Telecommunications Asia Telecom Sector - Future Reimagined: Will Fixed Broadband get a boost from COVID-19?

Emerging Markets still behind developed markets in data usage

We highlight the increasing incidence of working from home, and estimate that 30-35% of jobs in wealthier countries can be done from home. While this number is lower in emerging markets, it continues to grow and has got a boost from COVID-19. This trend of work/school/entertain from home (WSEFH), in turn, is driving increased demand for home broadband particularly in emerging Asian markets where penetration remains low (below 20% in India, Indonesia and the Philippines and below 50% in Thailand and Malaysia).

Fixed broad band (FBB) penetration is <20% in India, Indonesia and the Philippines and <50% in Thailand and Malaysia. Using income distribution data, we estimate the size of addressable market at 20-60% of households in India, Indonesia and the Philippines, and 40-80% in Thailand and Malaysia. This points towards a potential 2-5x expansion in subscriber base in the next 3-5 years. While mobile networks have historically supported Internet usage in EMs, we estimate monthly data use can be 400-500GB in full WSEFH environment, making it difficult for mobile networks to support from a cost and capacity standpoint.

Upfront capex is high for FBB vs mobile but recurring opex, capex and churn are much lower, resulting in healthy return profile as businesses mature. More importantly, while fully-loaded capex for a new subscriber can be as high as US$400-500, last mile capex is only US$200-300. As mobile networks need fiberized backhaul, a large part of capex can be shared between fixed and mobile, lowering the entry hurdle.

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