Taiwan Telecommunications Report Q1 2012

In this quarter’s update on Taiwan’s telecoms market, we have incorporated the latest available data from Taiwanese telecoms operators and the National Communications Commission.
In the mobile sector, we have excluded personal handyphone sytem (PHS) from our subscriber calculations. We now take into consideration subscribers of 2G and 3G technology. At the end of September 2011, we estimate that there were 28.402mn mobile subscribers, representing an increase of 5.1% y-o-y. With regard to forecast, we expect 31.936mn mobile subscribers at the end of 2016, up from 28.795mn at the end of 2011. While the mobile market continues to grow in spite of market saturation, we expect the Taiwanese fixed-line sector to continue on its long-term downtrend in spite of a slight reversal in mid-2011. The biggest threat for the fixed-line industry will come from mobile alternatives such as VoIP. Lastly, the broadband industry in Taiwan is expected to grow on the back of strong demand for mobile broadband solutions. WiMAX remains comparatively unpopular compared to 3G technology. We expect the broadband industry to expand to 28.059mn at the end of 2016.
Taiwan has been a strong supporter of WiMAX with the government initiating several programmes to spur developments in the increasingly marginalised technology. However, we believe that plans by the National Communications Commission (NCC) to release six technology neutral 4G licences in 2013 could be a sign that the government is starting to recognise WiMAX's bleak long-term outlook, and cave into the growth momentum of rival LTE.
The NCC has set its sight on the 700MHz (currently being used by the military) and 2.6GHz (currently idle) frequency bands for 4G services. The technology neutral stance would give telecoms operators the freedom to select the suitable 4G technology, but BMI believes that LTE would be the overwhelmingly preferred option. Although WiMAX services launched in Taiwan in 2009, the NCC reported that there were only 128,748 subscribers at the end of September 2011, which is a considerably poor performance given that there are six WiMAX providers (five if a merger between Vee TIME and VMAX Telecom is completed). By comparison, Japan's NTT DoCoMo had 390,000 LTE subscribers in September after launching services in December 2010.
Taiwan retained its sixth position in BMI’s latest Risk/Reward Ratings (formerly Business Environment Ratings) for the Asia Pacific’s telecoms industry. However, we see downside potential due to the island’s economic outlook. Despite our expectations of a sharp slowdown in Taiwan's economic activity, growth surprised to the downside, which was more than we anticipated. On a seasonally adjusted annualised basis, the economy contracted 1.1%. Expectations of further slowing in China's economy, coupled with a deterioration in Taiwan's leading economic indicators, have led us to downgrade our growth forecasts for 2011 and 2012 to 3.6% and 3.4% respectively from 4.3% previously. Our estimates remain below the Bloomberg consensus of 4.9% and 5.0% in 2011 and 2012 respectively and the government's forecasts of 4.6% and 4.4%.

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Executive Summary 7
SWOT Analysis 9
Taiwan Mobile SWOT 9
Taiwan Wireline SWOT 10
Taiwan Political SWOT 11
Taiwan Economic SWOT 12
Taiwan Business Environment SWOT 13
Risk/Reward Ratings 14
Asia Pacific 14
Asia Telecoms Risk Reward Ratings Q112 20
Taiwan 20
Industry Forecast Scenario 22
Mobile 22
Table: Mobile – Historical Data And Forecasts, 2009-2016 22
ARPU 24
Table: ARPU – Historical Data & Forecasts (TWD), 2009-2016 24
Fixed Line 26
Table: Fixed Line – Historical Data & Forecasts, 2009-2016 26
Internet 28
Table: Internet – Historical Data And Forecasts, 2009-2016 28
Market Data Analysis 30
Mobile 30
Table: Taiwan Mobile Market, September 2011 30
Subscriber Divisions 32
ARPU 32
Table: ARPU By Operator (TWD) 33
3G 34
Table: Taiwan 3G Market, September 2011 35
Long-Term Evolution 36
Mobile Contract Wins 39
Table: Mobile Contract Wins 39
Mobile Operator Data 40
Table: Taiwan Mobile Market Overview 40
Table: Chunghwa Telecom 40
Table: Taiwan Mobile 41
Table: FarEasTone 43
Table: Asia Pacific Broadband and Wireless Communications Inc (APBW) 44
Table: VIBO 44
Mobile Content 45
Mobile Content 45
Regional Outlook 45
Selected NFC Developments, 2011 46
Country Outlook 51
Mobile TV 54
Value-Added Services Timeline 55
Table: Selected VAS 55
Fixed Line 57
Internet 59
Table: Taiwan Broadband Internet Subscribers 59
Table: Chunghwa Telecom Broadband Subscribers (‘000), 2010-2011 60
FTTH 61
WiMAX 63
Wireline Contract Wins 66
Table: Wireline Contract Wins 66
Regulatory Environment And Industry Developments 68
Taiwan: Regulatory Bodies And Their Responsibilities 68
Legislation And Market Liberalisation 68
Licensing And Spectrum 70
Call Termination Rates Overhaul 71
Industry Developments 72
Competitive Landscape 73
Key Players 73
Table: Key Players In Taiwan’s Telecommunications Sector 73
Table: Selected Operators Financial Indicators 74
Company Monitor 75
HTC 75
HTC: Q211 Profit & Loss Indicators (TWDbn) 76
Company Profiles 82
Chunghwa Telecom 82
Taiwan Mobile 87
Far EasTone 91
Regional Telecommunications Penetration Overview 95
Fixed Line 95
Table: Regional Fixed-Line Penetration Overview 95
Mobile 96
Table: Regional Mobile Penetration Overview 97
Broadband 97
Table: Regional Broadband Penetration Overview 98
Country Snapshot: Taiwan Demographic Data 99
Section 1: Population 99
Table: Demographic Indicators, 2000-2030 99
Section 2: Labour Market And Spending Power 100
Table: Employment Indicators, 2000-2005 100
Table: Consumer Expenditure, 2000-2005 (US$) 100
Table: Average Annual Manufacturing Wages, 2005-2012 100
Glossary Of Terms 101
Table: Glossary Of Terms 101
BMI Methodology 103
How We Generate Our Industry Forecasts 103
Table: Key Indicators For Telecommunications Industry Forecasts 103
Telecoms Business Environment Ratings 105
Risk/Reward Ratings Methodology 105
Ratings System 105
Indicators 105
Table: Ratings Indicators 106
Weighting 107
Table: Weighting Of Indicators 107
Sources 107
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