South Korea's SK Telecom has reportedly agreed to establish a joint venture with Indonesian mobile network operator XL Axiata as part of its ongoing efforts to develop a pan-Asian mobile content and value-ad ded services (VAS) business. This would be the second venture established by SKT in Indonesia and BMI expects these investments to provide a significant boost to the quality and diversity of operators' mobile VAS revenues, which are currently dominated by low-value messaging services.
Yonhap News Agency reports that SK Planet , a subsidiary of SKT that specialises in the development of white-label premium M-VAS for mobile network operators, will invest US$9.2mn in the venture. XL Axiata - which is owned by Malaysia-based Axiata Group - will contribute a similar amount. The scope of the business has yet to be determined, it is reported, but BMI believes it will have a similar business strategy to that of PT MelOn Indonesia , a partnership between SK Planet and Indonesia's largest mobile network operator, Telkomsel , which launched in 2012 to offer online navigation, shopping and auction-based services, among other things.
|Content Will Soon Become King|
|XL Axiata Non-Voice Revenues (IDR trn)|
Over the last three years, Indonesia's mobile network operators have been reporting strong growth in revenues from non-voice services, driven by the increased availability of affordable smartphones - the BlackBerry is widely used by business customers as well as Indonesian youths - as well as the rise of social networking services and the migration of entertainment-based content such as music and video to the digital environment. XL Axiata, for example, reports that non-voice revenues totalled IDR8,448bn (US$865mn) in 2012, up by 15.0% from IDR7,345bn in 2011. Telkomsel, meanwhile, reported an 18% y-o-y increase in its non-voice revenue, to IDR21,000bn.
However, messaging - particularly SMS - continues to account for the bulk of non-voice revenues. This is a critical weakness for operators faced by the growing threat of network-agnostic over-the-top (OTT) propositions such as WhatsApp and Viber , among others, so they need to ensure revenue growth continuity by developing a strong portfolio of data-centric services. XL Axiata reports that IDR3,316bn was generated from 'pure ' data services in 2012, up by 50.4 % y-o-y and accounting for 39.3% of non-voice revenues (30.0% in 2011). Telkomsel, meanwhile, reports that pure data services generated IDR7,700bn in 2012, up by 50% y-o-y, representing 36.7% of non-voice revenues.
BMI believes that operators need to ensure that pure data revenue needs to become the dominant component of service revenue mix if operators are to survive the onslaught of third-party, OTT applications and services as well as declining revenues from voice and interconnection services. Based on recent growth trends, we expect pure data to replace messaging as the dominant component within the next 18 to 24 months and initiatives such as that being pursued in collaboration with SK Planet can accelerate that trend.