The arrival of 5G telecommunication services has kicked off another round of mergers among Southeast Asian wireless carriers seeking to ease investment burdens, raising concerns over market domination by a handful of players.
In Thailand, second-ranked telecom True has merged with the third-place Total Access Communication (DTAC). The new entity, which kept the name True, now controls more than half the market, stealing the crown from Advanced Info Service (AIS), which had been the leading carrier for over two decades.
During a March news conference marking the completion of the merger, True CEO Manat Manavutiveth said the company plans to expand 5G services to cover 98% of Thailand's population by 2026.
In Malaysia, the Axiata Group-controlled carrier Celcom consolidated with Digi.com, which was 49% owned by Norway's Telenor. Combining the No. 3 and No. 2 telecoms, respectively, created a new national leader with over 20 million customers.
Driving these mergers is a need for capital expenditures to fuel expansion, along with resources for research and development. Investments by the telecom sector in the Asia Pacific are expected to reach $134 billion between 2022 and 2025, according to British researcher GSMA.
Spending for 5G will account for 75% of those costs, and competition to build 5G networks is increasing.
Changeovers to new telecommunication standards often trigger mergers among carriers. In 2014, Indonesia's third-ranked telecom XL Axiata bought out fifth-place Axis Telekom Indonesia.
That same year, Myanmar allowed Telenor and Qatar's Ooredoo to enter the market, which had been controlled by a state carrier, to bring in needed investments.
During the pandemic, online shopping and cashless payments took off in Southeast Asia. As video streaming became the norm, data fees skyrocketed. Developing 5G networks became a matter of urgency.
Southeast Asian cellphone subscribers spend longer hours online. The Philippines leads the region with the average of 5.5 hours of internet use per day through mobile devices, according to a report published this year by DataReportal. Thailand and Indonesia were also in the top 10.
Southeast Asia's demand for 5G services could potentially be greater than other markets. Telecom equipment supplier Ericsson forecast 5G users in Southeast Asia and Oceania will reach over 600 million in 2028.
Market domination by large players presents a major concern. The Philippine cellphone market is almost entirely divided between Globe Telecom and PLDT. Critics have faulted the quality of the wireless services for failing to live up to the cost of subscription.
In response, the administration of former President Rodrigo Duterte had lobbied other companies to enter the telecom industry. That led to the launch of Dito Telecommunity in March 2021.
The Thai government authorized the merger of True and DTAC in October under such conditions as setting a cap for usage fees under the new entity. Consumer advocates, however, have aired concerns about the merger resulting in a decline in quality of service.
China is emerging as a major source of equipment powering the 5G expansion in Southeast Asia. While the U.S. and other markets have moved to block Chinese companies from their 5G sectors, they have found better luck striking collaborative deals in Southeast Asia because of their cost competitiveness.
AIS and Chinese telecom device company ZTE established an R&D center for 5G in September to develop systems for automated guided transport robots and self-driving vehicles.
In June last year, the Thai government announced a collaboration with Huawei Technologies to promote 5G for industrial use. Huawei is also partnering with Indonesia in training 5G professionals.
Southeast Asian nations have been defining themselves as part of the Global South that is not firmly aligned with either the U.S. or Chinese camps. Although Malaysia chose Ericsson to develop the 5G network, officials stressed that the result was based on a rigorous bidding process, suggesting no Chinese enterprise was blackballed for geopolitical reasons.