the global change in the telecom industry -- a taiwan case

The Global ChangeThe Global Changein the Telecom Industryin the Telecom Industry

-- a Taiwan Case-- a Taiwan CaseKeynote in

Extreme CommunicationsA Radical Rethinking of Business,

Technology and Communication Strategies

Dr. Mao Chi-KuoApril 15, 2003

The Media Lab, MIT

© Dr. C.K. Mao 4/15/2003 Telecom: Taiwan Case 1

ContentsContents

n Background Information

n Telecom Market Profiles

n Highlights on Mobile & Broadband

Businesses

nMarket Trends

n Challenges Ahead


Demographic BackgroundDemographic Background

n Land Areal 36,000 KM2

(≅ 2 X Massachusetts)

n Populationl 22.5 million

n Householdl 6.8 million

n Per CapitaIncomel U$ 12,000

TaipeiTaipei

Map ofMap ofTaiwanTaiwan


Telecom Deregulation ScheduleTelecom Deregulation Schedule

1996 1997 1998 1999 2000 2001 20021996 1997 1998 1999 2000 2001 2002

DGT reformedChunghwa formed

JulFeb Nov

Telecom Act2nd Amend

Jan-May

MobileOpened

Dec

SatelliteOpened

Sep

Lease lineOpened

Feb Dec

SubmarineCable

OpenedFixed

Opened

Mar

ISROpened

Jul

July

Telecom Act1st Amend

Telecom Act3rd Amend

ChunghwaDomestic IPO


• Date of Establishment: July 1st, 1996 (reformed from DGT)

• Number of Employee: 29,000

• Total Capital: US$ 2.8bn

• Total Asset: US$ 13.0bn

• Total Liability: US$ 2.2bn

• Shareholders’ Equity: US$ 10.8bn

• Total Revenue (2001): US$ 5.2bn

• EBIT: US$ 1.34bn (2001 — 7th place: Taiwan + China together)

• EPS: NT$ 3.86 (2001) ; NT$ 4.4 (2002)

• Awards: Best Corporate Governance in Taiwan 2003(by The Asset)

Most Committed to Creating Shareholder Value 2003 (by FinanceAsia)

Chunghwa Telecom (CHT) Data Chunghwa Telecom (CHT) Data

Telecom Market ProfilesTelecom Market Profiles


Telecom Market StructureTelecom Market Structure

Types Business Categories Total

Fixed Network 4 Leased Circuit 15Submarine Cable 1

Cellular ServicesRadio PagingMobile Data

Dispatching Radio 12Mobile

CT -2

35

Mobile Satellite Service 0Fixed Satellite Services 9

Type I

Satellite TV Program Relay 713

68

Internet Access 185Voice Simple Resale 21

i-phone 20124

350

Sub Total

151

656

1900MHz Low Tier Radio 13

0

68

2120

124350

Fixed

Satellite

others

Type II

Dec. 2002


Market Profiles (1)Market Profiles (1)

5052.5 54.5

56.8 57.3 57.8

6.9

21.6

52.2

80.2

96.6

107

814

22

2835

38

4

14

23

0

20

40

60

80

100

120

97 98 99 00 01 02

Pen

etra

tio

n (p

op

ula

tio

n b

ased

) �

Local Phone

Mobile

Internet

* Broadband / Internet


Market Profiles (2) Market Profiles (2)

190.7188.7189.4184.3180.7

170.0

107.096.6

80.2

52.2

21.6

6.9

79.078.078.077.076.075.0

28.8

16.13.7

0

20

40

60

80

100

120

140

160

180

200

97 98 99 00 01 02

Pen

etra

tio

n (H

ou

seh

old

bas

ed) %

Local line/HH

Mobile/Pops

Cable TV /HH

Broadband Internet/HH


Market Structure ChangeMarket Structure Change

Dec 1997 (Before)

Fixed� 74%Mobile*�22%Data� 4%

∑∑∑∑ RevenueRevenue U$ 5.5 bnU$ 5.5 bn

Dec 2001 (After)

Fixed� 35%Mobile*�55%Data� 10%

∑∑∑∑ RevenueRevenue U$ 9.9 bnU$ 9.9 bn

Pager 1%

CHT Mobile 18%

Private Mobile 36%Local 22%

DLD 6%

ILD 7%

Data 10%

D-Long Dist 20%

I-Long Dist 21%Data 4%

Pager 6%

Mobile 16%

Local Phone 33%

Private operators stared servicing since 1998

Private operators stared servicing since 1998

Highlights onHighlights onMobile & BroadbandMobile & Broadband

BusinessesBusinesses


Take-off of Broadband MarketTake-off of Broadband Market

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Oct

. 200

0

Nov

. 200

0

Dec

. 200

0

Jan

. 200

1

Feb

. 200

1

Mar

. 200

1

Ap

r. 2

001

May

. 200

1

Jun

. 200

1

Jul.

2001

Au

g. 2

001

Sep

. 200

1

Oct

. 200

1

Nov

. 200

1

Dec

. 200

1

Jan

. 200

2

Feb

. 200

2

Mar

. 200

2

Ap

r. 2

002

May

. 200

2

Jun

. 200

2

Jul.

2002

Au

g. 2

002

Sep

. 200

2

Oct

. 200

2

Over 1 mn

ADSL:ADSL:

Monthly application: 85,000 linesMax Installation: 7,000 lines/day

Cable ModemCable Modem


Growth of Mobile MarketGrowth of Mobile Market

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

00/Q2 00/Q3 00/Q4 01/Q1 01/Q2 01/Q3 01/Q4 02/Q1 02/Q2 02/Q3

Acc

um

ula

ted

Su

bsc

rib

ers

24

25

26

27

28

29

30

31

32

Ch

un

gh

wa'

s M

arke

t S

har

eCHT subs

Total Market (4 major players)

CHT Market Share %

CHT Regain No.1

CHT Lose No.1


Mobile Market Growth RateMobile Market Growth Rate

12.4

6.7

8.1

4.8

2.02.4

6.7 6.7

9.5

6.1

4.9

6.3

5.1

4.13.8

11.6

12.5

9.4

0

2

4

6

8

10

12

14

00/Q2 00/Q3 00/Q4 01/Q1 01/Q2 01/Q3 01/Q4 02/Q1 02/Q2 02/Q3

Mar

ket

Gro

wth

Rat

e %

Total Market Subscriber Growth Rate

CHT’s Subscriber Growth Rate


Mobile RevenueMobile Revenue Data RevenueData Revenue

902876803

760

665

1H/00 2H/00 1H/01 2H/01 1H/02

CAGR: 16%

(US $ mn)

439419405

367

275

1H/00 2H/00 1H/01 2H/01 1H/02

CAGR: 26%

(US $ mn)

CHTCHT’’s Mobile & Data Revenuess Mobile & Data Revenues


CHTCHT’’s Revenue Mix Shifts Revenue Mix Shift

Q1 2000 Q4 2002

Fixed 66%Mobile 24%

Data 10%

Fixed 43%

Mobile 37%

Data 20%

Total Revenue of Q1 2000: US$ 1.28bn Total Revenue of Q3 2002: US$ 1.35bn

Market TrendsMarket Trends


Market TrendMarket Trend-- From PSTN to Mobile & Data-- From PSTN to Mobile & Data

Pager 1%

CHT Mobile 18%

Private Mobile 36%Local 22%

DLD 6%ILD 7%

Data 10%

DLD 20%

ILD 21%Data 4%

Pager 6%

Mobile 16%

Local 33%

Fixed 66%

Mobile 24%

Data 10%

Fixed 43%Mobile 37%

Data 20%

Total Total MarketMarket

Chunghwa Chunghwa TelecomTelecom

Dec 1997 Dec 2001

Q1 2000 Q4 2002

n Mobile & Data lead telecom market’s growth


Market TrendMarket Trend-- From Narrow- to Broad-band-- From Narrow- to Broad-band

n Narrowband shifts significantly to broadbandn Telco’s revenue also benefited from this shift

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

01/'0

1

02/'0

1

03/'0

1

04/'0

1

05/'0

1

06/'0

1

07/'0

1

08/'0

1

09/'0

1

10/'0

1

11/'0

1

12/'0

1

01/'0

2

02/'0

2

03/'0

2

04/'0

2

05/'0

2

06/'0

2

07/'0

2

08/'0

2

09/'0

2

10/'0

2

11/'0

2

12/'0

2 0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

HiNet (ISP) BB Revenue HiNet (ISP) Dialup RevenueBB subs/Total subscriber

CHTCHT’’s ISP Subscriber Base and Revenue Mixs ISP Subscriber Base and Revenue Mix


Market TrendMarket Trend-- Access (Bandwidth) 1-- Access (Bandwidth) 1stst, Content 2, Content 2ndnd

Jan-

00

Mar

-00

May-0

0

Jul-0

0

Sep-0

0

Nov-0

0

Jan-

01

Mar

-01

May-0

1

Jul-0

1

Sep-0

1

Nov-0

1

Jan-

02

Mar

-02

May-0

2

Jul-0

2

Sep-0

2

Nov-0

2

ADSL monthlyADSL monthlyapplicationapplication

VAS (paidVAS (paidcontents)contents)RevenueRevenue

60,000± lines/month

n Two learning curves w/ about 1-year time lag

Challenges AheadChallenges Ahead


nMobile competition and growthlCoverage èè System Capacity & Quality èèVASlMobile voice product matured, ARPU drops; VAS has to

be the new “star” to maintain mobile business’ growthnMobile VAS revenue share is still relatively shallowl Is 3G the answer?lMobile-Internet or Mobile-internet ?

TimeCoverage

System Capacity& Quality

Value Added Services

Voice Product Life Cycle

Data Product Life Cycle

Transition Period

Source: YesMobile

Tot

al R

even

ue

ChallengeChallengeFrom Mobile Voice to Mobile VASFrom Mobile Voice to Mobile VAS


ChallengeChallengeThe Convergence of Telecom & Media (1)The Convergence of Telecom & Media (1)

n Broadband telecom network is capable to deliver video(multimedia) content to compete w/ cable TVl It’s on-demand, interactive, pay-per-viewl Bandwidth >10Mps via FTTB+VDSL under ADSL rate

u Consumers can access more quality contentsu Providers are willing to provide quality contents

n Regulatory Issuel Fair competition b/w operators; CATV’s trouble in Taiwan

n Technical Issuel Internet w/o boundary, quality contents require boundaryl Internet vs. “intranet”, managed IP or VPN solution ?

u Quality, Protection of IPR

n Marketing Issuel From Study’s PC to Living room’s TV set

u Is TV set still the “right” display? Is set-top-box necessary?


n What content to be carried? ? How to charge it?l Game? Sports? Learning? Movies? News?…

n Content Delivery Networkl Network Architecture

uCore Network, Access Network, capacity issue

l Network TechnologyuLegacy systems, new generation tech, migration strategy

n New Business Model (new learning curve to build-up)l Telco’s positioning: new media platforml Other roles: ISP, ICP, Content aggregator?l External Partnerships: Application Program Provider, Content

Distributor, Content Producern Distribution issue

l How to make the existing distribution channels accountableand feel “tangible” to the sale of pay-contentu vs. sale of ADSL lines/handsets

ChallengeChallengeThe Convergence of Telecom & Media (2)The Convergence of Telecom & Media (2)


nWLANlUntil today WLAN has a promising device market, but not

the service marketl In Taiwan, 80% of the access points (AP) are used in

residential marketuHot-spot business is limiteduBusiness market is slow due to economy and security

nWLAN and 3GlComparison

uWLAN is for someone, at some place, in sometimeu3G is for anyone, at any place, in anytime

lFrom an operator’s point viewu WLAN is preferred to be used by a stationary user accessing to

the Internet; 3G is for moving user to access InternetuIntegrated carriers who provide both fixed and mobile services

prefer to this view, but not the sole mobile operator

ChallengeChallengeThe Convergence of Fixed & Mobile ServicesThe Convergence of Fixed & Mobile Services


n Both broadband and mobile services in Taiwan,consumer market outperforms business marketfor the past 3 years

n Will dot-com come back?l Many interesting cases observedl Dot-com re-defined

u Any business which takes Internet’s advantage to re-shape itscompetitiveness – equivalent to e-business?

u The leverage could be even higher when Internet power(information flow) combined w/ logistic support (physical flow)and on-line transaction (monetary flow)t This can convert a corner store into a regional business

l If dot-coms come back, they will be in a very muchdifferent look – not limited to Yahoo! or e-Bay types

ChallengeChallengeWhen will Business Market come back?When will Business Market come back?


nFrom 1990s, encouraged by Wall Street investmentanalyst, the split of mobile/data unit from Telco torun independent business became a fashionl Integrated carrier suffered

nChunghwa’s experience suggests thatl the incumbent can leverage on the mobile / data

businesses to recreate itself employee value (vs. NTT)

l the mobile / data unit can also leverage on incumbent’swell established channels to distribute servicelvia this strategy, mobile operation won’t feel vulnerable

under the convergence of fixed and mobile technology

nWill Telco return to integral model?

ChallengeChallengeRe-thinking TelcoRe-thinking Telco’’s Organizations Organization

Thank YouThank You

the global change in the telecom industry -- a taiwan case

Documents