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Asias wireless future

McKinsey recently undertook detailed interviews with mobile-phone users in Asia. Half of all respondentsand even more of the high-value onessaid they would switch operators to get access to wireless data services.
Asian Internet users are more concerned than their Western counterparts about on-line security, and this fear has slowed the acceptance of electronic commerce in some parts of Asia. One way around on-line security concerns would be to permit consumers to pay for purchases through their mobile-telephone bills, a method that is viewed as more secure than releasing credit card numbers over the World Wide Web and could therefore stimulate rapid growth in on-line transactions. To nd out more about the potential for wireless data business in Asia, McKinsey recently undertook detailed interviews with 100 mobilephone users in Australia, Malaysia, Singapore, and Thailand. This research suggests that most Asian consumers likely to use wireless data services would prefer to pay for purchased goods either through their mobile-phone bills or by cash on delivery. Wireless data services are catching on in Asia. Japans leading mobile Percent of respondents who said they were likely or very likely to use wireless services operator, NTT DoCoMo, paved the way with its Malaysia 76 highly successful i-Mode 71 Thailand service, which by February 2000only a year 45 Singapore after its launchhad Australia attracted more than 35 4.25 million subscribers. Source: McKinsey proprietary market research, 1999 Over the same period, and partly as a result of i-Modes success, DoCoMos market capitalization rose to $312 billion, from $76 billion, encouraging operators throughout Asia to launch wireless data services. Responses to the McKinsey survey indicate that signicant demand for wireless data services may exist57 percent of respondents said they were likely to use such services, dened here as Internet access, information,
EXHIBIT 1

Interest in wireless data varies by country

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messaging, and the ability E X H I B I T 2 Asia is willing to pay for wireless data services to conduct e-commerce transactions through Percent increase in current monthly mobile-telephone bill that potential customers are willing to pay mobile phones. The level of interest varies markedly Singapore 74 by country, with a far Malaysia higher proportion of 49 respondents in Malaysia Australia 32 and Thailand than in 21 Thailand Australia and Singapore expressing interest Source: McKinsey proprietary market research, 1999 (Exhibit 1). One possible explanation for these differences is the low level of Internet penetration relative to mobile-phone penetration in Malaysia and Thailand; in those countries, offering data services via mobile phones could be a way of satisfying unfullled demand for Internet services. The research also reveals that customers are willing to pay a premium for a broader range of services; on average, respondents likely to use wireless data services would spend up to 44 percent more for them than those respondents currently spend on mobile-phone services. But Asian consumers do have their limits. In Australia, for example, 75 percent of the respondents interested in wireless data are willing to pay $5 a month, but only 40 percent would still be interested if the monthly charge were $10. Singaporeans are generally the least concerned about price, while Thais are the most sensitive to it (Exhibit 2). Perhaps this is partly explained by the youthful demographics of potential mobile-data usersin each country surveyed, wireless data services were most popu- E X H I B I T 3 Mobile shopping may grow to fixed-line levels lar among young adults, with 26- to 29-year-olds Percent of respondents expressing the strongest Respondents ranking on-line Respondents who already shopping as among their top shop on-line interest. 3 mobile-service preferences Respondents rank e-mail and general information as the mobile-data services they would most like to use, and there are signs that consumers are becoming interested in using handsets to shop on-line. At present, this
Singapore 13 12 8 13 7 19
Source: McKinsey proprietary market research, 1999

Thailand

Malaysia

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EXHIBIT 4

The most valuable customers are likeliest to switch

Percent of respondents (Singapore)
Would switch Might switch Will not switch

Most valuable customers1 (Top 10%)

70 10 20 40 20 40 40 7 53 27 6 67

High- to medium-value customers1 (Next 30%)

Medium- to low-value customers1 (Next 30%)

Least valuable customers1 (Bottom 30%)

doesnt rank as one of the top three mobile-service preferences, but 7 to 13 percent of respondents in three of the four markets surveyed expressed interest in the idea. In Singapore and Thailand, these gures are fairly close to the percentage of respondents who say that they currently shop on the Internet (Exhibit 3). This similarity may indicate that, in these markets, mobile shopping will be as popular as shopping via xed-line Internet access.

Value of customers based on monthly mobile-telephone expenditures. Source: McKinsey proprietary market research, 1999

On average, 50 percent of all respondents claim that they would switch operators if necessary to get access to wireless data services. High-value customers (measured by their monthly mobile-phone expenditures) are generally more willing to switch than low-value customers (Exhibit 4). Thus, there is an advantage in being the rst company to offer wireless data services in the countries surveyed, since it is likely to capture the most lucrative share of the market. More respondents in Malaysia (58 percent) than in the other three countries would buy new handsets to get access to wireless data; in Australia, only 16 percent of respondents indicated that they were willing to do so. This variation strongly correlates with the level of interest in wireless data by country, emphasizing that operators must consider carefully how much they will need to subsidize their handsets. Jeffrey Bernstein, George Riedel, and Shinichi Yokohama

Jeffrey Bernstein is a consultant and Shinichi Yokohama is a principal in the Tokyo office, and George Riedel is a director in the Sydney office. Copyright 2000 McKinsey & Company. All rights reserved.