COMMUNICATIONS

Bargain-hunters' delight

MOBILE PHONES: Operators have reverted to price wars after discovering there's more demand in the provinces, but the serious money will be made in non-voice services

Srisamorn Phoosuphanusorn

THAILAND'S MOBILE phone market is bracing for new tit-for-tat price wars this year with major operators scrambling for growth among first-time users, mainly in the fast-growing provincial market, after enjoying spectacular new-user growth last year.

Operators believe the number of mobile phone users in Thailand will grow by a further 15% this year, to 27 million subscribers or 40% of the population, fuelled mostly by the low-usage market segment in the dominant prepaid market. At the same time, they are banking on the fast-growing popularity of high-margin wireless data communications services to pad their bottom lines in a way that prepaid cannot.

Major handset makers expect that overall demand in Thailand this year will be around six million to seven million units, with the replacement market driving sales growth.

Early this year, cellular companies predicted that growth in the new-subscriber market would fall this year given the saturation in the postpaid market and the approach of peak demand in prepaid use. They pointed to the 35% new user growth seen last year after operators unlocked their International Mobile Equipment Identity (IMEI) and SIM card codes.

Unlocking the codes meant that handset sales were no longer tied to operators' service plans. Greater consumer choice in turn prompted more subscriptions but also increased operators' churn rates.

With fears of a serious slowdown in growth easing, estimates of new-user numbers this year have been revised upward to five million from three million, in an acknowledgment that the growth potential among first-time users in the provincial market may have been underestimated.

At the same time, the industry may have underestimated the scale of non-voice demand, from low-margin text messaging to lucrative wireless multimedia messaging services.

To gain a foothold among first-time provincial users operators are tailoring their offerings based on usage. Prepaid cards with a face value as low as 40 baht are now available.

Total Access Communication Plc, the operator of the DTAC service, touched off the latest round of price-cutting with its Baby SIM promotion packages, targeting preteens, customers who make fewer calls than they receive but want their accounts to stay active longer, and customers in the provinces.

The company claimed that Baby SIM users accounted for 60% of DTAC's new prepaid customers, and between 10% and 15% of its total prepaid subscriber base. It expects provincial customers would make up 60% of the firm's base by year-end.

The company targets 1.5 million new subscribers this year, compared with seven million currently, of whom six million are pre-paid.

Niche player Hutchison CAT Wireless Multimedia, which operates a CDMA service in Bangkok and the central provinces, has also been an innovator, allowing customers to mix and match three different top-up refill cards based on their needs with a flat-rate tariff of three baht per minute nationwide.

Not to be left out, market leader Advanced Info Service (AIS) flexed its muscle in the provincial market through its Sawasdee campaign to counter the success of DTAC's Baby SIM promotional campaign.

The Sawasdee package offers three refill cards: seven days and 50 baht, 15 days and 100 baht, or 30 days and 150 baht. Calls are billed at five baht per minute nationwide. AIS also offers a 299-baht Sim card with 50-baht call value and low-priced handsets for new subscribers.

AIS expects the package to help it sign up two million new subscribers this year, in addition to the 14 million it already has. Its optimism is well founded _ the Sawasdee promotion resulted in 100,000 new customers in its first week.

However, DTAC quickly countered with a 90-day, 300-baht card, the lowest rate among all prepaid products, in an attempt to win back customers after estimating that the Sawasdee campaign had siphoned off up to 20% of DTAC's Baby SIM subscriber base out of the services.

But while big subscriber numbers and service promotions grab the headlines, the real battleground going forward will be the quest for mobile data revenue growth beyond multimedia applications, says an analyst at Bualuang Securities.

Operators are also moving aggressively to expand the variety of data services to spur more interest from consumers. The SMS (short messaging service) market alone this year is expected to be worth two billion bath, triple its value two years ago.

AIS expects to at least double its mobile data service revenue to two billion baht and the number of regular mobile data users to one million, according to president Yingluck Shinawatra. DTAC is aiming to double its non-voice revenue to three billion baht this year.

Another analyst said operators who offer competitive, innovative and segmented service packages to meet real user demand will have the best chance to win customers.

She pointed out AIS had broadened its customer base into the low-end market, while it was already strong in the high end. DTAC lacks a large premium customer base, the most profitable segment and carries the lowest payment default risk.

The analyst said that while price competition would give the overall telecom sector a boost this year, operators would see average revenue per user per month decline.

The good news, she says, is that while the operators slug it out, consumers are finally enjoying the kind of choice and flexibility they have been craving for years.