Industry Overview

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Market Value Chain

Market participants of the telecommunications network services market provide various services including network planning, design and optimisation, network deployment, network operations and maintenance, infrastructure management, energy management and other professional services. The key end-users for telecommunications network services market mainly comprise Information and Communications Technology (ICT) companies that include telecommunications carriers or operators as well as telecommunications technology original equipment manufacturers ("OEM"). The end-users of the telecommunications network services market is depicted (Figure 1) below:

Figure 1: The End-users of the Telecommunications Network Services Market

Figure 1

(Source: Protégé Associates)

The Telecommunications Network Services Market in Malaysia

The telecommunications network services market in Malaysia is currently one of the major supporting services providers to the fast expanding ICT industry. The estimated market size of the local telecommunications network services market in 2011 was RM5.80 billion.

The local communication sub-sector which includes key telecommunications areas such as Internet and broadband as well as cellular markets has also been expanding in recent years. The local communication sub-sector had managed to sustain its growth momentum throughout the 2007-2011 periods.

Performance of Selected Telecommunications Markets in Malaysia

The Performance of the DEL Market in Malaysia

The Malaysian Communications and Multimedia Commission ("MCMC") defines DEL as fixed line that connects a customer's equipment to the Public Switched Telephone Network ("PSTN") and has a dedicated port on a telephone exchange. In Malaysia, number of subscriptions for DEL decreased in 2011 with a total of 4,091,000 compared to 4,406,000 subscriptions recorded in 2010. Meanwhile, the number of business DEL subscriptions has continued to grow over the years as more companies use the fixed line for general contact and fax purpose.

The Performance of the Cellular Telephones Market in Malaysia

The performance of the cellular telephones market in Malaysia remains promising and is clearly heading in the right direction. The number of cellular telephone subscriptions increased by 9.8 percent year-on-year from 33,859,000 in 2010 to 36,662,000 in 2011.

The Performance of the Broadband and the Internet Market in Malaysia eeee

The broadband and the Internet market in Malaysia is another bright spot in the local ICT industry with strong contribution from the broadband market. Total number of broadband subscriptions in Malaysia surged from 755,500 in 2006 to more than 5.6 million in 2011 on the back of favourable government policies such as the MyICMS886 and aggressive rollouts of broadband infrastructure by telecommunications carriers or operators.

Competitive Analysis

The number of telecommunications network services market players in Malaysia is relatively small with an estimated of less than 200 market players that are based here. This market has relatively high barriers to entry particularly with regards to relatively high technical competency and capital requirement. Based on revenue generated by OCK Group for its financial year ended 31 December 2011 of RM88.3 million, and the telecommunications network services market estimated at RM5.80 billion in 2011, OCK Group's estimated market share stood at 1.5 percent.

Demand and Supply Conditions

(A) Demand Conditions

The following factors represent key trends, developments and events influencing market demand.

Figure 2: Demand Conditions Affecting Malaysia's Telecommunications Network Services Market, 2012-2016

Impact Demand Condition Short-Term Medium-Term Long-Term
2012 - 2013 2014 - 2015 2016
+ The Growing Prominence of Broadband Internet High High High
+ Advancement in Technology for ICT Products High High High
+ The Inherent Need for Continued Capital Expenditure by Telecommunications Operators Medium Medium Medium
+ Increasing Population and Young Demographic Profile in Malaysia Medium Medium Medium
+ A Rebounding Malaysian Economy Medium Medium Medium
+ Increasing Importance of ICT in Business Activities Medium Medium Medium
+ Replacement of Physical Functions with Virtual Possibilities Medium Medium Medium
+ Improving Interconnection of Global Telecommunications Networks Medium Medium Medium
- Relatively Low Technology Sophistication among Rural Consumers High Medium Medium

(Source: Protégé Associates)

(B) Supply Conditions

The following factors represent key trends, developments and events influencing market supply.

Figure 3: Supply Conditions Affecting Malaysia's Telecommunications Network Services Market, 2012-2016

Impact Supply Condition Short-Term Medium-Term Long-Term
2012 - 2013 2014 - 2015 2016
+ Continuing Support from the Malaysian Government High High High
+ Prevalent Strategic Alliances with Principal Product and Equipment Suppliers High High High
- Sharing of Telecommunications Network Infrastructure Medium Medium Medium
- Geographical and Infrastructure Challenges in East Malaysia Medium Medium Low

(Source: Protégé Associates)

Substitute Products or Services

There are no known direct substitutes for telecommunications network services yet. However, telecommunications network services with older technologies are typically replaced with newer innovations as the market is often characterised by rapid advances in technology. The techniques and implementation methods used for telecommunications network services may also be changed from time to time. The existing hardware used in telecommunications networks may also be replaced with newer hardware.

Historical Market Performance and Growth Forecast

The performance of the local telecommunications network services market is positively correlated with the level of new investment involving capital expenditure and other network services related operating expenses such as maintenance and repair works by the local telecommunications carriers or operators in Malaysia. The market is projected to grow from its estimated market size of RM5.80 billion in 2011 to RM6.70 billion in 2016 - registering a Compound Annual Growth Rate (CAGR) of 2.9 percent.

Figure 4: The Estimated and Forecast Market Size of Malaysia's Telecommunications Network Services Market, 2011-2016

Year Market Size (RM billion) Annual Growth (%)
2011 5.80 4.90
2012 5.97 2.90
2013 6.15 3.00
2014 6.33 2.90
2015 6.51 2.80
2016 6.70 2.90

CAGR (2011 - 2016) = 2.9 percent

Notes:

  1. All figures are rounded; the base year is 2011.
  2. The above figures include the costs for the required telecommunications network infrastructure, hardware and equipment.

(Source: Protégé Associates' Independent Market Research Report entitled Strategic Analysis of the Telecommunications Network Services Market in Malaysia, dated May 2012)

Note

* Please read this section in conjunction with OCK Group Berhad's Prospectus dated 29 June 2012.