22 nd to 23 rd August, 2013 Shangri La Hotel Singapore

A STRATEGY FOR ASEAN 22nd to 23rd August, 2013Shangri La Hotel Singapore Organiser Co-Organiser

Network ASEAN Forum 2013CONNECTIVITY 22nd - 23rd August 2013

7_85 Connectivity context – Highly dynamic ecosystem with critical role for ASEAN economic development • ASEAN telecommunications markets dominated by mobile - >2/3 of revenue in most markets except Singapore • Continued strong growth rates beyond mobile penetration rates of 100%, with slight declines in ARPU • Region characterized by high variance in market structure - by ARPU levels, pre- vs. postpaid, levels of data usage/smartphone ownership • Competition tends to be highly concentrated around top 3 players (>80% share), still with strong role of domestic-only telcos with select regional players • Ongoing massive shift to data and 3G on the back of rapidly declining smartphone prices; emerging markets to date showing better monetization on traffic than developed markets • Fixed connectivity in most markets at low levels of development with <20 connections/inhabitants – however strong push across region on fiber rollouts, with Singapore and Malaysia as early movers

3_89 Agenda • International roaming • OTT in ASEAN • New services - Mobile money/virtual CC; potential for mobile advertising • Regulatory maturity in ASEAN – spectrum, interconnect, local content requirements

Roaming charges in ASEAN countries are significantly higher than in Europe and vary across Telcos Data charges (per MB) Range Voice charges - calls made (per min) Voice charges - calls received (per min) n/a SMS charges Note: Charges are for usage within/across ASEAN countries; charges vary based on call or usage destination; charges exclude VAT Source: Telco websites

6_85 14_85 15_85 16_85 18_85 11_85 13_85 Roaming regulations in ASEAN would need to be strengthened to reduce charges Europe’s regulation on roaming is holistic & well-enforced… …initiatives across Asia not commonly enforced, thus less impactful • Adoption of the Addendum of ATRC* Intra-ASEAN Mobile Roaming Rates to reduce roaming charges; countries to implement when ready • Bilateral initiatives common • Malaysia & Singapore • Malaysia & Brunei • Singapore & Brunei • Holistic regulatory approach to international data roaming services • Protect consumer interest • Good compliance in all member states • Ofcom, UK communications regulator, helps enforce roaming regulation 1 ASEAN 2007 • Roaming I: Cap wholesale & retail charges for voice calls 2009 • Public consultation on 2007 regulation; results not satisfactory • Roaming II: Cut in SMS and wholesale data roaming charges • Cut-off mechanism available once bill reaches €50 • Addresses transparency measures & bill shock • Aims to remove regulatory barriers that cause high input costs for roaming 2 APT 3 2011 • Roaming III: Caps retail prices for data roaming • Customers can sign up for a mobile roaming contract with foreign operators while traveling APEC • Issued guidelines on provision of info to consumers on roaming & substitute technologies Note: ATRC: ASEAN Telecommunication Regulators Council; APT: Asia Pacific Telecommunity; APEC: Asia Pacific Economic Cooperation Source: Ovum “Regulatory Status of International Roaming”

13_85 OTT services in ASEAN markets are growing; likely a threat to SMS revenue SMS as a source of revenue has been declining… …likely due to growth in ott services • Many market drivers supporting substitution to OTT services • Increasing Smartphone penetration • Low price compared to regular voice • Ease of access • Apps and app marketplaces • Telcos start to bundle VoIP (in particular smaller Telcos in fragmented markets) • Technological development • Improved sound quality on 3G networks • Deployment of high capacity all-IP networks (e.g. LTE) • Availability of alternative networks (Wi-Fi) • Features e.g. video conferencing • Net neutrality regulation undermine attempts to block VoIP in certain markets • Increase in consumer demand as users of dedicated VoIP expect mVoIP Note: Non-voice revenue include data, messaging & VAS; does not include all Telcos in each countries Source: Wireless Intelligence; Gartner; Ovum; Informa

8_85 16_85 ASEAN players are expanding networks, partnering with OTT players & pushing apps usage INDONESIA Singapore Malaysia *Rich Communications Services provide similar rich-featured messaging standards as OTT apps Source: Analyst reports; Bain analysis

A significant portion of the ASEAN population is still not served by the formal financial sector Unbanked Banked Note: Banked population defined as percentage of the population 15 years and older that has a formal relationship with a bank or other financial institution via a current savings account, checking account, credit card or a combination of these products” Source: Euromonitor

Rapid growth in mobile usage presents a unique channel to reach both banked and unbanked segments EXAMPLE Indonesia - Mobile penetration overtook banking penetration since ’06… …Presenting an opportunity to target both banked and unbanked segments in innovative ways “ With the Indonesian population at approximately 250 million people, these new mobile banking services will help us attract new customers and expand our market share significantly - Strategy & Finance Director CIMB Niaga ” “ In contrast [to the banking sector], the Indonesian telco sector has been extremely effective in moving down market. … Combining FS expert with the broad market capabilities of the mobile telco channel presents a unique opportunity for gov’t and commercial entities to develop new business opportunities - USAID Report ” Source: USAID, Sybase, Bain analysis

Opportunities in mobile money along three categories of usage Transactions Services Mobile Commerce Mobile Banking 1 2 3 M-Wallet Mobile consumer services Mobile Banking • New mobile consumer payment technology (NFC, QR code, …) • Banking inquiries • E.g., account balances, SMS alerts • Mobile/online savings accounts • Mobile/online loan applications and disbursements • Insurance • Stored value account • Mobile top-up • Mobile wallet-to-wallet transfers (P2P) Mobile merchant services • New mobile merchant payment technology (mobile POS, P2P on the spot, …) Traditional Payments Mobile shop/portal services • E.g., online shopping, online games, media, virtual products • Utility bill payments • Remittances (domestic, international) • Cash-in/cash-out • Via banks, retailers, agents • Including government cash payments Mobile marketing services • E.g., customer loyalty, mobile ads, coupons and offers Source: Bain analysis

19_85 48_85 50_85 51_85 Regulatory challenges across ASEAN similar with potential for learning from other markets – select examples Spectrum Interconnect Local content Fiber rollout • General trend to reduce interconnect charges across markets, e.g. recent efforts in Thailand, which typically enable more level playing field for challengers • Few exception like SMS Interconnect in Indonesia to reduce amount of spamming • Emerging trend to push local economic participation in technology sectors related to telecoms, with efforts particularly in Indonesia • Questionable net benefits as competition gets disrupted • Only Singapore and Malaysia with broad rollout to date • Key future challenge to enable broad-based rollout in other ASEAN markets, where telco economics often do not justify investments but significant multiplier benefits for other sectors are expected – various forms of public/private partnerships can be used • Various approaches to shaping competition, from focusing on few key players to fostering new entrants • Increasing emphasis on assigning common spectrum blocks across ASEAN to facilitate connectivity (e.g. digital dividend blocks by 2020)

THANK YOU Organiser Co-Organiser

22 nd to 23 rd August, 2013 Shangri La Hotel Singapore