With market penetration for subscribers stabilising at just below 105% over the past several years and voice revenue stagnant, the Sultanate’s mobile operators are entering a challenging new era that will require innovative solutions. “We are confronting the same challenges that telecoms are facing worldwide: declining voice and SMS revenue, decreasing average revenue per user (ARPU), and greater reliance on data,” Idris Vasi, the former CEO of DST, told OBG.

Meanwhile, as the future driver of revenue generation – mobile data and value-added services – may be clear, telcos must carefully plan investments in their network. This is a global dilemma, but the limited size of the Brunei Darussalam’s market makes the cost-benefit analysis especially difficult.

SMARTPHONE UPTAKE: Statistics for the Sultanate’s mobile sector are difficult to find, but it is undeniable that the global trend towards smartphones and tablets has reached the country. Swedish firm Ericsson estimated in 2012 that between 50% and 80% of new activations in the Sultanate are smartphones, each of which is likely accompanied by a mobile broadband service package. App- and data-enabled phones are allowing “over-the-top” players like Skype, Viber and Whatsapp to cut into traditional profit areas such as SMS revenues.

Free messaging services, by using tiny quantities of mobile data rather than the SMS protocol, are circumventing what was once a major cash cow for networks. Although mobile data charges can be quite lucrative for telcos, the decrease in the “free money” represented by SMS revenue, along with stagnant voice revenues, has resulted in lower ARPU.

Simultaneously, smartphones are consuming mobile data at a rate which strains the infrastructure in place. The flagship mobile carrier of the telecoms group DST, DST Communications, revealed that in the first eight months of 2012, data usage increased 70% over the same period in 2011, and continues to grow at about 8% per month, largely due to a rise in the consumption of video streaming sites. The resulting degradation has led DST to invest in two technologies: policy control and a fourth-generation (4G) network, which it hopes will help protect its margins.

The former, policy control, will allow DST to introduce tiered service plans and eliminate unlimited plans, which are blamed for clogging the network. Vasi told press that some 10-15% of users account for 80-90% of traffic on the network. In Brunei Darussalam, where just 65,736, or 14.8% of mobile subscribers have post-paid subscriptions, tiered access plans will mean weekly or monthly quotas of bandwidth. However, DST also hopes to introduce Facebook day passes or similar micro-products.

GOING 4G: Network upgrades are another key to delivering improved service and enticing more customers. DST’s network deployment has evolved: the operator now offers 3G across the Sultanate and has upgraded many carriers to 14.4-mbit HSPA+, with plans to upgrade to 21-28 mbit.

Speed, however, is less of a concern than congestion, which has produced degraded service in more populous areas. DST has responded by expanding capacity, upgrading stations to two dual voice-and-data carriers. It is also looking into adding a third or fourth carrier at in-demand stations and upgrading 2G networks, which are still used by feature phone users. The next step, however, is long-term evolution (LTE) technology, known as 4G, which provides dramatically faster speeds and even more importantly, can decrease the network’s overall congestion.

“The existing 3G technology provides speed and performance, which is increasingly necessary as data growth expands and voice traffic stagnates,” Vasi told OBG. “Data is a big driver for 4G, or LTE; a lot of operators are using 4G as a data offload strategy, because 3G networks are getting congested. New apps and services require more and more data, including more video. Therefore, it is not really a question of how the market will accept 4G; the rise in data traffic will make it essential.” DST began working on its LTE network in 2011 by partnering with Swedish technology giant Ericsson to trial the next-generation technology. According to Vasi, DST is targeting March 2013 as the roll-out date for 4G, which will debut alongside the firm’s new policy control plan. The initial launch will include 50 4G-enabled sites, but the carrier intends to roll-out 4G to all of its Brunei Darussalam sites by the end of the year. DST plans to offer bundled packages in the form of USB dongles, tablets and other devices. This is a necessary step as few affordable devices on the market currently support 4G. DST is also planning to introduce carrier subsidies as a way to attract higher-ARPU customers.

These programmes – in which customers can get a smartphone at a reduced price in exchange for committing to a long-term data plan or paying higher rates for several months – are fairly new to the country. They tend to be more popular in developed countries where post-paid plans are the norm. The right offer, however, could drive post-paid adoption, as neighbouring countries like Malaysia have shown.

MOBILE COMPETITION: Given its market share of 75-85%, DST attracts the majority of attention in the telecoms industry; however, b-mobile should not be dismissed. The latter was the first operator to offer 3G services (in 2005) and the first to provide 3.5G services (in 2008). This has helped the company secure its subscriber base of approximately 100,000.

In November 2012, the company relocated to new headquarters in Beribi, as its 150 employees had outgrown previous offices. The new location has the added benefit of consolidating the company’s departments into a single location. Although b-mobile’s sizeable subscriber base, technological progress and recent move suggest adequate performance, the company’s future was called into question in early 2013 following concerns about service quality.

During January 2013, b-mobile subscribers experienced persistent periods of service outages and/or degraded service quality, including unsent SMS messages, dropped calls and poor data performance. At the start of February 2013, the Authority for InfoCommunications Technology Industry announced that it would be working with b-mobile to restore services and prevent disruptions to consumers.

In another twist, January 2013 also saw b-mobile’s parent company, TelBru, file a petition with the Supreme Court in a bid to close the mobile operator. Little information was available regarding the exact reasons for requesting the closure of the company and on February 28, 2013 the petition was officially withdrawn. In another turn for the better, local media reports also indicated that b-mobile’s technical difficulties had largely been resolved.

The recent activity with b-mobile suggests that DST will continue to control the mobile sector for the time being. However, the resolution of issues at b-mobile is a positive step for the country’s consumers. This is particularly true considering b-mobile’s focus on a more price-sensitive segment of the market.