A STRATEGY FOR ASEAN

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

Organiser

Co-Organiser

Network ASEAN Forum 2013 CONNECTIVITY

22nd - 23rd August 2013

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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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

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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Roaming charges in ASEAN countries are significantly higher than in Europe and vary across Telcos
Range

Data charges (per MB)

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
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent SNG 130822 - Connectivity ro ... on v10

Roaming regulations in ASEAN would need to be strengthened to reduce charges

EUROPES REGULATION ON ROAMING IS HOLISTIC & WELL-ENFORCED Holistic regulatory approach to international data roaming services
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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

Protect consumer interest

Good compliance in all member states Ofcom, UK communications regulator, helps enforce roaming regulation 2007 2009
Roaming I: Cap wholesale & retail charges for voice calls 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

ASEAN

Bilateral initiatives common

- Malaysia & Singapore - Malaysia & Brunei - Singapore & Brunei

Addresses transparency measures & bill shock

APT

Aims to remove regulatory barriers that cause high input costs for roaming

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
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent SNG 130822 - Connectivity ro ... on v10

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

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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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
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent SNG 130822 - Connectivity ro ... on v10

ASEAN players are expanding networks, partnering with OTT players & pushing apps usage
INDONESIA
Focus on network upgrades, innovative pricing and product mix to increase data uptake
OTT threat mgt. primarily through partnerships and own app stores Network expansion (3G)
- >50% CAPEX in 2011 allocated for this

SINGAPORE
Expanding its LTE network
Working with alliance partner Vodafone Group on an interoperable RCS* platform Expanding VAS offerings like NFC movie ticketing service, ebookstore, NFC app etc. Upgrading its 4G & LTE network Launched new VAS offerings such as several mobile apps, mobile payment service using NFC, e-book service etc.

Launched money remittance service, tracking & monitoring system etc. Network expansion (3G)
- Contracted NSN in 2012

MALAYSIA
Focuses on content bundling to promote wireless data services Offers deals with OTTs such as Skype & Deezer (music streaming service)

Expanding mobile data and VAS offerings like app store, music, games etc.

*Rich Communications Services provide similar rich-featured messaging standards as OTT apps Source: Analyst reports; Bain analysis
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent SNG 130822 - Connectivity ro ... on v10

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

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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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
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent SNG 130822 - Connectivity ro ... on v10

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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 govt and commercial entities to develop new business opportunities
- USAID Report

Source: USAID, Sybase, Bain analysis

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent SNG 130822 - Connectivity ro ... on v10

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Opportunities in mobile money along three categories of usage

Transactions Services M-Wallet

Mobile Commerce Mobile consumer services

- New mobile consumer payment technology (NFC, QR code, )

Mobile Banking Mobile Banking

Stored value account Mobile top-up Mobile wallet-to-wallet transfers (P2P)

Banking inquiries
- E.g., account balances, SMS alerts

Mobile merchant services

- New mobile merchant payment technology (mobile POS, P2P on the spot, )

Mobile/online savings accounts

Mobile/online loan applications and disbursements Insurance

Traditional Payments
Utility bill payments Remittances (domestic, international) Cash-in/cash-out
- Via banks, retailers, agents - Including government cash payments
Source: Bain analysis

Mobile shop/portal services

- E.g., online shopping, online games, media, virtual products

Mobile marketing services

- E.g., customer loyalty, mobile ads, coupons and offers

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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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

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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Regulatory challenges across ASEAN similar with potential for learning from other markets select examples
Spectrum
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)

Interconnect
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

Local content
Emerging trend to push local economic participation in technology sectors related to telecoms, with efforts particularly in Indonesia

Fiber rollout
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

Questionable net benefits as competition gets disrupted

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

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THANK YOU

Organiser

Co-Organiser