Ecosystm research shows that enterprises in Southeast Asia are increasingly considering telecom operators as go-to-market partners (Figure 1). Enterprises are demanding more than just devices and connectivity and with the fervent digital transformation (DX) efforts underway, services such as managed services, business application services, cybersecurity and network services are in demand. Technology vendors have an opportunity to partner with the right telecom operator in each market to enhance their IT market offerings, ahead of the 5G rollouts.
The broad 5G ecosystem inculcates cross-sector innovation and greater collaboration leading to new business models and exciting new opportunities. Singtel is the leading operator in the region and has the enterprise segment contributing approximately 65% to its revenue in its domestic market. In the World Communications Award 2019, Singtel won both “Best Enterprise Service” and “The Broadband Pioneer” awards. This places Singtel in a fine position to capitalise on the 5G enterprise services.
5G Needed Now More Than Ever
The pandemic has seen a rise in network traffic, onboarding of the digital customer and rapid DX of businesses which has whetted the appetite for faster broadband speeds and new services. Southeast Asia countries stand to profit from the trade war between the US and China and 5G features of low latency and higher security can boost adoption of IoT, Smart Manufacturing and broader Industry 4.0 goals to drive the economy.
Fixed Wireless in Southeast Asia is expected to be very popular considering the low penetration of fibre to the home (with the exception of Singapore) and will provide enterprises with a viable secondary connection to the internet. Popular applications – including video streaming and gaming – which are speed, latency and volume hungry will also be a target market for operators. Mobile operators that do not have a fixed broadband offering can enter this space and provide a serious “wireless fibre” alternative to homes and businesses.
Governments and telecom regulators ought to make spectrum available to the major telecom operators as soon as possible in order to ensure that the cutting edge 5G communications services are made available to consumers and businesses. Many experts believe 5G can raise the competitiveness of a nation.
US-China Trade War Threatens to Change Equipment Supplier Landscape
Despite severe pressures caused by the US-China trade war, Huawei posted an impressive 13.1% YoY growth in 1H 2020 registering revenue of USD 64.88 billion. Both Huawei and ZTE generate approximately 60% of their business from their domestic markets which is critical with the current unfavourable global sentiments. Huawei has diversified its business and built its consumer devices business which should withstand the disruptions caused by the political challenges.
Ericsson and Nokia stand to benefit from Huawei’s current global position and this was evident with the wins for the 5G contracts by Singtel and JVCo (Singtel and M1). The JVCo announced it selected Nokia to build the Radio Access Network (RAN) for the 5G standalone (SA) mmWave network infrastructure in the 3.5GHz radio frequency band. Singtel selected Ericsson to provide for the RAN on the same mmWave network.
However, while there is an opportunity for NEC and Samsung to join the party, Huawei is expected to do well in most other countries in Southeast Asia.
The Indonesia market is the largest in the region and is expected to hit USD 133 billion from USD 40 billion in 2025. Indonesia’s lack of a world-class telecom infrastructure coupled with their slowness in 5G adoption has not impeded the country’s attractiveness for global technology investors who see the 270 million population as an immense opportunity. US tech giants, Facebook, Google, and PayPal have invested in Indonesia to reap the benefits from the growing digital economy powered by unicorns such as Gojek, Bukalapak, Tokopedia. In June 2020, Google Cloud launched in Jakarta, only the second in the region after Singapore with the four big unicorns being anchor customers.
In 2025, Google predicts Thailand to be the second-largest internet economy worth USD 50 billion. The internet economy for Singapore, Malaysia and the Philippines are estimated to be over USD 27 billion each. Shopee and Lazada are the top eCommerce apps in the region and have seen an increase in sales due to the disruption in the Retail industry. In-store shopping contributes to more than 50% of Retail in Singapore and Malaysia – this provides a tremendous opportunity for eCommerce players.
While movement restrictions are gradually being lifted, some things may never return where they were before COVID-19. Public debts have risen with numerous aids and handouts impacting economic growth forecast and rising unemployment is impacting customer spending power. On the plus side, DX of businesses and sharp onboarding of customers have redefined interactions, and sectors such as Education, are going online which will boost the digital economy. While the challenges are evident, exciting times are ahead for the technology and telecom sector in Southeast Asia.
Making its largest foray into the Indian market yet, last week Facebook announced that it is investing US$5.7 billion in Jio Platforms – India’s largest telecom operator – for a 9.9% minority stake. Facebook makes its intentions very clear and is targeting the 60 million small and medium enterprises (SMEs) who can be the backbone of India’s growing digital economy. This includes a rather unorganised retail sector, which has had to adopt digital at breakneck speed following the Government’s earlier financial reforms, which impacted the smaller retailers, dependent primarily on cash transactions. Facebook is by no means the only global giant with an interest in India’s retail business – with Amazon and Walmart leading the way.
The JioMart and WhatsApp Pilot
Just days after the announcement, JioMart – an eCommerce venture also a wholly-owned subsidiary of Reliance Industries, like Jio Platforms – has launched a pilot in Mumbai which allows users to order groceries through WhatsApp. Customers can now place grocery orders through WhatsApp Business with JioMart reaching out to small-scale retailers and brick and mortar stores – or “Kirana stores” as they are referred to in India – to fulfil the order. More than 1,200 local stores have been engaged for this pilot. It currently does not include a digital payment option and invoices and alerts are sent through WhatsApp. Mukesh Ambani, Chairman and MD of Reliance Industries, says that the JioMart and WhatsApp collaboration has the potential to make it possible for around 30 million neighbourhood stores to transact digitally.
India Emerging as the New Battlefield
India is an important eCommerce market for global giants such as Facebook and Amazon, who have struggled with establishing a presence in China. Walmart has also set it its sights on India, with its recent acquisition of Flipkart. Ecosystm Principal Advisor, Kaushik Ghatak says. “India represents the final frontier, where the battle lines are being drawn, and the three are heading towards a collision path. Facebook’s recent move has just upped the game for Amazon and Walmart, as well as for the eCommerce and Fintech start-ups who have been eyeing this market.”
Amazon has been the early mover, establishing its eCommerce presence in India way back in 2013. Ghatak says, “From its initial marketplace approach of curating suppliers to start selling on its platform, Amazon graduated to offering its own delivery and fulfilment services, by establishing dozens of warehouses across India. This was to ensure the quality and timeliness of deliveries, upholding its ‘Fulfilment by Amazon’ (FBA) brand promise. There was a considerable cost though, in terms of time to ramp up and investments – with the associated asset risks. Also, reaching out to the diffused retail sector, with their non-existent or very low level of digitalisation, has been difficult for all the major eCommerce players such as Amazon and Flipkart. Jeff Bezos’ announcement of an additional investment of $ 1 billion, earlier this year, to digitise SMEs, allowing them to sell and operate online, is a step to extend its reach into this diffused retail market.”
JioMart’s model, according to Ghatak is in stark contrast to Amazon’s. “JioMart’s currently ongoing pilot in Mumbai is a classic B2C marketplace model, with little or no asset risk. The orders placed by the customers are routed to the nearest Kirana store based on stock availability, with the customers going to pick up the ordered items themselves at times.”
Ecosystm Principal Advisor, Niloy Mukherjee says, “Jio has unparalleled market access in India with reports showing north of 370 million subscribers. Even at a $1.7 per month revenue from such a huge number, one can get to a $7.5 billion-dollar annual business. But even this is dwarfed by what that subscriber base itself is worth – through the data it provides, the products that can be sold and so on. Similarly, WhatsApp will prove to be more important than Facebook in India, with more than 400 million users. Using WhatsApp to get Kirana stores to do delivery can be a true game-changer.”
Talking about how this competes with Amazon, Mukherjee says, “This can eat into the business of an Amazon and my guess is, it will be far more efficient. The proximity to the customer will allow multiple deliveries per day at short notice, and fresh produce guarantees – maybe even door returns if not satisfied – that would be hard to match. Given the traffic situation in large Indian cities, delivery logistics from a more distant source will always struggle to compete. This is one tip of a multi-pronged spear – there are obviously other products that can be contemplated, leading to additional revenues.”
The Possibilities Ahead
Mukherjee explains why he thinks Facebook invested in Jio Platforms, rather than just forging a collaboration model. “Clearly both parties want to tie the other down and make sure that this alliance is long term. And this possibly means revenue will be shared instead of the usual commission model. Also, the go-to-market implications can run to more than just the Indian market. WeChat Pay is huge in China but not really elsewhere. If this works, there could be a potential “WhatsApp Pay” in the rest of the world. For Jio who already dominates the telecom landscape in India, this deal is a step towards taking their earnings to a new level, above the top end of the telecom category – they can access profit pools available to hardly any telecom provider worldwide.”
At a time when a market entry for foreign players in India is getting tougher with increasing regulatory pressures, a tie-up with the biggest player in India is indeed a very promising step – for both Facebook and Reliance. “For Facebook, this is a great opportunity to take its dependence away from a primarily ad-driven revenue model. The digitalisation of the diffused retail sector in India will open up new revenue opportunities from its WhatsApp Business App, WhatsApp Business API, and WhatsApp Pay-UPI gateway (pending regulatory approval). There is a potential of revenues from a variety of marketing services, membership fees, customer management services, product sales, commissions on transactions, and software service fees,” says Ghatak.
Talking about the potential for Reliance Industries, Ghatak says, “The technology horsepower of Facebook will help propel them ahead of Fintech and eCommerce companies in India – challenging already established players such as Amazon and Flipkart, and the newbie start-ups. Ability to drive transactions and digital payments in the diffused retail sector will open up huge revenue opportunities that were largely untapped until now, with low asset risks. Also, this sector has traditionally operated on a cash-based model and the recent COVID-19 crisis has exposed how vulnerable the sector is with a limited view of the supply chain, and limited funding for working capital. Developing relationships with the millions of Kirana stores spread across India also gives the opportunity of revenue generation through supply chain financing – a largely ignored sub-sector until now.”
Mukherjee thinks that this alliance will challenge players such as Amazon and Amazon Pay, Google Pay and PayTM. Ghatak also thinks that eventually, Jio Platform will have to either choose between or integrate the best features of WhatsApp Pay and the Jio Money Merchant payment gateways.
However, Ghatak offers a word of caution on the downside risks as well. “Partnering with Facebook is a hugely ambitious game plan for Reliance Industries. The success of its plans will also depend on how well it is able to curate the suppliers who are responsible for the actual delivery. In a consumer-driven business model, trust and customer experience cannot be compromised. The low asset, high leverage and high reach model can unravel itself if the customer gets the short end of the stick, in this rush for eCommerce domination.”
According to Speedtest, global mobile and broadband speeds have suffered as a result of the increase in traffic with speeds dropping in March 2020 for mobile to 30.47 Mbps (from 31.62 Mbps in February) and fixed broadband to 74.64 Mbps (from 75.41 Mbps in February). In Southeast Asia, only Singapore and Vietnam averaged mobile speeds of 54.37 Mbps and 33.97 Mbps respectively, exceeding the global average speeds. As for fixed broadband, Singapore ranked highest globally achieving 197.26 Mbps while Thailand and Malaysia clocked 149.95 Mbps and 79.86 Mbps respectively, trumping the global average speeds.
Southeast Asian carriers increase network efficiency and quality
Singapore. The country’s ICT regulator, Infocomm Media Development Authority (IMDA), reported an increase in internet usage and its intentions to support telecom carriers in boosting network capacity to ensure essential services run smoothly. Priority will be given to high traffic and residential areas where a larger proportion of the population are working from home. The Ministry of Communications and Information (MCI) reported that Singapore has at least 30 percent buffer in network capacity even during peak periods. Major TV operators Mediacorp, Singtel and Starhub have made more content available for free during this period. This may further impact network speeds as customers are consuming more content over wifi (on mobile apps) or over the fibre networks.
Thailand. Part of the country’s public assistance measures during the pandemic, include offering about 30 million mobile subscribers 10GB free data. The National Broadcasting and Telecommunications Commission (NBTC) will also upgrade the speeds of fixed broadband to at least 100 Mbps which is expected to benefit 1.2 million household subscribers. Leading operator Advanced Info Service (AIS) recently announced that it has deployed 5G networks at hospitals to boost network capacity and speeds, and is deploying robots for telemedicine to empower the healthcare system to fight COVID-19.
Malaysia.Maxis and Telekom Malaysia (TM) reported a surge in traffic since the movement control order (MCO) was implemented by the Government on the 18th March 2020. The MCO is expected to run at least until 28th April 2020. TM cited a 30 percent increase in usage attributed to the increase in traffic for streaming, online games and teleconferencing. Leading operators Maxis, Digi, Celcom and U Mobile have offered 1GB free data during the MCO period as part of the Government’s stimulus package. Maxis, TM, Digi and Celcom have also committed significant manpower to ensure that the networks are operating efficiently and to ensure customer support. Leading TV operator Astro has made all movie, news and cartoon networks available to all its customers until the 28th April 2020.
Social distancing fillip for video conferencing
The rise of social distancing has made us all seek new ways to connect, mainly through video chat. Video conferencing traffic is on the rise as it is the next best thing to face-to-face meetings. Microsoft Teams and Zoom have been big benefactors. The American Economic Institute (AEI) notes that Zoom hit some 200 million users daily from a daily average 10 million. Microsoft Teams added some 12 million registrations to a total of 44 million.
Many predict that the home working trend will continue in the recovery stage and beyond, due to improvements in the telecommunications infrastructure and impending rollout of 5G. It is also predicted that the commercial property sector is likely to suffer due to this trend. This period also highlights the critical importance of cybersecurity with increasing occurrences of hacking and fraud. Zoom is being forced to reinforce their privacy and security measures, as an example.
COVID-19 has changed the way we web
On the social front, many are also using video conferencing to communicate with friends and family. Operators relaxing and offering additional data has undoubtedly contributed to the increase in this usage too. Now that many are homebound, network traffic in residential areas are higher than ever. In the past, peak hours of traffic at homes were at night – this has changed with adults and children homebound. Adults are using video conferencing and more voice calls; while children are using elearning, playing games or streaming videos. The European Commission had asked Netflix and other streaming platforms to reduce streaming quality to standard definition (SD). Netflix has assured that it has the capability to manage levels of streaming quality in accordance with the networks quality requirement of individual countries.
Online gaming and video streaming have emerged as winners and have seen an increase in consumption in these times as they provide for entertainment for millions stuck at home. There is tremendous opportunity for both telecom operators and content providers to increase their number of services in this area. Netflix, YouTube, Microsoft Xbox and PlayStation are among the winners in this sector. YouTube provides for a primary news source and commentary on the epidemic for many. Netflix’s stocks are near an all-time high at present.
eCommerce boost for essentials goods and services
The eCommerce sector should see a major improvement in Southeast Asia as physical channels to market have reduced. Emerging economies such as Malaysia and Thailand should see an improvement in services and embrace eCommerce like their mature counterparts. Statista reports that the average Malaysian eCommerce shopper spent just US$159 and Thailand just US$100 on online consumer goods purchases in 2018, considerably lower than the global average of US$634. There is huge opportunity to provide for basic necessities such as online grocery, food and delivery of goods. As a consequence, contactless payment and the transport and logistics sector will be forced to adapt their business operations to ride this wave successfully. As eCommerce transactions diversify and increase in emerging markets, it will give telecom providers an opportunity to keep engaging with platform players.
Telecom carriers are likely to suffer financial losses due to the scale of the disruption COVID-19 has brought about. However, there are some positives takeaways from this period. The increase of network traffic and the changing patterns have driven carriers to better understand network traffic management. The sharp consumer and business onboarding as far as applications and digital services are concerned, has given the digital economy and 5G use cases a shot in the arm. This is likely to spur innovation in services including communications, eCommerce, payments, logistics and healthcare among others.
“Edge computing has been widely touted as a necessary component of a viable 5G setup, as it offers a more cost-effective and lower latency option than a traditional infrastructure. Also, with IoT being a major part of the business case behind 5G, the number of connected devices and endpoints is set to explode in the coming years, potentially overloading an infrastructure based fully on centralised data centres for processing the data,” says Mortensen.
Although some are positioning the Edge as the ultimate replacement of cloud, Mortensen believes it will be a complementary rather than a competing technology. “The more embedded major cloud providers like AWS and Microsoft can become with 5G providers, the better they can service customers, who want to access cloud resources via the mobile networks. This is especially compelling for customers who need very low latency access.”
Affirmed Networks Brings Microsoft to the 5G Infrastructure Table
Microsoft recently announced that they were in discussions to acquire Affirmed Networks, a provider of network functions virtualisation (NFV) software for telecom operators. The company’s existing enterprise customer base is impressive with over 100 major telecom customers including big names such as AT&T, Orange and Vodafone. Affirmed Networks’ recently appointed CEO, Anand Krishnamurthy says that their virtualised cloud-native network, Evolved Packet Core, allows for scale on demand with a range of automation capabilities, at 70% of the cost of traditional networks. The telecom industry has been steadily moving away from proprietary hardware-based infrastructure, opting for open, software-defined networking (SDN). This acquisition will potentially allow Microsoft to leverage their Azure platform for 5G infrastructure and for cloud-based edge computing applications.
Ecosystm Principal Advisor, Shamir Amanullah says, “The telecommunications industry is suffering from a decline in traditional services leading to a concerted effort in reducing costs and introducing new digital services. To do this in preparation for 5G, carriers are working towards transforming their operations and business support systems to a more virtualised and software-defined infrastructure. 5G will be dynamic, more than ever before, for a number of reasons. 5G will operate across a range of frequencies and bands, with significantly more devices and connections, highly software-defined with computing power at the Edge.”
The acquisition of Affirmed Networks is not the only Microsoft initiative to improve their 5G offerings. Last week also saw Microsoft announce Azure Edge Zones aimed at reducing latency for both public and private networks. AT&T is a good example of how public carriers will use the Azure Edge Zones. As part of the ongoing partnership with Microsoft, AT&T has already launched a Dallas Edge Zone, with another one planned for Los Angeles, later in the year. Microsoft also intends to offer the Azure Edge Zones, independent of carriers in denser areas. They also launched Azure Private Edge Zones for private enterprise networks suitable for delivering ultra low latency performance for IoT devices.
5G will remain a key area of focus for cloud and software giants. Amanullah sees this trend as a challenge to infrastructure providers such as Huawei, Ericsson and Nokia. “History has shown how these larger software providers can be fast, nimble, innovative, and extremely customer-centric. Current infrastructure providers should not take this challenge lightly.”
This year Google Cloud is set to expand the number of locations to 26 countries. Earlier in the year, Google CEO Sundar Pichai had promised to invest more than US$ 10 billion in expanding their data centre footprints in the USA and they have recently opened their Salt Lake City data centre. Last week Google announced four new data centre locations in Doha (Qatar), Toronto (Canada), Melbourne (Australia), and Delhi (India). With Australia, Canada and India, Google appears to be following the same policy they followed in Japan – where locations in Osaka and Tokyo give customers the option to have an in-country disaster recovery solution. Doha marks Google Cloud’s first foray into the Middle East. While the data centre will primarily cater to global clients, Google has noted a substantial interest from customers in the Middle East and Africa.
Mortensen says, “Google’s new data centres can be seen as an organic geographical expansion of their cloud services but there are a few more factors at play. With data privacy laws getting stricter across the globe, the ability to offer localised data storage is becoming more important – and India is a very good example of a market where keeping data within the geographical borders will become a must.”
“The expansion will also help the development of Google’s own edge computing services going forward. As we noted in our Ecosystm Predicts document, we believe that Cloud and IoT will drive edge computing (which is tightly tied to 5G). Edge computing will function in a symbiotic relationship with centralised data centres where low latency is important. The geographical expansion of Google’s data centre presence will thus also help their push towards edge computing services.”
Google offers their cloud infrastructure and digital transformation (DX) solutions to customers in 150 countries. Not only are they expanding their data centre footprint, but they are also creating industry differentiation. They have targeted industry-specific solutions that deliver new digital capabilities in 6 key verticals – financial services; telecommunications media and entertainment; retail; healthcare and life sciences; manufacturing and industrial; and public sector.
Partnering with Telecom Providers
Last week also saw the unveiling of the Global Mobile Edge Cloud (GMEC) aimed at the telecom industry’s need to transform and the challenges it faces. The telecom industry – long considered an enabler of DX in other industries – stands at a crossroads now. It is time for the industry to transform in order to succeed in a challenging market, newer devices and networking capabilities, and evolving customer requirements – both consumer and enterprise. Talking about the impact of 5G on telecom providers, Ecosystm Principal Advisor, Shamir Amanullah says, “5G is an enterprise play and leading tech giants, carriers and the companies in the ecosystem are collaborating and inking partnerships in order to create solutions and monetise 5G opportunities across industries.”
Google Cloud announced a partnership with AT&T, which is meant to leverage AT&T’s 5G network and Google Cloud’s edge compute technologies (AI and machine learning, analytics, Kubernetes and networking) to develop a joint portfolio of 5G edge computing solutions. This is part of Google’s larger strategy of supporting telecom providers in their efforts to monetise 5G as a business services platform. Through the GMEC, Google Cloud will partner with carriers to offer a suite of applications and services at the edge via 5G networks.
The telecom industry is a key focus as Google aims to help operators take 5G to market, by creating solutions and services that can be offered to enterprises. This includes better customer engagement through data-driven experiences, and improvement of operational efficiencies across core telecom systems. Telecom providers such as Vodafone and Wind Tre are leveraging Google to improve customer experience through data-driven insights.
Amanullah says, “Google Cloud already has thousands of edge nodes inside the carrier networks which will be enabled for use by enterprises, providing access to data analytics, AI and machine learning capabilities. Carriers can offer enterprises these data-driven solutions, to transform the customer experience they offer. Google will also create solutions which will enable carriers and enterprises to improve infrastructure and operational efficiencies through modern cloud-based Operations Support Systems (OSS) and Business Support Systems (BSS).”
Mortensen also thinks that the data centre expansion should be seen in the light of Google’s GMEC push. “Both India and the Middle East are big potential markets via the local telecom providers.”