SINGAPORE-The main effects of the Asia-Pacific currency crisis on wireless carriers will be to make both foreign-manufactured equipment and foreign-debt servicing more expensive, said Jonathan Tarlin, senior vice president-international for The Strategis Group, last week at Wireless Showcase Asia. As a direct result, he said, network-infrastructure investment will slow and operators will look for ways to cut costs.
With the devaluation of currencies in many regional economies, carriers in these markets will find that equipment manufactured overseas becomes more expensive, said Tarlin. He pointed to Indonesia, whose currency dropped more than 70 percent against the U.S. dollar from June 1997 to Jan. 20. That means suddenly it costs Indonesian carriers 70 percent more to buy the equipment from manufacturers outside of the country.
Of course, costs for equipment manufactured and sold in Indonesia will not be affected by the devaluation, explained Tarlin. “But for most of these operators [in the region], they’re purchasing infrastructure equipment and handset equipment from outside of their own countries.”
The other problem is carriers will continue to have to make payments on debt, and the currency crisis makes those payments more expensive.
“In Asia this is a particular problem because many of these markets have been expanded very, very rapidly, and [operators] had to finance their equipment purchases,” said Tarlin. And the crisis only makes it that much more difficult for them to pay off their debt.
According to The Strategis Group, four of the primary markets that have been affected most by devaluation, in addition to Indonesia, are Thailand, whose currency has declined more than 50 percent since June; South Korea, down 44 percent; Malaysia, down nearly 40 percent; and the Philippines, whose currency has decreased 35 percent.
As a result of the economic situation, cellular and personal communications services subscriber growth for third-quarter 1997 in most of those five countries slowed or even flattened, reported Tarlin.
The exception has been South Korea, where subscriber growth continued to climb, he said.
“There was relatively little impact on subscriber growth in the third quarter [in South Korea] due to the introduction of PCS, which stimulated competition,” Tarlin said. In addition, a lot of the Code Division Multiple Access handsets used for the networks there are manufactured by Korean companies, so carriers purchased them in local currencies-not higher, foreign currencies.
