Industry Overview

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT
PROTEGE ASSOCIATES SDN BHD (675767 H) SUITE C-06-06, PLAZA MONT’ KIARA
2 JALAN KIARA, MONT’ KIARA 50480 KUALA LUMPUR, MALAYSIA GEN +603 6201 9301 FAX +603 6201 1302
www.protege.com.my The Board of Directors, Sedania Innovator Berhad Level 11, Kelana Parkview Tower, Jalan 556/2, 47301 Petaling Jaya, Selangor Darul Ehsan Dear Sirs / Madams, Executive Summary of the Strategic Analysis of the Mobile Content and Solutions Market Focusing on Aggregators (Platform and Services Enablers> in Malaysia This Executive Summary of the ‘Strategic Analysis of the Mobile Content and Solutions Market Focusing on Aggregators (Platforms and Services Enablers) in Malaysia’ is prepared by Protege Associates Sdn. Bhd. C’Protege Associates”) for inclusion in the prospectus of Sedania Innovator Berhad (“Sedania Innovator”) to the Securities Commission Malaysia in relation to its proposed listing on the Official List of Bursa Malaysia Securities Berhad. 1.0 Malaysia Economic Overview The Malaysian economy registered a strong finish in 2014. It expanded at a faster pace of 6.0 percent in 2014 on the back of continued expansion in domestic demand and an improvement in external trade performance. Despite the positive results revealed in most of Malaysia’s key economic indicators for 2014, the Malaysian Government is mindful of a potentially continuing weak energy and commodity prices which may be a major economic headwind for the local economy. In the near future, the growth in the Malaysian economy is expected to be anchored again by domestic demand. Domestic demand is expected to be led by private expenditure that is forecast to register an increase of 6.0 percent in 2015. The Malaysian economy is expected to grow by between 4.5 to 5.5 percent in 2015. The projected slower pace in growth for 2015 is due to the expectations of a moderated rate of private consumption as well as slower investments and export growth in the oil and gas industry. The services sector is expected to remain the largest contributor to the economy by accounting for more than half of Malaysia’s real GDP in 2015. In terms of pace of growth, the construction sector is expected to register the fastest pace among all the key economic sectors in 2015. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
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2.0 Introduction of the Mobile Content and Solutions Market in Malaysia Mobile content services as defined by Malaysian Communications and Multimedia Commission (‘MCMC”) refer to any messaging service that provides content and is accessible on a mobile access device or fixed access device, for which charges may be imposed over and above the standard network charges of the relevant service provider. It consists of the provision of content service to any person and short messaging service (‘SMS”) Broadcast. The messaging operation comprises two components in the delivery flow i.e. mobile originated (‘MO”) and mobile terminated (‘MT”). An MO message refers to message sent from a mobile device to a software application or to another mobile device. On the other hand, an MT message refers to message sent to a mobile device from a software application or from another mobile device. Both MO and MT delivery flow are illustrated in Figure 1.
Figure 1: MO and MT Delivery Flow Mobile User BI Software Application

“::::==’:=M:=,==== MO message from

MT message to Mobile User A Mobile User A
Mobile User A Source: Protege Associates
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
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3.0 Market Segmentation In Malaysia, the mobile content and solutions market can be broken down into six main categories, namely mobile phone personalisation, infotainment, information, banking and financial services, communication and others, which is depicted in Figure 2. Figure 2: The Provision of Mobile Content and Solutions in Malaysia Mobile Content Services and Solutions
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Java Games Strategy, Puzzle, Action, Racing

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I :, , ,——————-, Source: Protege Associates Mobile content and solutions in Malaysia are offered via three mediums namely SMS, multimedia messaging service C’MMS”) and wireless application protocol (‘WAP”). The proVision of mobile content and solutions in Malaysia can be segregated in four main facets as follows:­a) The provision of content to any person, including but not limited to information, news update, data, jokes, greetings/ messages, ringtones, wallpapers etc. for which charges mayor may not be imposed on customers; b) The provision of service to any person, including but not limited to chat services, participation in contests, fundraising and voting; 81 3 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ c) A combination of provision of content and service; and d) SMS broadcast or bulk SMS which can be channelled via SMS, MMS and WAP The provision of mobile content and solutions is applicable for various purposes -catering to the demand of mobile users for mobile phone personalisation, top-up services, credit transfer (airtime sharing), infotainment, information and communication as well as adding value to/ improving the services of financial institutions and corporations. It is also used as a channel for text donation and text voting. 4.0 Market Dynamics Scorecard for the Mobile Content and Solutions Market in Malaysia
Competitive Landscape Approximately 400 market players, including mobile network operators (“MNOs”), aggregators (platform and services enablers) and content developers/ providers as well as mobile solution providers
2015 Supply Conditions • Collaboration with Telecommunications Carriers or Operators
• Government Support towards E-payment
• Downward Pressure on Profit Sharing

Source: Protege Associates 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ 5.0 Historical Performance and Growth Forecast of the Mobile Content and Solutions Market in Malaysia Protege Associates estimates that the mobile content and solutions market in Malaysia was worth approximately RM4.18 billion in 2014. The market is projected to grow at a compound annual growth rate C’CAGR”) of 8.4 percent for the period from 2014 to 2019. The market size (revenue) and growth forecast for the mobile content and solutions market in Malaysia from 2013 to 2019 is shown in Figure 3. Figure 3: The Market Size (Revenue) and Growth Forecast for the Mobile Content and Solutions Market, 2013-2019
CAGR (2014-2019) = 8.4 percent Note: All figures are rounded; the base year is 2014 Source: Protege Associates The mobile content and solutions market in Malaysia is dominated by the MNOs who accounted for the largest share of the revenue. The MNOs are also capable of taking the roles of aggregators (platform and services enablers), content developers/ providers and solutions providers at the same time, which effectively put them in competition with other aggregators (platform and services enablers), content developers/providers and solution providers or may engage in a revenue sharing arrangement with them. Overall, the mobile content and solutions market in Malaysia is expected to remain sustainable with increasing cellular telephones subscription. Revenue from SMS broadcast services is expected to remain buoyant with growing usage sectors such as mobile social networking, mobile banking, mobile advertising and text voting. This service continues to be a reliable official form of text communication, particularly in the banking sector. At the same time, revenue from solution services such as airtime sharing is also expected to grow as subscription of cellular telephone increase, in particular prepaid users segment. This is 57. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ especially the case in rural areas where there is limited top-up infrastructure and users resort to sharing credit with each other. The continued growth in 3G subscriptions and mobile phone users’ technology know-how is also spurring the growth of the Malaysian mobile content and solutions market. With users accessing more and more content on their mobile devices, whether for work, or personal reasons, the market will strive to meet the demand through the production of more localised content and services. At present, the mobile content and solutions market in Malaysia is still being driven by revenue from the SMS broadcast method, with lesser revenue from mobile apps. However, mobile apps are expected to claim a larger portion of revenue by 2017 whilst SMS broadcast is expected to remain as a relevant revenue generator. This development augurs well for the growth in the mobile content and solutions market in Malaysia. Moving forward, the mobile content and solutions market in Malaysia is expected to generate RM6.29 billion in revenue in 2019. From 2015 to 2019, the market is expected to grow by 8 percent to 12 percent each year. 6.0 Competitive landscape of the Mobile Content and Solutions Market in Malaysia The mobile content and solutions market in Malaysia is estimated to consist of approximately 400 participants, including MNOs, aggregators (platform and services enablers) and content developers/ providers. These participants are mutually dependent despite the ability of some to undertake multiple roles -MNOs may deploy mobile messaging platform and content, and aggregators (platform and services enablers) may develop their own content. By and large, the different market players operating in the mobile content and solutions market are dependent on the others to thrive. Figure 4 shows the breakdown of participants within the mobile content and solutions market in Malaysia. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Figure 4: Breakdown of Estimated Number of Participants in the Mobile Content and Solutions Market in Malaysia Participant MNOs Estimated Number of Participants
Approximately 10 I I Description ‘ MNOs and mobile virtual network operators (‘MVNOs”) which purchase airtime at wholesale rates from MNOs and resell wireless subscription to consumer through its own branding and other value-added services. There are four major operators in Malaysia: Maxis Berhad (‘Maxis”), Celcom Axiata Berhad (‘Celcom”), DiGi.Com Berhad (‘DiGi”) and U Mobile Sdn Bhd (‘U Mobile”), with the rest being smaller network operators or MVNOs. Some MNOs are involved in the provision of content provision and aggregation services.
Content Developers/ Providers  Approxi mately 350  Involved in the development and provision of content. Content providers typically depend on the messaging platform of aggregators (platform and services enablers) to access operator’s networks as a means of disseminating content to mobile users. Examples of mobile content developers are Adacode Systems Sdn Bhd, Alpha Crossing Sdn Bhd, Ice Mobile Sdn Bhd.
Source: Protege Associates Aggregators (platform and services enablers) work between pure content developers/ providers and MNOs by providing a mobile messaging platform to the content developers/ providers to sell and distribute their contents and services through mobile network. Generally, aggregators (platform and services enablers) in the mobile content services industry compete on various factors such as: • Number of mobile networks connected
• Message traffic handling ability
• Number of content developers/ providers or total amount of content aggregated

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Sedania Innovator is an investment holding company and the Group (comprises Sedania Innovator and lOOnY Sdn Bhd (“lOOnY”)) is engaged in the business pertaining to or connected with telecommunications and information technology, which includes multimedia products and all other related activities. lOOnY, its subsidiary, is a major platform provider and service enabler in Malaysia, specialising in providing ancillary services to the mobile subscribers in Malaysia and Bangladesh. Its current products are mobile sharing platforms and mobile application services, namely Airtime Sharing CATS”) platforms and GreenBilling©. For the financial year ended 31 December 2014, Sedania Innovator recorded revenue of RM11.4 million, profit before tax of RM6.5 million and profit after tax of RM6.4 million. At the international level, Huawei Technologies Co. Ltd., Telefonaktiebolaget L. M. Ericsson and Sybase Inc. are examples of notable international companies that offer mobile platform technology services. For the mobile content and solutions market in Malaysia, Protege Associates has used the following criteria when selecting other market players for comparison with Sedania Innovator: • A mobile content and solutions market player with business in Malaysia; and
• Has at least a telecommunication carrier or operator as a business partner or key customer.

After taking into consideration the above criteria, Protege Associates has selected three market players namely UnrealMind Interactive Berhad CUnreaIMind”), Macro Kiosk Berhad (“Macro Kiosk”) and Macromac Pic CMacromac”) for comparison purpose. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Figure 5: Key Competitor Analysis within the Mobile Content and Solutions Market in Malaysia
UnrealMind  Developing  and  publishing  of  mobile  Financial year ended (‘FYE”):  entertainment-related  content,  as  well  as  31 December 2013  providing  integrated  mobile  platform  for  Revenue:  delivery,  billing  and  administration  of  RM17.6 million  customised mobile content and services.  Profit before tax:  RM3.3 million

Macromac  Provision of mobile messaging platform to the content developers/ providers.  FYE: 31 December 2013 Revenue: RM24.1 million  Profit before tax: 8.2 million
Sources: Companies Commission of Malaysia, Annual Report of Macromac and Annual Report of Goldis Berhad 6.1 Estimated Sedania Innovator’s Market Share The revenue generated by Sedania Innovator for the financial year ended 31 December 2012 was RM9.0 million which is equivalent to 0.3 percent out of the RM3.25 billion estimated market size (revenue) of the mobile content and solutions market in Malaysia in 2012. The revenue generated by Sedania Innovator for the financial year ended 31 December 2013 was RM9.9 million which is equivalent to 0.3 percent of the estimated market size (revenue) of the mobile content and solutions market in Malaysia in 2013. The market share is derived from dividing Sedania Innovator’s revenue of RM9.9 million for the financial year ended 31 December 2013 with the market size (revenue) of the mobile content and solutions market in Malaysia in 2013 which is estimated to be RM3.76 billion. The estimated market share of the other market players selected for comparison ranges from less than 0.5 percent to 4.3 percent further reflecting the fragmented nature of the industry. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Figure 6: Estimated Market Share of Selected Market Players in the Mobile Content and Solutions Market in Malaysia, 2013
Notes: 1) The list ofselected industry players above is not exhaustive 2) The above market shares only provide an indication and are not considered directly comparable due to the following reasons: a)  The revenue may be at the group level  b)  Not all companies carry out activities which are completely similar to each other or in  the same geographical area
Sources: Theannualreport ofMaeromac,SedaniaInnovator, CompaniesCommission ofMalaysia and Protege Associates The revenue generated by Sedania Innovator for the financial year ended 31 December 2014 was RM11.4 million which is equivalent to 0.3 percent of the estimated market size (revenue) of the mobile content and solutions market in Malaysia in 2014. The market share is derived from dividing Sedania Innovator’s revenue of RMll,4 million for the financial year ended 31 December 2014 with the market size (revenue) of the mobile content and solutions market in Malaysia in 2014 which is estimated to be RM4.18 billion. 7.0 Demand and Supply Conditions Demand and supply conditions refer to market factors that can positively or negatively affect future market size (revenue) and growth by specifically altering demand or supply dynamics. These demand and supply factors can include trends, key developments or events that spur market expansion, leading to increases in sales or revenues, or developments that negatively affect market growth. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
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7.1 Demand Conditions figure 7: Demand Conditions Affectirlg the Mobile COntent and Solutions Market in Malavsia, 2015-2019
Emergence of Data Mobile Applications! Content  Low  Low  Medium
Source: Protege Associates Increasing Cellular Telephone Subscription and Penetration Rate An increasing cellular telephone subscription and penetration rate would likely indicate a larger pool of potential users of mobile content and solutions selVices. Cellular telephone subscription increased by 4.6 percent year-on~year from 42,996,000 in 2013 to 44,972,000 in 2014 whereas cellular telephOne penetration had surpassed 100.0 per 100 inhabitants for 2011 and stood at 148.5 per 100 inhabitants in 2014. MOVing forward, the cellulartelephone subscription and penetration is envisaged to continue on its expansion trail throughout the period from 2015 to 2019 despite a penetration rate of above 100 percent. In practice, the possession of more than one cellular telephone per customer is increasing, while a segment of the population is still without a mobile telecommunication device. These trends indicate an increasing pool of potential customers that would continue to drive the mobile content and solutions market in Malaysia. Along with the expanding mobile subscription baSe, in particular the prepaid users, the usage of airtime sharing selVices is expected to increase as more clients transfer credit to each other, especially in rural areas where there is limited top-up infrastructure. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Replacement of Physical Functions with Virtual Possibilities The Internet age has allowed the virtualisation of many physical functions. Functions that have been carried out physically in the past are increasingly being replaced by virtual functions. Apart from the business world, which now very commonly uses the Internet to market and sell goods, this phenomenon has important implications for consumers as well. Physical activities such as shopping and paying for goods can now be conducted online, trading posts have been replaced by the likes of eBay and the Lelong.com.my market places. Even banking and bill payment processes have been moving online to the Internet. Soon, many other functions could be virtualised for the Internet. Additionally, under the electronic government (‘e-Government”) initiative, the Malaysian Government is looking to virtualise government services such as licence renewal, tax returns filing, specialised healthcare advice and police report lodging to increase the access of urban and rural communities to these services. The proliferation of these advanced virtual functions creates a need for fast, reliable Internet connections that can go a long way towards driving the market for broadband and the Internet in the future. This development bodes well for the overall growth in the local mobile content and solutions market. This development can help to drive the demand for mobile content and solutions leading to further growth in the market. Growing Usage of Mobile Content and Solutions Mobile content and solutions are provided to a variety of sectors to cater to both mobile users and corporations. Growth in the provision of mobile content and solutions in these sectors will contribute positively to the industry as a whole. Protege Associates has identified potential growth of provision of mobile content and solutions in the following sectors namely mobile banking, mobile advertising, mobile social nerworking and text voting. 1) Mobile Banking Mobile banking is one transactional avenue that financial institutions are keen to grow as it helps to reduce cash handling costs, expand customer base and minimise the necessity of customer services at branches while at the same time offers opportunities to promote value-added products directly to consumers in a targeted manner. In line with the increasing mobile subscribers in Malaysia, financial institutions are finding ways to enhance their mobile banking services. In Malaysia, mobile banking services, including Internet banking and SMS banking, are showing signs of growth with the increasing number of subscribers each year. The 127. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ number of mobile banking subscribers registered a commendable growth of 28.8 percent in 2014. The growth in number of subscribers led to an expansion in transaction volume and transaction value of more than 50 percent respectively in 2014. The performance of mobile banking services from 2011 to 2014 is illustrated in Figure 8. Figure 8: Performance of Mobile Banking Services, 2011-2014
Source: aNN Moving forward, the number of mobile banking subscribers is anticipated to grow further in line with the increasing number of mobile subscribers boosting the transaction volume and hence, contributing further expansion to the mobile content and solutions market in Malaysia. 2) Mobile Advertising Driven by the high cellular telephone penetration of more than 100.0 per 100 inhabitants in Malaysia! mobile advertising has been recognised as a cost~efficient marketing method that can reach targeted audience with minimal restriction of time and place. Local! regional and global brands are riding on the mobile advertising bandwagon to reach out to their customers and henceforth, the demand for mobile advertising in the global market, including the local market! is forecast to grow. Various mobile advertising channels can be found in Malaysia namely mobile messaging advertising,in-game mobile advertising and location-based advertising and more recently through mobile social networking sites. While the data-driven advertising channels through rich mobile applications and content are forecast to dominate growth in the global mobile advertising market (due to the increasing use of smartphone and media tablets), mobile messaging advertising especially SMS and MMS advertising are expected to remain essential in the mobile advertising sector. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ SMS and MMS services, with established demand in Malaysia, and its availability as a fundamental application in all types of cellular telephones, provide a cost efficient advertising channel with relatively high familiarity to the consumer. This importance of SMS and MMS advertising is further proven by the launch of advertising platform by one of the MNO giants in Malaysia, despite growing smartphone usage among its user base. In 2010, Maxis launched its permission-based SMS and MMS mobile advertising platform to connect the marketers with the right consumers, based on the subscribers’ profile, interests and preference. Henceforth, SMS and MMS advertising is expected to flourish throughout the period from 2015 to 2019 as an established mobile advertising avenue. 3) Mobile Social Networking In line with the increasing adoption of smartphones together with the rising trend in the usage of mobile app and mobile web, mobile social networking service is recognised as a communication instrument for personal and business use where information is to be relayed instantaneously without delay. Mobile social networking offers an avenue for the consumption of social media where information, ideas, pictures and videos are create and shared across a variety of social media technologies such as Internet forums, social blogs and social networking sites. This ensures the users benefit from getting immediate alerts and notifications of changes in their communities. The majority of mobile social networking traffic comes from status updates, replying to messages, comments on walls and viewing photos. Most individual users are inclined to post rather recent updates while businesses have to keep their latest news, services, offerings and other information updated regularly to meet consumers’ expectations. This continuous updates drives the need for more services from the mobile content and solutions market in Malaysia, thus contributing towards its demand. 4) Text Voting Text voting is a mobile content and solutions application that has been used in the broadcasting industry to provide interaction between audience and the programme while generating additional revenue through a high volume of SMS votes received. This one-off purchase model requires the mobile users to pay for the vote “purchased” in addition to the SMS charges applied by the MNOs. Text voting is often utilised by reality television shows, such as musical and dance competitions, where people are able to vote for their favourite contestant via SMS. This “audience participation” component is also utilised in 92 14 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ the broadcasting industry in Malaysia where reality shows such as Malaysian Idol, Akademi Fantasia and ShoWdown adopt the text voting system. Moving forward, text voting is anticipated to have increasing application and contribute a larger share to the mobile content and solutions market in Malaysia. Airtime Sharing Mobile banking, mobile sodal networking and text voting are mobile content and solutions that require the usage of airtime as they are closely linked to the usage of SMS and MMS services. Therefore the increase usage of SMS and MMS in mobile banking and text voting is expected to lead to increased airtime sharing, especially in rural.areas that have relatively poor or limited Internet infrastructure and sale points for mobile top-ups. Emergence of Data Mobile Applications! Content The switch in preference from voice to data services, including SMS, MMS and data roaming, can be traced back to the mid-2000s. This trend has been seen to spread through the majority of mobile carriers worldwide. Average revenue per user (‘ARPU fl) from voice service dropped in mid 2000s despite the escalation in mobile subscribers and overall revenues. Figure 9: Global Mobile ARPU Trends
Voice ARPU declining By end 2005, the majority of carriers worldwide saw dropping ARPU, even as mobile subscribers and overall revenues continuecl to grow. Mid 2000s
SOUrce: MCMC 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ The change of mobile users’ preference from voice to data has supported the growth of mobile content and solutions market where mobile content and solutions and mobile advertising were considered important drivers of ARPU. This switch of preference has also contributed to the prevalence of smartphones and data mobile applications and content which are more storage and bandwidth-intensive. Data mobile applications and content may only require the mobile users to pay once (for mobile Internet access) to download the application and enjoy an unlimited content supply -resulting in switching of preference from paid content models among the smartphone users. These data mobile applications and content may substitute the need for certain SMS-based services particularly push notifications for certain content such as newswire and gaming results, leading to reduced demand for SMS­based mobile content and solutions. However, while these bandwidth-intensive mobile content may be fast in gaining popularity, the persisting role of SMS and voice calls as fundamental communication applications for all types of phone and ability to reach more mobile users than the data mobile applications regardless of mobile data coverage has resulted in the traditional mobile content solutions still remaining relevant in the near future. For instance, SMS remains a crucial mode of communications in supporting functions such as the provision of verification or authentication data, and marketing and advertising content to targeted mobile phone users at a reasonable cost to the content owners. 7.2 Supply Conditions Figure 10: Supply Conditions Affecting the Mobile Content and Solutions Market in Malaysia, 2015-2019
Source: Protege Associates 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Collaboration with Telecommunications Carriers or Operators Telecommunications carriers or operators are constantly under the pressure to improve services to entice new subscribers while retaining existing ones. Besides that, ARPU for voice services has been dropping steadily through the years. To combat the situation telecommunications carriers or operators have been exploring mobile data and video related services to increase revenue and profitability. This development has led to the ongoing collaboration between telecommunications carriers or operators and mobile content and solution services providers. Such partnership is considered healthy and synergistic as both parties work hand-in-hand to create a product that is beneficial to them. Both parties can leverage on each other strength and resources to offer products that are appealing to customers. Government Support towards E-Payment The Malaysian government has given keen attention to the payment ecosystem in the country. As such, creating an integrated payment ecosystem has been identified as one of the entry point projects (‘EPPs”) under the Financial Services National Key Economic Area of the ETP by the Malaysian Government. This EPP aims to increase E-payment transactions, including mobile banking and Internet banking, from 1.2 billion to 12 billion each year, as well as reducing dependence on cash transactions to 63 percent by 2020. The Malaysian Government also anticipates that E-payment transactions will generate a significant incremental contribution to Malaysian GNI of RM2.6 billion by 2020. Downward Pressure on Profit Sharing The mobile content and solutions market has been growing and evolving in a fast pace in the last few years owing to the increasing role of applications and application store. Presently, application services are provided by telecommunications carriers or operators directly or through third-party content aggregators (platform and services enablers), generally known as mobile content or ancillary service providers. In the market, the content owners, mobile content providers, technology enablers and telecommunications operators play different roles in providing the application services to the end users. The revenue generated from the sales of applications is also shared among the related parties. More often than not, the telecommunications carriers and operators would be entitled to enjoy a larger share of the turnover, while the remaining is split between the other parties. This puts downward pressure on profit sharing for the other firms, espedally for the mobile content and solutions providers 95 17 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ as it is often the case where the content owners get the majority share of the remaining revenue. 8.0 Market’s Reliance on and Vulnerability to Imports Mobile content and solutions are already offered domestically by local companies. The mobile content and solutions market in Malaysia has been enjoying a relatively high profile particularly with the listing of some of its market players in Malaysia and overseas. Over the years, Malaysia has been able to produce many IT-skilled graduates that joined the mobile content and solutions market. However, while Malaysia generally has a ready pool of information and communications technology (“ICT”)-skilled personnel, market players may sometimes engage the services of foreign seasoned IT specialists to boost their competitiveness, especially in those research and development intensive fields or in specialised niche sectors. In general, the mobile content and solutions market in Malaysia is not reliant on or vulnerable to foreign expertise. If and when necessary, foreign talent is engaged to serve as a supplement to a company and is not deemed a necessity for market players’ operations. 9.0 Substitute Products or Services Under the context of marketing, mobile advertising is considered as new vertical after traditional media such as TV, radio and paper media. The traditional media has been in the market for a long period of time and has established a steady pool of ready audience. Hence, traditional media remains as a popular advertising channel. Besides that, rich mobile application also provides an advertising platform to the marketer. Data-driven marketing, either through mobile data or Internet, such as in-game marketing, social media advertising and mobile web marketing, has also started to gain a foothold in the mobile advertising market. The introduction of rich mobile application has gradually change the mobile users’ preference from paid mobile content to unlimited media content and supply -threatening the reverse billing model of mobile content and solutions market. With reference to the services provided by Sedania Innovator, the substitute services are as follows. Firstly, there are the USSD services that provide mobile users with a means to request and share airtime or credit with other users within the same network. These services are in direct competition with Sedania Innovator’s ATS Solutions, although they require more 187. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ steps (i.e. more time consuming) to execute the transfer or airtime or credit. Secondly, substitute services to Sedania Innovator’s GreenBilling©, comes in the form of existing billing services offered by MNOs such as paper-based billing by post and electronic-billing via email or the Internet. 10.0 Relevant Laws and Regulations Governing the Market and Peculiarities of the Market The mobile content industry in Malaysia is governed by MCMC under the Communications and Multimedia Act 1998 and Malaysian Communications and Multimedia Commission Act 1998. In 2010, Mandatory Standards for the Provision of Mobile Content Services was effective to regulate the mobile content and solutions market in Malaysia. Besides that, General Consumer Code of Practise for the Communications and Multimedia Industry Malaysia is applicable to the SMS broadcast model as a mobile advertising tool. The mentioned laws and regulations are expounded in the following subsections. These laws and regulations are established to provide for and to regulate communications and multimedia activities in Malaysia, including the mobile content and solutions market in which Sedania Innovator is also a participant. 10.1 Communications and Multimedia Act 1998 All the market players that are involved in the ICT industry in Malaysia which include mobile content and solutions market players need to comply with the Communications and Multimedia Act 1998. The regulatory functions of the Postal Services Act 1991 and the Digital Signature Act 1997 were taken over by the Communications and Multimedia Act 1998 on 1 November 2001. Under the Communications and Multimedia Act 1998, 10 national policy objectives were set forth for the local communications and multimedia industry to form basis for the new regulatory framework which include economic, technical, consumer protection and social regulations. These 10 national policy objectives are: 1) To establish Malaysia as a major global centre and hub for communications and multimedia information and content services; 2) To promote a civil society where information-based services will provide the basis of continuing enhancements to quality of work and life; 3) To grow and nurture local information resources and cultural representation that facilitate the national identity and global diversity; 4) To regulate for the long-term benefit of the end user; 97 19 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ 5) To promote a high level of consumer confidence in service delivery from the industry; 6) To ensure an equitable provision of affordable services over ubiquitous national infrastructure; 7) To create a robust applications environment for end users; 8) To facilitate the efficient allocation of resources such as skilled labour, capital, knowledge and national assets; 9) To promote the development of capabilities and skills within Malaysia’s convergence industries; and 10) To ensure information security and network reliability and integrity. MandatoryStandardsforthe ProvisionofMobileContentServices The Mandatory Standards for the Provision of Mobile Content Services is a set of standards which provides direction and clear practices that safeguard consumer interests. Powered by the Communications and Multimedia Act 1998, it outlines the standards on several criteria in the mobile content and solutions market which include: a) Acquisition or subscription of mobile content and solutions; b) Subscription-based services and termination of services c) Keywords d) Provision of information of mobile content and solutions; e) Promotion of mobile content and solutions via television, print media and radio; f) Marketing message or advertisement via SMS; g) Shortcode; h) Customer service; and i) Chat services, contest services and donation
Communications andMultimedia (Licensing) Regulations 2000 The Communications and Multimedia (Licensing) Regulations 2000 is powered by Communications and Multimedia Act 1998 to set out the regulations of the ICT industry. Under the mentioned regulation, an application service provider class 98 20 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ licence may be applied by a person who provides any or all of the following application service: a) PSTN telephony; b) Public cellular services; c) IP telephony; d) Public payphone services; e) Public switched data service; f) Audio text hosting service provided on an opt-in basis; g) Directory services; h) Internet access services; i) Messaging services; or j) Such other applications service which are not exempted under the Act or not
listed in this subregulation 10.2 Malaysian Communications and Multimedia Commission Act 1998 The MCMC is the regulatory body for the ICT industry in Malaysia. It was created under the Malaysian Communications and Multimedia Commission 1998 to promote the above Malaysian Government’s national policy objectives and oversee the new regulatory framework for the converging industries of telecommunications, broadcasting and online activities. Examples of the new regulatory framework for the ICT industry in Malaysia are depicted in Figure 11. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ Figure 11: Examples of New Regulatory Framework for the leT Industry in Malaysia , I
Regulation Examples of Framework I Consumer • Emphasises the empowerment of consumers
• Ensures adequate protection measures in areas such as affordability of services, dispute resolution and service availability

 

Social • Content development
• Content regulation such as prohibition of offensive content
• Public education on content-related issues

 

Source: MCMC Meanwhile, the power and functions of the MCMC as provided by the Malaysian Communications and Multimedia Commission Act 1998 include the following: 1) To advise the Minister on all matters concerning the national policy objectives for communications and multimedia activities; 2) To implement and enforce the provisions of the communications and multimedia laws; 3) To regulate all matters relating to communications and multimedia activities not provided for in the communications and multimedia laws; 4) To consider and recommend reforms to the communications and multimedia laws; 5) To supervise and monitor communications and multimedia activities; 6) To encourage and promote the development of the communications and multimedia industry including in the area of research and training; 7) To encourage and promote self-regulation in the communications and multimedia industry; 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ 8) To promote and maintain the integrity of all persons licenced or otherwise authorised under the communications and multimedia laws; 9) To render assistance in any form to, and to promote co-operation and co-ordination amongst, persons engaged in communications and multimedia activities; and 10) To carry out any function under any written law as may be prescribed by the Minister by notification published in the Gazette. 10.3 General Consumer Code of Practice for the Communications and Multimedia Industry Malaysia General Consumer Code of Practise for the Communications and Multimedia Industry Malaysia outlines the general requirements for all types of advertising in Malaysia. The objectives of the mentioned code are to provide a model procedure for: 1) Reasonably meeting consumer requirements; 2) The handling of customer complaints and disputes; 3) The creation of an inexpensive mediation or process other than the court and procedures
for compensation of the customers in case of breach of the consumer code; 4) The protection of consumer information; 5) To endeavour to achieve the relevant national policy objectives of the Communication and Multimedia Act 1998; 6) To provide benchmarks for the communications and multimedia service providers for the benefit of consumers; 7) To promote a high level of consumer confidence in service delivery from the industry; 8) To provide guidelines for self-regulation among the industry 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ 10.4 Multimedia Super Corridor (UMSC’1-Malaysia Status MSC-Malaysia status is granted to companies operate under any of the three main clusters i.e. software and e-solutions, shared services and outsourcing, and creative multimedia. A company must meet five qualifying criteria to obtain MSC-Malaysia status i.e.: 1) Be a provider or heavy user of information technology and multimedia products and services; 2) Employ a substantial number of knowledge-workers; 3) Have a strong value proposition, specifying how its operations can contribute to the development of MSC-Malaysia and the country as a whole; 4) Establish a separate legal entity for its MSC-qualifying activities; and 5) Comply with the country’s environmental guidelines A MSC-Malaysia status company enjoys the 10 Bill of Guarantees, including:­1) World-class physical and information infrastructure; 2) Unrestricted employment of local and foreign knowledge-workers; 3) Freedom of ownership or no equity restriction; 4) Freedom to source for capital globally; 5) Competitive financial incentives, which include income tax exemption of up to 10 years or investment tax allowance and duty free imports of multimedia equipment; 6) Intellectual property protection; 7) Uncensored Internet; 8) Globally competitive telecommunications tariffs; 9) Ability to tender for MSC-Malaysia infrastructure contracts if use MSC-Malaysia as the company’s regional hub; and 10) Has the support of Multimedia Development Corporation as an effective one-stop agency 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ 11.0 Prospects and Outlook of the Mobile Content and Solutions Market in Malaysia The mobile content and solutions market in Malaysia was valued at RM4.18 billion in 2014. Figure 12: Forecast Market Size (Revenue) of the Mobile Content and Solutions Market in Malaysia, 2015-2019 7.00 6.00 ….. ~ 5.00 :6 ~ 4.00 Ill::…… g: 3.00 c CII ~ 2.00 1.00 0.00 2018 2019

Source: Protege Associates The positive outlook on the demand for mobile content and solutions in Malaysia stems mainly from the increasing cellular telephone subscription and penetration rate, replacement of physical functions with virtual possibilities and the growing usage of mobile content and solutions. As at end of the third quarter of 2014, total number of cellular telephone subscriptions stood at 43.7 million and this is expected to continue increasing in the near future. In addition, the rise of the Internet era has led to the growing penetration in mobile shopping and banking which has spurred the need for rich mobile content and solution services. This trend is also expected to continue into the near future as well. However, the emergence of data mobile applications or content may dampen the growth of the mobile content and solutions market. On the supply side, the industry is expected to be boosted by further collaboration with MNOs and the government’s support towards E-payment. In terms of the market as a whole, Protege Associates expects the mobile content and solutions market in Malaysia to grow at a steady pace. While there are issues such as the emergence of data or bandwidth-intensive mobile applications and downward pressure on profit sharing among market players that may hamper growth, government support and the rapid development in the industry indicate positive expansion in the short to medium term. 103 25 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
,t· [ The market is projected to continue growing for the 2014-2019 period at a CAGR of 8.4 percent. The market size (revenue) is expected to reach RM6.29 billion in 2019. Protege Associates has prepared this report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of the information. We believe that this overview presents a true and fair view of the industry within the boundaries and limitations of secondary statistics, primary research and continued industry movements. Our research has been conducted to present a view of the overall industry and may not necessarily reflect the performance of individual companies in this industry. We are not responsible for the decisions and/ or actions of the readers of this write-up. This write-up should also not be considered as a recommendation to buy or not to buy the shares of any company or companies. Thank you. Yours sincerely,
SEOW CHEOW SENG Managing Director Protege Associates Sdn. Bhd.

 

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