated countries, Hong Kong and Singapore.  In these two countries, the number of fixed broadband connections (including both private and business connections) exceeded the number of households by the end of 2012.  Australia, which is by far the most sparsely populated country, had one of the lowest fixed broadband penetration rates as a percentage of households in 2012 at 64%. Figure 23: Fixed broadband penetration by country, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 42

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Fibre will be the dominant technology for fixed broadband connections in the region reaching almost half of all connections by 2017  We forecast that fibre (FTTH/B) will account for 48% of fixed broadband connections by the end of 2017, up from 42% at the end of 2012.  There will be a noticeable shift towards fibre in Australia and Singapore, where national fibre-optic broadband networks are under construction.  In these countries, fibre represented less than 1% of fixed broadband connections in 2010, but will account for 13% of fixed broadband connections in Australia and 46% in Singapore by 2017.  Elsewhere in the region, fibre represented between 39% and 50% of total fixed broadband connections in Hong Kong, Japan and Taiwan by the end of 2012, and was as high as 59% in South Korea.  In terms of retail revenue, the shift towards fibre will be even greater – from 45% of the region’s fixed broadband retail revenue in 2012 to 55% in 2017. This is partly because of the price premium for higher access speeds and because fibre services are more likely to be bundled with OTT services (IPTV and VoBB).  DSL will be the fixed broadband technology that will be eroded most by the migration to fibre. Figure 24: Fixed broadband connections by type, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] Figure 25: Fixed broadband revenue by type, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 43

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 The number of fixed voice connections will increase little in most countries, and will continue to steadily decline in Japan and South Korea  The number of fixed voice connections will decline at a CAGR of –1% from 2012 to 2017. Small growth in most markets is offset by declines in Japan; excluding Japan, fixed voice connections are forecast to grow at a CAGR of 0.007%, and this increases to 0.2% when we also exclude South Korea.  The long-term decline in Japan’s fixed voice connections is not just because of its declining population, but also a declining fixed voice penetration. Fixed voice MoU have also declined significantly in Japan, indicating fixed–mobile substitution at both the connection and usage levels. We forecast that Japan’s fixed voice connections will decline at a CAGR of –2% from 2012 to 2017, and its population penetration rate will decline at a CAGR of –1.6%.  Fixed voice connections are also forecast to decline as a percentage of the population in Australia and Singapore, but population growth will enable the absolute number of fixed voice connections to continue to grow at a CAGR of 0.3% from 2012 to 2017 in these countries, reaching its peak in Singapore in 2015.  After reaching its peak in 2010, fixed voice connections in Hong Kong are again forecasted to increase slightly from 2012 to 2014, declining thereafter, with its CAGR for the forecasted period of 2012 to 2017 at –0.05%. Figure 26: Fixed voice connections by country, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] Figure 27: Fixed voice penetration by country, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 44

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Total fixed voice traffic will fall, driven by continued declines in MoU per fixed voice connection  The number of fixed voice minutes has declined throughout the region, and we expect that trend to continue at a CAGR of –3.3% between 2012 and 2017.  These forecasts are the result of declining average MoU per fixed connection, which is a feature of all the countries we have looked at individually in DVAP.  The decline in fixed voice traffic will be strongest in Hong Kong, Taiwan and Japan, where we forecast a CAGR of between –3.8% and –4.2% for fixed voice minutes from 2012 to 2017.  Despite falling volumes, competition (and to some extent regulatory measures) will be such that retail revenue per fixed voice minute will continue to fall, even if only slightly.  The greatest decline in average retail revenue per fixed voice minute will be in Japan (CAGR –8% from 2012 to 2017). Figure 28: Outgoing fixed voice minutes by country, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] Figure 29: Outgoing mobile and fixed voice minutes, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 45

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 In the fixed telecoms market, slow growth in broadband revenue will fail to compensate for the decline in voice revenue in most countries  Fixed telecoms revenue has been declining and we expect this to continue. In 2010 and 2011, fixed telecoms revenue grew marginally, but this was based on economic recovery from the worldwide financial crisis in 2009.  In all markets except Singapore, growth in fixed broadband revenue will not compensate for declining fixed voice revenue.  We expect retail revenue from fixed voice services to continue to decline during 2012–2017 – at CAGRs ranging from –3.3% in Singapore to –11.8% in Japan.  Fixed broadband revenue will increase in most markets. The exceptions will be Hong Kong and South Korea where we expect a slight decline (at a CAGR of –1.4% and –0.6% respectively from 2012 to 2017) because the markets are highly penetrated with fixed broadband connections, including fibre.  Fixed broadband revenue will grow most in countries where there is room to increase penetration rates, and where operators are most successful in promoting fibre and associated enhanced services such as IPTV.  The forecast growth in revenue from business network services is largely a function of economic growth expectations for each country. Figure 30: Fixed retail revenue by type, developed Asia–Pacific, 2008–2017 [Source: Analysys Mason, 2013] 46

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Type CAGR 2008–2012 CAGR 2012–2017 Mobile voice–1.3%–2.6% Mobile messaging7.1%–2.8% Mobile handset data24.4%6.8% Mobile broadband20.0%1.3% Fixed voice and narrowband–6.3%–5.8% Fixed broadband4.5%2.0% Business network services1.2%2.8% Total0.9%–1.3% Type CAGR 2008–2012 CAGR 2012–2017 Mobile handsets2.7%2.8% Mobile broadband41.8%8.0% Fixed voice0.9%0.3% Fixed broadband3.5%2.8% Australia’s mobile market will continue to outpace fixed, but the National Broadband Network (NBN) will provide important growth opportunities Figure 31: Retail revenue by service type, Australia, 2008–2017 [Source: Analysys Mason, 2013] Figure 32: Growth rates of retail revenue by service type, Australia, 2008– 2017 [Source: Analysys Mason, 2013] Figure 33: Growth rates of connections by type, Australia, 2008–2017 [Source: Analysys Mason, 2013] 48

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 4G in Australia will be driven by smartphones and mobile broadband, but will be limited by coverage in the short and medium term  Telstra is Australia’s largest mobile operator with 46% of SIMs in June 2012, followed by SingTel Optus (31%) and Vodafone Hutchison Australia (VHA) (23%). The latter lost market share during 2011 and 2012 because of issues with its network and customer care.  The proportion of prepaid mobile accounts declined in favour of contracts, falling from 41% in 2008 to 35% at June 2012. However, prepaid accounts will continue to be important, accounting for 33% of connections in 2017.  3G has been available in Australia since the launch by Hutchison in 2003, but the two largest operators did not launch it until 2005. Despite this later start, 71% of Australian mobile connections were 3G by mid-2012.  Telstra launched 4G datacard services in November 2011, and LTE smartphones from January 2012. Optus launched LTE for businesses in August 2012 and consumers in September 2012. VHA launched LTE trials in February 2013.  Australia’s smartphone and mobile broadband users will drive 4G adoption, but will be limited by network coverage. As of June 2012, Telstra covered 16 major cities and airports and 89 regional areas, but only for a 3–5km radius each. The operator plans to cover two-thirds of the population with its LTE network by mid-2013. We expect 4G to account for 41% of mobile connections by the end of 2017. 49 Figure 34: Mobile connections by generation, and mobile penetration, Australia, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Australia’s mobile broadband connections are high and growing, but fewer will substitute for fixed broadband as fibre is rolled out nationwide  Mobile broadband penetration is very high in Australia, accounting for 21% of mobile connections in 2012, compared to a regional average of 7%. Mobile broadband connections were mainly for 3G (and some 4G) USB modems and connected laptops, but also include some mid-screen devices such as connected tablets and e-readers.  A high proportion of mobile broadband connections are substitutes for fixed broadband, which has limited coverage.  Mobile broadband has been the major source of growth in broadband connections in recent years, and mobile accounted for approximately half of all broadband connections in Australia by 2012.  Mobile broadband connections will continue to grow at a CAGR of 8% during the forecast period, to represent 25% of mobile connections and 56% of all broadband connections by 2017. A declining proportion of mobile broadband connections will be substitutive for fixed broadband as the Australian government rolls out a national fibre-optic network, but progress on that network has been slow to date.  Smartphone penetration has been increasing rapidly in Australia; 88% of contract handsets sold by Telstra in the year to June 2012 were smartphones. We forecast 76% of active handsets in Australia will be smartphones by the end of 2017, up from 55% at the end of 2012. 50 Figure 35: Mobile connections by device, Australia, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Handset data services will overtake messaging and broadband as Australia’s second-largest source of mobile revenue after voice  Mobile voice revenue has been declining in Australia since 2011, and we forecast that it will decline further at a CAGR of –2.6% from 2012 to 2017.  Mobile messaging is popular in Australia and accounted for just under 20% of mobile service revenue in 2012. However, continued price pressure and competition from web-based forms of messaging are likely to erode this revenue source at an average CAGR of –2.8% from 2012 to 2017.  Mobile broadband has been a major source of revenue and growth for mobile operators in recent years, but growth appears to be slowing. Mobile broadband accounted for around 14 % of mobile retail revenue in 2012, and is forecast to increase only slightly to 15% in 2017. We expect a CAGR of just 1.3% for mobile broadband revenue from 2012 to 2017.  Handset data services, currently mobile operators’ third largest revenue source, are expected to overtake mobile messaging by 2015. We forecast that handset data services will account for 21% of mobile revenue in 2017, up from 14% in 2012, supported by increased smartphone penetration. 51 Figure 36: Mobile retail revenue by service type and ASPU, Australia, 2008– 2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Australia’s National Broadband Network promises to significantly improve the availability of fixed broadband  Fixed voice penetration has been declining in Australia as a proportion of households and population, but the number of connections has grown slowly in absolute terms. We expect that trend to continue with fixed voice penetration declining from 57% of Australia’s population in 2012 to 54% in 2017, but the number of connections will grow at a CAGR of 0.3% in the same period.  A growing number of Australians do not have a fixed voice connection. The Australian Communications and Media Authority (ACMA) estimates that 2.7 million people aged 14 years and older – around 10% of Australia’s total population – did not have a fixed-line phone at home in June 2011. Of those without a fixed voice line, 96% used a mobile phone.  Fixed broadband penetration is constrained in Australia because of limited coverage, but the government’s National Broadband Network (NBN) project aims to make fibre-optic broadband access available to 93% of Australian premises by 2021. Broadband access for the remainder is expected to be delivered by fixed wireless or satellite.  Roll out of the NBN is in its early stages with just 18 200 premises passed at March 2012. Less than 1% of Australia’s fixed broadband connections were FTTH/B in June 2012, but we forecast that this will increase to 13% by the end of 2017. 52 Figure 37: Fixed connections by type and fixed penetration, Australia, 2008– 2017 [Source: Analysys Mason, 2013] Figure 38: Fixed retail broadband revenue by technology and ARPU, Australia, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Type CAGR 2008–2012 CAGR 2012–2017 Mobile voice–9.4%–6.2% Mobile messaging28.7%2.2% Mobile handset data64.3%14.2% Mobile broadband26.4%0.3% Fixed voice and narrowband–3.9%–8.9% Fixed broadband2.1%–1.4% Business network services–0.8%1.4% Total2.5%0.7% Type CAGR 2008–2012 CAGR 2012–2017 Mobile handsets4.9%1.3% Mobile broadband29.0%8.5% Fixed voice0.9%–0.1% Fixed broadband5.2%2.6% Growth in the Hong Kong telecoms market will be dominated by mobile data products, as fixed consumer revenue faces saturation Figure 39: Retail revenue by service type, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013] Figure 40: Growth rates of retail revenue by service type, Hong Kong, 2008– 2017 [Source: Analysys Mason, 2013] Figure 41: Growth rates of connections by type, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013] 53

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Mobile penetration in Hong Kong is among the highest in the world, because of the intense competition and a dynamic population  Hong Kong’s mobile market is very competitive; its five network operators each control between 10% and 30% of subscribers. This competition has kept prices low and encouraged innovation – Hong Kong was among the first jurisdictions to license and launch LTE in 2010, but limited device availability and a lack of competition inhibited early take-up.  All major operators are expected to commercially launch LTE in spectrum bands with a range of compatible devices in 2013, which will encourage take-up.  China Mobile has launched TD-LTE, which is designed to be compatible with its FDD product and is the only operator in the world offering LTE on both technology standards in the same market.  Mobile penetration in Hong Kong was 182% at the end of 2011 and we expect it to reach 210% by the end of 2016. This is because of a high level of multiple-SIM ownership, as well as Hong Kong’s high population turnover, with a large number of expatriates from mainland China and elsewhere.  We expect 3G to continue to account for more than half of all mobile connections until the end of 2015, and forecast that 4G will account for 56% by the end of 2017. 54 Figure 42: Mobile connections by generation, and mobile penetration, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Mobile broadband SIMs are the main driver of subscriber numbers in Hong Kong, but smartphone take-up is a more significant trend  Mobile broadband accounted for 14.5% of mobile connections by mid-2012. This proportion will increase to 20% by 2017, compared with 16% for the region as a whole, as data SIMs continue to provide the main source of volume growth in the mobile market.  Mobile broadband will account for 51% of broadband connections by the end of 2017 (44% at mid-2012), but because fast fixed broadband services are widespread, only a very few of these will be users’ primary means of broadband access.  Growth in the number of handsets in Hong Kong has been limited since 2008, because of the very high rate of mobile penetration. Growth will continue, but at slow CAGR of 1.3% between 2012 and 2017.  More significant than the growth in the total handset base is the change within the base, as users migrate away from basic and feature phones towards the latest touchscreen smartphones. Smartphones have rapidly become the ‘device of choice’ in Hong Kong, accounting for 52% of handsets in mid-2012. By the end of 2017, this will increase to 83%, and the majority of the remainder will be feature phones with Internet capability of some sort. 55 Figure 43: Mobile connections by device, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Handset data will provide the most important source of revenue growth for operators in Hong Kong for the next 5 years  Hong Kong’s boom in the take-up of smartphones, and the intense competition between networks to provide the best 4G coverage, will cause healthy growth in operators’ handset data revenue during the next 5 years. We expect handset data revenue to more than double, from HKD6.8 billion (USD881 million) in 2012 to HKD13 billion (USD1711 million) in 2017 and generate an average HKD171 (USD22) of spend per handset user per month in 2017.  Mobile voice revenue will continue to decline, because services such as VoIP, text, email and IM will erode prices and traffic.  Mobile retail revenue will grow at a CAGR of 3.4% from 2012 to 2017, whereas voice will decline at a CAGR of –6.2%, accounting for just 23% of retail revenue by 2017, down from 37% in 2012.  The increased functionality of handsets will enable ASPU rates to increase, as the devices are used for more new services and become more central to subscriber behaviour.  However, overall mobile ASPU will rise at a CAGR of just 0.6% to reach HKD159 (USD20.4) per month in 2017. This is because of the dilution effects of lower mobile broadband ASPU, which will decline as usage shifts from laptops onto smartphones, and as the share of mid-screen devices increases relative to laptops with USB modems. 56 Figure 44: Mobile retail revenue by service type and ASPU, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Hong Kong has a strong fixed-line market, and the high take-up of fibre broadband will encourage the move towards VoBB  The Hong Kong fixed-line sector is very competitive by worldwide standards.  Fixed voice penetration was 59% of the population in mid- 2012. Fixed voice revenue has been relatively resilient, declining at a CAGR of –4.7% between 2008 and 2011. We expect this decline to accelerate to a CAGR of –8.6% between 2012 and 2017, as VoBB gains ground at the expense of PSTN.  Hong Kong is one of the the world’s most advanced broadband markets, aided by its compact geography and dense population. We estimate that fibre accounted for 51% of fixed broadband lines at June 2012. This will increase to 64% by the end of 2017, at the expense of DSL and cable services.  The total number of fixed broadband connections exceeds Hong Kong’s number of households, and household penetration is expected to increase to 120% at the end of 2017 (up from 108% in mid-2012).  Fixed broadband ARPU is expected to continue to decline, and this combined with slowing growth in the number of connections will cause a decline in revenue from 2012. Total revenue will peak at HKD4.9 billion (USD0.63 billion) in 2012, falling to HKD4.5 billion (USD0.59 billion) in 2016. 57 Figure 45: Fixed connections by type and fixed penetration, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013] Figure 46: Retail fixed broadband revenue by technology, and ARPU, Hong Kong, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Service CAGR 2008–2012 CAGR 2012–2017 Mobile voice–11.5%–3.6% Mobile messaging–46.6%–25.4% Mobile handset data9.7%2.8% Mobile broadband56.2%18.9% Fixed voice and narrowband–6.2%–11.8% Fixed broadband4.7%0.5% Business network services–1.4%0.3% Total–1.0%–0.2% Connections CAGR 2008–2012 CAGR 2012–2017 Mobile handsets4.1%0.4% Mobile broadband67.2%29.8% Fixed voice–2.6%–2.0% Fixed broadband5.0%1.1% Mobile handset data services will account for 40% of Japan’s telecoms service revenue by 2017 Figure 47: Retail revenue by service type, Japan, 2008–2017 [Source: Analysys Mason, 2013] Figure 48: Growth rates of retail revenue by service type, Japan, 2008–2017 [Source: Analysys Mason, 2013] Figure 49: Growth rates of connections by type, Japan, 2008–2017 [Source: Analysys Mason, 2013] 58

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Japan’s mobile operators are promoting LTE as one of several responses to congested 3G networks  Japan was the first country in the world to commercially launch 3G in 2001, and 94% of mobile connections in Japan were 3G by the end of 2010.  NTT DOCOMO launched LTE in December 2010 for mobile broadband services, adding a small number of LTE handsets during 2011. LTE-enabled smartphones became more widely available in 2012, and KDDI and SOFTBANK launched LTE networks with the iPhone 5 in September 2012.  All three operators have experienced service-disrupting congestion on their 3G networks and hope to alleviate some of this congestion with their more spectrally efficient LTE networks. NTT DOCOMO has increased its population coverage targets for LTE from 70% to 98% by March 2015 in response to its congestion issues.  The three main operators are also using Wi-Fi networks to divert data traffic off their 3G networks, but our forecasts do not include Wi-Fi service connections or revenue.  We forecast 74% of mobile connections will be 4G in Japan by the end of 2017, comprising approximately 94 million handsets and 22 million mobile broadband data connections. 59 Figure 50: Mobile connections by generation, and mobile penetration, Japan, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Japan is shifting from advanced, operator-controlled feature phones to more-standardised smartphones based on Android and Apple iOS  Japan’s move from feature phones to smartphones is transforming operator–vendor relationships.  The Japanese market has long had highly functional 3G feature phones. Operators have driven handset specifications and have favoured local device manufacturers.  More recently, the three main operators have widened their range of devices to include many based on the Android operating system.  SoftBank Mobile began offering the iPhone in July 2008, and subsequently gained market share. Its exclusivity ended in 2012 when KDDI started to offer the iPhone.  We forecast that smartphones will account for 82% of Japan’s handsets by the end of 2017, up from 31% at the end of 2012. NTT DOCOMO, Japan’s largest mobile operator, had 10.2 million smartphone subscribers as of March 2012 and is targeting 40 million by March 2016.  Mobile broadband penetration has been increasing with operators promoting connected data-centric devices such as tablets, as well as lower-ARPU devices such as digital photo frames and portable game consoles. We forecast that mobile broadband connections will increase at a CAGR of 30% from 2012 to 2017, but associated revenue will grow by just 19% because of declining ARPU. 60 Figure 51: Mobile connections by device, Japan, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Handset data services now account for more than half of Japan’s mobile retail service revenue and is forecast to grow further  Handset data services accounted for 56% of mobile retail revenue in 2012. Service innovation will continue to allow growth in handset data revenue, which is forecast to account for 59% of mobile retail revenue by 2017.  In absolute terms, revenue from handset data services is forecast to grow at a CAGR of 2.8% from 2012 to 2017.  Mobile broadband services accounted for only 5% of Japan’s mobile service revenue in 2012 because handsets – rather than USB modems – are often used as cellular modems for laptops. Also, Wi-Fi provides a feasible alternative to cellular laptop connections throughout urban areas.  We forecast an expansion in mobile broadband revenue to 11% of total mobile service revenue, but expect most of that growth to come from mid-screen devices such as tablets and e-readers, rather than large-screen devices such as laptops.  Mobile messaging services such as SMS are not an important part of the Japanese mobile market. Instead, mobile email has long been available to consumers through services such as NTT DOCOMO’s i-mode. 61 Figure 52: Mobile retail revenue by service type and ASPU, Japan, 2008– 2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Japan’s fixed voice penetration rate will continue to decline, while fixed broadband penetration will grow only slightly  Fixed voice minutes accounted for 39% of total outgoing minutes in Japan in 2011; this is expected to fall to 36% in 2012 and 30% by 2017. Meanwhile, total voice minutes are expected to decline by a CAGR of –1% from 2012 to 2017 as data communications substitute for fixed.  Japan’s fixed broadband penetration is likely to grow from 30% at the end of 2012 to 33% at the end of 2017.  NTT DOCOMO and some altnets are investing heavily in fibre-optic networks, and encouraging take-up and usage of these networks by offering HDTV and VoD services to make use of the broadband speeds of up to 1Gbps.  FTTB accounted for 39% of fixed broadband connections in mid-2012, and we expect this to grow to 43% by the end of 2017. FTTB will in part substitute existing fixed broadband connections, particularly DSL connections, which we expect will continue to decline in 2012–2017 (at a CAGR of –3.3%).  The number of BFWA connections have grown rapidly since the launch of UQ Communications’ WiMAX services in 2010.  Fixed broadband ARPU will decline, particularly for access services, but FTTH/B and associated media services will support modest growth in fixed broadband retail revenue at a CAGR of 0.5% from 2012 to 2017. 62 Figure 53: Fixed connections by type and fixed penetration, Japan, 2008– 2017 [Source: Analysys Mason, 2013] Figure 54: Retail fixed broadband revenue by technology and ARPU, Japan, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Service CAGR 2008–2012 CAGR 2012–2017 Mobile voice–1.0%–1.9% Mobile messaging7.2%0.2% Mobile handset data18.7%6.6% Mobile broadband45.7%–7.6% Fixed voice and narrowband–5.7%–3.3% Fixed broadband6.2%3.8% Business network services–1.3%6.2% Total2.8%–0.2% Connections CAGR 2008–2012 CAGR 2012–2017 Mobile handsets3.4%2.2% Mobile broadband43.6%6.5% Fixed voice1.7%0.3% Fixed broadband9.1%3.1% Service innovation in Singapore’s mature telecoms market will drive growth in handset data and fixed broadband revenue Figure 55: Retail revenue by service type, Singapore, 2008–2017 [Source: Analysys Mason, 2013] Figure 56: Growth rates of retail revenue by service type, Singapore, 2008– 2017 [Source: Analysys Mason, 2013] Figure 57: Growth rates of connections by type, Singapore, 2008–2017 [Source: Analysys Mason, 2013] 63

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 LTE has been launched by all three operators in Singapore, and all are expected to have nationwide LTE coverage by the end of 2013  SingTel Mobile (the incumbent) had a 47% share of mobile market subscribers at September 2012. StarHub had 27% and M1 had 26%.  All three operators provide nationwide HSDPA services and have launched commercial LTE services.  M1 launched LTE in June 2011 for corporate customers only, providing service in the financial district for LTE-ready USB modems. Nationwide coverage was achieved by September 2012 when M1 launched LTE-enabled smartphones.  SingTel launched LTE in December 2012 for USB modems, followed by LTE smartphone availability from June 2012. The LTE network covered 50% of Singapore by mid-2012 and SingTel planned to extend that to 80% by the end of the year.  StarHub launched LTE in Singapore’s financial district and airport in September 2012, at the same time as announcing it had upgraded its 3G network with DC-HSPA+. It plans to extend its LTE network to 50% of Singapore by the end of 2012 and offer a nationwide LTE network by the end of 2013.  We forecast that 4G will account for 62% of mobile connections in Singapore by the end of 2017, up from just 3% at the end of 2012. This will largely be driven by a low price differential between 3G and 4G smartphone data plans. 64 Figure 58: Mobile connections by generation, and mobile penetration, Singapore, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Singapore’s mobile operators have heavily subsidised smartphones in order to drive the penetration rate and take-up of data services  Mobile operators in Singapore have focused on encouraging smartphone take-up, with handset subsidies. Subsidies are negating much of the increase in ARPU associated with smartphones in the short term, but operators view this as an opportunity to increase overall ARPU during the course of the associated two-year contracts.  Smartphones represented 42% of handsets in Singapore by the end of 2011. They are forecast to reach 55% by the end of 2012 and 98% by the end of 2017.  Mobile broadband’s share of mobile connections is growing with its inclusion in fixed broadband bundles, but ARPU is declining. We expect mobile broadband connections to increase from 15.6% of mobile connections at the end of 2012 to 18.5% at the end of 2017, a CAGR of 3.5%.  Mobile handset penetration is expected to grow very little. Although handset numbers are forecast to increase at a CAGR of 2.2% from 2012 to 2017, we expect the handset population penetration rate to increase only slightly from 121% to 123% during the same period. 65 Figure 59: Mobile connections by device, Singapore, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Singapore’s mobile retail revenue will flatten, but handset data revenue will grow thanks to smartphone penetration and service innovation  Handset data services (excluding SMS and MMS) will be the primary driver of growth in Singapore’s mobile revenue during the forecast period. Retail revenue from such services is forecast to grow at a CAGR of 6.6% from 2012 to 2017.  In addition to promoting and subsidising smartphones, Singapore’s operators have launched sophisticated mobile data services, including:  SingTel’s AMPed music download portal and deF!ND voice-based search services  M1’s application store  StarHub’s TV on Mobile.  The regulator is encouraging service innovation by providing grants to develop open service delivery platforms for location positioning, creating mobile websites, and mobile payments, ticketing and fulfillment. The regulator also appointed a consortium to make NFC mobile payments available in Singapore by mid-2012. The consortium missed this initial deadline, but expects to launch NFC services in 2012.  We expect mobile broadband revenue to decline at a CAGR of –7.6% from 2012 to 2017, despite the forecast rapid rise in adoption, because average revenue for such services will fall dramatically with offers such as SingTel’s SGD4 (USD3 at 2011 exchange rates) add-on to fixed broadband services. 66 Figure 60: Mobile retail revenue by service type and ASPU, South Korea, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Singapore’s Next Generation National Broadband Network is shifting broadband access and fixed voice connections towards fibre  Cable is the main broadband access technology in Singapore and accounted for 48% of fixed broadband connections at September 2012. This is linked to the dominance of cable TV for free-to-air TV and StarHub’s pay-TV service. SingTel is the main provider of ADSL, which accounted for 35% of fixed broadband connections in September 2012. M1 sells access to both cable and ADSL.  The Next Generation National Broadband Network (NGNBN) is increasing the number of fibre connections, which accounted for 17% of fixed broadband connections in September 2012, up from 7% at the end of 2011. We forecast that FTTH/B will account for 46% of fixed broadband connections in Singapore at the end of 2017.  All three operators began retailing access based on the NGNBN at the end of 2010 and are offering pay-TV services over fibre as well as via their existing access technologies.  Fixed broadband revenue could dip in 2012 as access revenue falls for all connection types (particularly DSL and cable, which will lose share to fibre). However, fixed broadband revenue is forecast to grow again as FTTH/B attracts additional IPTV revenue. Our forecasts do not include cable-TV revenue, which we expect to decline as a result of competition from IPTV services offered over the NGNBN. 67 Figure 61: Fixed connections by type and fixed penetration, Singapore, 2008–2017 [Source: Analysys Mason, 2013] Figure 62: Retail fixed broadband revenue by technology and ARPU, Singapore, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Service CAGR 2008–2012 CAGR 2012–2017 Fixed voice–7.4%–3.2% Fixed broadband–2.6%–11.9% Business network services31.5%4.1% Mobile voice29.8%18.1% Mobile messaging–5.3%–5.7% Mobile handset data3.7%–0.6% Mobile broadband–2.3%–3.0% Total0.6%–0.9% Connections CAGR 2008–2012 CAGR 2012–2017 Fixed voice4.3%0.5% Fixed broadband27.6%32.0% Mobile handsets4.8%–0.3% Mobile broadband5.8%1.7% South Korea has a mature broadband market and an advanced mobile market that rapidly adopts new (often home-grown) technologies Figure 63: Retail revenue by service type, South Korea, 2008–2017 [Source: Analysys Mason, 2013] Figure 64: Growth rates of retail revenue by service type, South Korea, 2008–2017 [Source: Analysys Mason, 2013] Figure 65: Growth rates of connections by type, South Korea, 2008–2017 [Source: Analysys Mason, 2013] 68

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 South Korea has the highest penetration of LTE services in the world with more than 15 million subscribers at the end of 2012  Mobile penetration in South Korea is continuing to grow driven by connected devices (such as tablets) and mobile broadband SIMs  SK Telecom and LG Uplus launched LTE services in July 2011, with KT launching in early 2012 after a protracted legal dispute surrounding the switch-off of its 2G network.  Initial take-up of LTE exceeded even the operators’ published targets. SK Telecom revised its year-end 2012 targets in September of that year having already surpassed the original target. South Korea’s LTE penetration of 32% is the highest in the world, and only the USA has a higher number of connections.  Operators have invested in alternative networks (for example, WiBro/Wi-Fi) in order to ease congestion on mobile networks. (WiBro connections are not included in our count of mobile connections). 69 Figure 66: Mobile connections by generation, and mobile penetration, South Korea, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Growth in the number of mobile connections in South Korea will be primarily from mobile broadband  The number of mobile connections in South Korea is expected to grow at a CAGR of 2.8% from 2012 to 2017, giving a penetration rate of 119%, up from 110% at the end of 2012.  The 2012 penetration rate seems low compared to most other developed mobile markets, but reflects a low rate of prepaid usage and multiple-SIM ownership. In fact, the South Korean mobile market is one of the most advanced in the world, and one in which smartphone adoption will be very high.  We forecast that smartphones will account for 96% of mobile handsets by the end of 2017, up from an estimated 63% at the end of 2012. Operators offer a wide range of smartphones (particularly from South Korean manufacturers), and are attempting to drive demand and usage with related mobile services such as social networking, location-based services, mobile IPTV and a smartphone application store.  Growth in the number of mobile connections is expected to come mainly from mobile broadband, but we also expect small net growth in handsets. As a greater variety of devices become connected (for example, e-readers and GPS systems), we forecast that mobile broadband will increase at a CAGR of 32% going from less than 2.3% of mobile connections in 2012 to 8.4% by the end of 2017. 70 Figure 67: Mobile connections by device, South Korea, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Growth in handset data revenue will offset the decline in voice revenue, but overall growth in total revenue will be low  Mobile voice retail revenue accounted for 54% of total mobile retail revenue in 2012, but is forecast to fall to 46% by 2017 as competition (including from MVNOs) erodes average mobile revenue per minute. South Korea’s first MVNO was licensed in October 2010, and additional MVNOs were licensed in May 2011. The threat from mobile VoIP services is limited because the regulator allows operators to block disruptive OTT services.  Handset data revenue will provide the most monetary growth for mobile operators during the forecast period, aided by smartphone adoption. Mobile handset data revenue is forecast to grow at a CAGR of 4.1% from 2012 to 2017  Revenue from mobile messaging services has been relatively stable in recent years and represented 5% of total mobile service revenue in 2012. We forecast this revenue stream will decline to 3% of total mobile service revenue by 2017 as smartphones make it even easier for South Koreans to substitute mobile email and social media for SMS and MMS.  Despite the projected CAGR of 32% for mobile broadband connections (2012 to 2017), we expect a lower CAGR of 18% for mobile broadband revenue because most growth will be associated with mid-screen devices, which are likely to generate lower data revenue than connected laptops. 71 Figure 68: Mobile retail revenue by service type and ASPU, South Korea, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 South Korea has a highly penetrated broadband market, but growth continues in penetration, speeds and IPTV take-up  South Korea had a high fixed broadband penetration rate of 101% of households at the end of 2012, and this figure is forecast to grow to 110% by the end of 2017.  FTTH/B has been the dominant broadband technology since 2008. By the end of 2012, it accounted for 59% of fixed broadband connections in South Korea, and we expect this figure to grow to 64% by the end of 2017.  Growth in FTTH/B has been aided by successful infrastructure-based competition policies of the Korea Communications Commission (KCC), which have resulted in three competing broadband Internet providers with nationwide NGA networks. Targets to provide specific service levels (1Gbps to all homes) had been set for the end of 2011, but the limited information on this subject in the last year would suggest that these targets have been missed.  IPTV services are growing rapidly and are provided by KT, SK Broadband and LG Uplus. Bundling IPTV and broadband services has enabled telecoms operators to compete with cable-TV providers, and to be particularly competitive on price. 72 Figure 69: Fixed connections by type and fixed penetration, South Korea, 2008–2017 [Source: Analysys Mason, 2013] Figure 70: Retail fixed broadband revenue by technology and ARPU, South Korea, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Service type CAGR 2008–2012 CAGR 2012–2017 Mobile handsets3.1%1.9% Mobile broadband51.3%17.9% Fixed voice4.0%0.6% Fixed broadband3.6%2.5% Service type CAGR 2008–2012 CAGR 2012–2017 Mobile voice–2.9%–2.4% Mobile messaging–0.0%–4.5% Mobile handset data60.3%9.9% Mobile broadband63.2%16.0% Fixed voice and narrowband1.6%–6.6% Fixed broadband5.1%0.4% Business network services0.8%2.2% Total1.7%–0.6% Taiwan’s retail revenue could fall if declines in voice and messaging revenue outweigh growth in broadband and mobile handset data Figure 71: Retail revenue by service type, Taiwan, 2008–2017 [Source: Analysys Mason, 2013] Figure 72: Growth rates of retail revenue by service type, Taiwan, 2008– 2017 [Source: Analysys Mason, 2013] Figure 73: Growth rates of connections by type, Taiwan, 2008–2017 [Source: Analysys Mason, 2013] 73

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Mobile broadband will continue to have a small impact in Taiwan, but smartphone take-up will become significant  Mobile broadband datacards and tablets are expected to account for nearly 6% of mobile connections in Taiwan at the end of 2012.  We expect the number of mobile broadband connections to grow at a 17.9% CAGR from 2012 to 2017, which will account for around 45% of net additions to mobile connections during that period. Mobile broadband will represent around 11% of mobile connections at the end of 2017.  One of the factors behind the current low level of mobile broadband take-up is the ubiquity of fixed broadband, which has reduced the demand for mobile broadband as a primary service. Nevertheless, mobile is estimated to account for 23% of all broadband connections at December 2012, and this will increase to 38% by 2017, as mobile broadband grows in popularity as a secondary service.  The mobile handset base will grow more slowly, from a population penetration of 119% at September 2012 to 131% by the end of 2017 (a CAGR of 1.7% from 2012 to 2017).  Handset users will migrate from basic handsets to smartphones. Smartphones account for a relatively low share of handsets currently – around 35% by the end of 2012 compared with a regional average of just under 44% – but this will increase sharply and we expect 75% of Taiwan’s active handsets to be smartphones by the end of 2017. 74 Figure 74: Mobile connections by device, Taiwan, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Voice revenue is declining in Taiwan, but increased use of data services on handsets and other data devices will compensate in the short term  Mobile retail service revenue was in decline in Taiwan until 2011 when it grew 2% to TWD195 billion. Preliminary estimates suggest mobile revenue is likely to grow again in 2012, potentially exceeding TWD200 billion, due to growth in mobile broadband and handset data service revenue.  However, we expect that the increase in the number of SIMs will be cancelled out by declining ASPU by 2014. This is the result of reduced tariffs as well as the diluting effect of lower- spending prepaid subscribers entering the market.  Handset ASPU will decline faster than the overall ASPU, because the latter takes into account the higher ASPU of mobile broadband SIMs.  Voice accounted for 79% of Taiwan’s mobile service revenue in 2011, and this will fall to 68% in 2017.  Revenue from handset data services will increase from 10% of mobile retail revenue in 2012 to 16% in 2017, while messaging revenue will decline from 4.7% of the total to 3.6%, as revenue from traditional messaging services is eroded by increased use of email, IM and other data communications.  Revenue from mobile broadband services such as datacards and other connected devices such as tablets and e-readers will grow to 12.3% of mobile service revenue by 2017. 75 Figure 75: Mobile retail revenue by service type and ASPU, Taiwan, 2008– 2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Mobile penetration has ample scope for growth in Taiwan, and although 4G will be late on the scene, take-up will be swift  The mobile market in Taiwan is crowded – six networks serve 23 million people – but the high population density makes roll-out less capex-intensive than in sparser countries, and there has been little if any talk of consolidation.  Mobile population penetration, including handsets and data- centric mobile broadband devices, reached 124% in June 2012 and is forecast to reach 148% by the end of 2017. Mobile handset population penetration is expected to reach 131% by the end of 2017, up from 118% at mid-2012.  Much of the expected growth in penetration will be prepaid, as new, low-spending users enter the market and existing users procure secondary SIMs either for handsets or data devices. By 2017, 14.9% of SIMs will be prepaid, compared with 12.5% at the end of 2012.  It is estimated that 74% of Taiwan’s mobile connections were 3G at the end of 2012.  The leading operators are not expected to launch 4G services until 2015 because of a lack of spectrum – the regulator is planning to start the LTE licensing process in the second half of 2013. When LTE launches, we expect take-up to be swift because many compatible handsets will be available.  We expect that 4G will account for 29% of mobile connections by 2017, well below the regional average of 62%. 76 Figure 76: Mobile connections by generation, and mobile penetration, Taiwan, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Fixed voice access is near-universal in Taiwan, but lines and revenue will continue to increase, as will fixed broadband, particularly FTTH/B  Taiwan’s incumbent Chunghwa Telecom continues to dominate the fixed-line market.  The installed base of voice connections has continued to grow in recent years. Although the number of PSTN connections is expected to fall for the first time in 2012, VoIP connections are increasing and are forecast to account for 18.0% of fixed voice connections by the end of 2017, up from 9.6% at the end of 2012.  Overall fixed voice penetration reached 73% of the population at the end of September 2012, up from 72% at the end of 2011. We expect the number of fixed voice to connections and population penetration to plateau from 2015 at 17.2 million lines and 74% respectively.  Fixed broadband penetration is estimated at 24% of population (76% of households) at the end of 2012. Fibre- based broadband accounts for a substantial share of lines. FTTH/B will account for 68% of fixed broadband connections by 2017, up from 53% in 2012.  In the short term, we expect broadband ARPU to continue to grow, aided by increased take-up of OTT services such as IPTV, and the transition away from DSL to more-expensive fibre services. However, ARPU will decline from 2014 onwards to reach TWD729 (USD25) per month by 2017. 77 Figure 77: Fixed connections by type and fixed penetration, Taiwan, 2008– 2017 [Source: Analysys Mason, 2013] Figure 78: Retail fixed broadband revenue by technology and ARPU, Taiwan, 2008–2017 [Source: Analysys Mason, 2013]

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 About the authors [1] Tom Mowat (Principal Analyst) is the lead analyst for Analysys Mason’s Asia–Pacific research programme and is based in our Singapore office. Tom recently rejoined Analysys Mason from PwC, where he was a Manager in the TMT Consulting team. He has extensive expertise in fixed and mobile broadband services, strategy and forecasting, regulatory issues, cost-modelling and the particular issues affecting telecoms markets in developing regions. His previous role at Analysys Mason was within the Custom Research team, developing project-based analysis for key industry clients. Tom's experience includes leading numerous projects for telecoms service providers, vendors, and regulatory and industry bodies, as an analyst and consultant. Tom has degrees in mathematical and particle physics from the University of Nottingham and the University of Durham. William Hare (Analyst) is co-leader of Analysys Mason’s Global Telecoms Forecasts programme, and is a key contributor to the modelling behind the Telecoms Market Matrix. He joined Analysys Mason’s Consulting division in 2007, before transferring to the Research division in 2010. William’s primary specialisations include business and market modelling and data analysis, for both the mobile and fixed telecoms markets. He read mathematics at the University of Cambridge. Katrina Bond (Associate Analyst) is a freelance analyst with more than a decade of experience in understanding, analysing and forecasting the telecoms industry. She has a global perspective having been based in Australia, the UK and now in the USA, and has maintained a special interest in the Asia–Pacific region. Katrina previously managed Analysys Mason’s mobile research programme as a Principal Analyst in the company’s Research division. She has written extensively on fixed–mobile substitution, mobile data and content services, mobile data solutions for businesses, mobile payments, and billing, pricing and roaming issues related to mobile data services. 79

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 About the authors [2] Satvik Singhania (Research Analyst) joined Analysys Mason in 2012 and works on our Asia–Pacific research programme. He is based at our Singapore office, and has a degree in Economics and Finance from the Singapore Management University. 80

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 About Analysys Mason Knowing what’s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research. 81 Consulting  Our focus is exclusively on TMT.  We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy.  We have developed rigorous methodologies that deliver tangible results for clients around the world. For more information, please visit www.analysysmason.com/consulting. Research  We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services.  Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts.  Our dedicated Custom Research team undertakes specialised and bespoke projects for clients. For more information, please visit www.analysysmason.com/research.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Research from Analysys Mason 82 We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors, through a range of research programmes that focus on different services and regions of the world. Alongside our standardised suite of research programmes, our Custom Research team undertakes specialised, bespoke research projects for clients. The dedicated team offers tailored investigations and answers complex questions on markets, competitors and services with customised industry intelligence and insights. To find out more, please visit www.analysysmason.com/research.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Consulting from Analysys Mason For more than 25 years, our consultants have been bringing the benefits of applied intelligence to enable clients around the world to make the most of their opportunities. 83 Our clients in the telecoms, media and technology (TMT) sectors operate in dynamic markets where change is constant. We help shape their understanding of the future so they can thrive in these demanding conditions. To do that, we have developed rigorous methodologies that deliver real results for clients around the world. Our focus is exclusively on TMT. We advise clients on regulatory matters, help shape spectrum policy and develop spectrum strategy, support multi-billion dollar investments, advise on operational performance and develop new business strategies. Such projects result in a depth of knowledge and a range of expertise that sets us apart. We help clients solve their most pressing problems, enabling them to go farther, faster and achieve their commercial objectives. To find out more, please visit www.analysysmason.com/consulting.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Published by Analysys Mason Limited Bush House North West Wing Aldwych London WC2B 4PJ UK Tel: +44 (0)845 600 5244 Fax: +44 (0)845 528 0760 Email: research@analysysmason.com www.analysysmason.com/research Registered in England No. 5177472 © Analysys Mason Limited 2013. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client- specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party.

© Analysys Mason Limited 2013 The developed Asia–Pacific telecoms market: trends and forecasts 2012–2017 Research Forecast Report The developed Asia–Pacific.

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