1

Telecoms

regulatory

developments

in the region

TELECOMMUNICATIONS, MEDIA & TECHNOLOGY

Dr Martyn Taylor Partner martyn.taylor@nortonrose.com

June 2012

2

Overview

Dr Martyn Taylor Partner +61 2 9330 8056 martyn.taylor@nortonrose.com

1. Analyst predictions

2. Regulatory developments in Asia

3. Regulatory developments in Australasia

4. Regulatory developments in Middle East

5. Regulatory risk profiles

3

Analyst

predictions

TELECOMMUNICATIONS, MEDIA & TECHNOLOGY

4

Mobile telecom networks in 2012 and 2013

1. 3G now has >50% global penetration. 4G LTE is the growth focus

for advanced economies. 2G network closures will be considered.

2. 4G mobile spectrum will dominate most regulatory agendas,

including ‘digital dividend’ spectrum. MVNOs will be recognised

as a more politically expedient way to liberalise telecom markets.

3. Tower sale and leaseback deals may unlock value from passive

infrastructure in order to fund CAPEX for 4G spectrum and LTE.

4. Smart phones and tablets will continue to accelerate mobile data

usage. Mobile internet traffic is becoming an increasing

proportion of all global Internet traffic, currently at 10%.

5. Mobile payment systems, machine to machine (M2M), and near

field communications (NFC) are key areas of potential innovation.

6. Mobile advertising is in need of innovation. Mobiles account for

10% of media consumption, but only 1% of advertising spend.

5

Fixed telecom networks in 2012 and 2013

1. One third of the world’s population are now on the Internet.

Developing economies have >100% growth in Internet access.

2. NGN rollouts will dominate national policy agendas as nations

seek to achieve ubiquitous broadband Internet access.

3. NGN rollouts will provide an opportunity to revisit many

regulatory policy settings, including to recognise convergence.

4. TDM traffic will continue to be substituted for VoIP as

broadband penetration increases and OTT applications such as

Skype increase in popularity in the mass market.

5. Traditional distinctions between platforms will continue to be

removed via a shift to generic Internet access and ‘IP

everywhere’. Mobile and fixed are becoming substitutable.

6. Smartphones and tablets will drive fixed data traffic growth via

the use of home WiFi as a cheaper alternative to cellular data.

6

Importance of broadband deployments

• ‘Digital divide’ once measured as differences in communications access

is now measured in terms of differences in the quality of access.

• Slow download speeds result in lost opportunities. A 10% increase in

broadband penetration in developing nations increases GDP by 1.4%.

• Broadband is an enabling ICT platform that can influence entire economy:

• Improves variety, utility, value of services/applications offered by

providers, to benefit users, society, multiple sectors of economy.

• Positive externalities of that can spillover into economic growth.

• Human Rights Council of the UN General Assembly has declared access

to the Internet a basic human right which enables individuals to exercise

their right to freedom of opinion and expression.

• The Internet is a cross-border resource for aggregate human knowledge

that far surpasses any individual library. Broadband Internet access is the

key that unlocks this knowledge in today’s information society.

7

Government policy objectives

• A common policy objective is universal broadband Internet access

• Advanced nations: ‘superfast broadband’ speeds > 24 Mbit/s.

• Developing world: ‘basic broadband’ speeds up to 2 Mbit/s.

• Best illustrated by United Nations “Call to Action” for the Rio+20

sustainable development summit later this month:

• UN has called on all Governments to promote universal

broadband access, including policies to expand access to health

and education through broadband.

• UN has stated that its aim is to ensure that at least 50% of the

developing world’s population and 40% of households have

access to broadband Internet by 2015.

• UN has called for the private sector to contribute to this goal by

developing innovative business models that increase broadband

penetration, particularly in developing countries.

8

Speeds required for different applications

500kbit/s to 1Mbit/s

VoIP

SMS

Basic e-mail

Simple web browsing

Low-quality video

Basic social networking

Small file sharing

Music downloads

Basic smartphone content

1 to 5 Mbit/s

Complex web browsing

Email with attachments

Remote surveillance

IPTV SD (1-3 channels)

Simple telecommuting

Digital broadcast (1 ch)

Streaming music

Advanced social networking

Medium file-sharing

Video download SD

Low quality gaming

Simultaneous devices

5 to 10 Mbit/s

Complex telecommuting

Large file-sharing

IPTV SD (many channels)

Switched digital video

Video on demand SD

Broadcast video SD

Video streaming (2-3 ch)

Video download HD

Low-quality telepresence

Gaming

Basic medical file sharing

Basic remote diagnosis

Remote education

Building management

10 to 100Mbit/s

Telemedicine

Educational services

Broadcast video SD/HD

IPTV HD

Complex gaming

Complex telecommuting

Complex telepresence

Surveillance HD

Intelligent buildings

100Mbit/s to 1 Gbit/s

Telemedicine HD

Multiple educational

Broadcast video full HD

Full IPTV channel support

Video on demand HD

Gaming (immersion)

Full telecommuting

Video download (Blu-Ray)

1 to 10 Gbit/s

Research applications

HD telepresence

Digital cinema streaming

Complex telemedicine

Scientific remote control

Virtual reality

Terabyte file sharing

Remote supercomputing

3D HDTV channels

BASIC BROADBAND HIGH SPEED BROADBAND SUPERFAST BROADBAND

9

A future world defined by IP addresses…

10

Regulatory

developments

in Asia

TELECOMMUNICATIONS, MEDIA & TECHNOLOGY

11

0

200

400

600

800

1000

1200

1400

Ch

ina

India

Indon

esia

Pakis

tan

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lad

esh

Japa

n

Phili

ppin

es

Vie

tnam

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South

Kore

a

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r

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laysia

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Population (millions)

What are the key Asian jurisdictions ?

0

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400

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India

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mbo

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os

Sri L

anka

Population without mobiles

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Ch

ina

India

Japa

n

South

Kore

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esia

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alia

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Aggregate income (USD billions)

$0

$20,000

$40,000

$60,000

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gapo

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alia

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a

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laysia

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iland

Ch

ina

Indon

esia

Individual income (GDP per capita)

12

Many jurisdictions rely heavily on wireless networks

0%

20%

40%

60%

80%

100%

120%

140%

Mobile penetration(by population)

Fixed penetration(by household)

Jurisdictions that do not

yet have 100% fixed

network penetration by

household…

Very heavy reliance on

wireless telecoms

13

Singapore Low regulatory

risk

1. Singapore has a population of just over 5 million, which is a small market

by Asian standards. However, it has the greatest income per capita.

2. The World Economic Forum has described Singapore as ‘Asia’s most

connected country’, noting it leads the Asian region in ICT development.

3. The Government actively promotes the ICT sector and has a 10 year ICT

Master Plan, labelled the ‘Intelligent Nation 2015’ (iN2015) which is

administered by the Infocommunications Development Authority (iDA).

4. To give effect to iN2015, the Government allocated SGD 1 billion funding

for the deployment of the Singapore Next Generation Network (NGN).

The NGN is unique in the world in promoting four layers of structural

separation: ducts/exchanges, dark fibre, operation, retail.

5. Singapore’s mobile phone penetration is 150% by population. Around

75% of subscribers receive 3G services. 100% of Singapore households

have access to fixed broadband access of some kind.

SIN

GT

EL

46%

28%

26%

ST

AR

HU

B

M1

Mobile market

shares 2012

150% MOBILE

PENETRATION

(POPULATION)

100% FIXED

PENETRATION

(HOUSEHOLD)

14

1. NGN: iDA intervened in the Singapore Next Generation Network (NGN) regulatory framework to

address concerns regarding operational delays in connecting customers and resolving faults:

• iDA conducted a review of OpenNet’s Interconnection Offer and directed a number of operational

refinements. The acceptability of those changes is currently awaiting final iDA approval.

• Further regulatory instruments to give effect to the NGN have also been approved, including CityNet’s

reference access offer for access to lead-in ducts.

2. Spectrum: iDA is undertaking consultation on the refarming of spectrum for 4G mobile,

including the potential closure of 2G networks, the reservation of some 2.5GHz spectrum for a

fourth mobile operator, and the auction of 1800MHz, 2.3GHz and 2.5GHz spectrum.

3. Competition: iDA issued a 2012 version of the Telecoms Competition Code, now including an

amended version of Chapter 10 which regulates M&A in the Singapore telecoms sector.

4. Data protection: The Government undertook a third round of public consultation on the

proposed new data protection regime in April 2012. The Personal Data Protection Bill is planned

to be tabled to Parliament in the third quarter of 2012 and will regulate the collection, security

and privacy of personal data as well as introducing a ‘Do Not Call’ register.

Singapore – recent developments

15

1. At 240 million people, Indonesia is the third largest market in Asia behind

China and India. It also ranks fifth in aggregate income but 11th in

individual income per capita.

2. Indonesia faces difficult challenges in building telecoms infrastructure

over a complex geography. Around 80% of fixed network customers are

served by fixed wireless.

3. Indonesia’s mobile market passed 260 million subscribers in early 2012

with penetration at 107%.

4. Internet access has been historically restricted by the limited availability

of copper wireline infrastructure for DSL. While mobile and wireless

broadband is overcoming this access bottleneck, Internet penetration still

remains low at only 10% of the population

5. Telekomsel dominates the mobiles market with a 51% market share.

Indonesia Moderate to high

regulatory risk

TE

LK

OM

SE

L

51%

23%

21%

6%

IND

OS

AT

XL

AX

IAT

A

OT

HE

R

Mobile market

shares 2012

127% MOBILE

PENETRATION

(POPULATION)

66% FIXED

PENETRATION

(HOUSEHOLD)

16

1. SMS interconnection: Indonesia announced in May 2012 that its existing ‘sender keeps all’

regime for SMS messages would be replaced by an SMS terminating access payment model.

2. Convergence: The Ministry of Communications and IT (MCI) is drafting legislation to achieve

convergence of telecommunications, broadcasting and the Internet.

3. New spectrum: MCI is considering releasing a further 10MHz of 2.1GHz spectrum and some

2.3GHz spectrum to support 3G services and broadband wireless. There are also proposals to

accelerate the switchover to digital television in order to re-farm the 700MHz spectrum.

4. Content: Indonesia is considering reforms to its laws relating to the regulation and censorship

of content and reforms to its cross-ownership rules in relation to broadcasting assets.

5. NGN: The Government has continued to promote major telecoms infrastructure development: • The ‘Palapa Ring’ project will connect Eastern Indonesia regions with the remainder of Indonesia.

• Telekomunikasi Indonesia will invest $233 million to build a national broadband network, known as

“True Broadband” that will cover 497 cities and 13 million homes by the end of 2015.

6. VoIP and IPTV: Indonesia has commenced formally licensing VoIP and IPTV services.

Indonesia – recent developments

17

1. Malaysia has a population of 28 million and some of the most advanced

telecommunications infrastructure in the developing world.

2. Malaysia is mobiles-focussed but is focussed on deploying fixed network

infrastructure. Around 43% of households in Malaysia are currently

connected to fixed network infrastructure.

3. Malaysia’s ‘Vision 2020” aims to see it described as a developed nation

by 2020. Telecommunications is an important part of Malaysia’s plan.

4. Mobile penetration is one of the highest in Asia at 134% of the population

with 37 million subscribers in a competitive market. Malaysia is a heavy

user of SMS by world standards.

5. Growth in mobile broadband is currently rapid. Around one third of

mobile subscribers in Malaysia are currently on 3G, resulting in Malaysia

achieving its target of 55% household broadband penetration in 2011.

Moderate regulatory

risk Malaysia

134% MOBILE

PENETRATION

(POPULATION)

43% FIXED

PENETRATION

(HOUSEHOLD)

MA

XIS

40%

33%

25%

2%

CE

LC

OM

DIG

I

OT

HE

R

Mobile market

shares 2012

18

1. New spectrum: The Malaysian Communications and Multimedia Commission (MCMC)

intends to award 2.6GHz spectrum to nine companies to assist 4G rollout and the deployment

of wireless data technologies. The MCMC is also considering refarming 850/900/1800MHz

spectrum and 700MHz ‘digital dividend’ spectrum once switchover from analogue to digital

television occurs.

2. HSBB Network: Under the National Broadband Initiative, Telekom Malaysia has a public-

private partnership agreement with the Government to deploy a High-Speed Broadband

(HSBB) network. Deployment is well underway with the first subscribers connected from

2010. A regulatory holiday will be provided until 15 September 2015.

3. 4G sharing arrangements: The MCMC has commented that it expects to see further

rationalisation and co-operation in the Malaysian industry in order to reduce the costs of

deployment of 4G mobile infrastructure. Maxis and U Mobile entered into a 3G RAN sharing

deal in 2011. Celcom and Digi had also entered into an infrastructure sharing deal in 2010.

4. Competition law: The new Competition Act took effect from 1 January 2012, but does not

apply to any commercial activity regulated under the Communications and Multimedia Act.

Malaysia – recent developments

19

India

1. India is currently the fastest growing telecoms market in the world,

achieving a growth rate of 26% in 2011.

2. India is the world’s second largest telecoms market behind China. There

are around 903 million mobile users and 123 million Internet users.

3. Fixed line penetration remains at only 18% of the population. The state-

owned enterprises MTNL (serving Delhi, Mumbai) and BSNL (serving the

remainder of India) are the key fixed providers. Bureaucracy has

impeded fixed rollout initiatives.

4. Most of the growth rates and intense competition are occurring in mobiles.

The Indian mobiles market is divided into 23 geographic ‘circles’ along

state boundaries. Separate licences have been awarded for each circle.

5. At one point, some ‘circles’ had up to 13 licensed mobile operators.

However, intense price competition has resulted in industry consolidation.

High regulatory

risk

BH

AR

TI

20%

17%

VO

DA

FO

NE

RE

LIA

NC

E

OT

HE

R

Mobile market

shares 2012

BN

SL

IDE

A

TA

TA

17%

11%

11% 11%

13%

87% MOBILE

PENETRATION

(POPULATION)

18% FIXED

PENETRATION

(HOUSEHOLD)

20

1. Licensing: The 2G spectrum scandal involved allegations of favouritism in the awarding of 2G

licences. The Supreme Court of India revoked all 122 licences in February 2012 covering a third

of India’s 2G spectrum. A number of foreign companies that had entered into joint ventures with

local Indian companies were adversely affected. The spectrum is currently being re-auctioned.

Around USD 10 billion in existing 2G investment is at stake.

2. National Telecoms Policy 2012: India has adopted a new telecoms policy, partly to increase

transparency and provide a more predictable regulatory regime: • A single licence will be available that covers all India, rather than for a specific geographic circle.

• Spectrum licences will be unbundled from telecom licences and refarming of spectrum will be permitted.

• The use of a single licence will permit the removal of roaming charges between mobile circles and will

enable number portability for users moving between mobile circles.

• Use of spectrum will be liberalised, permitting any kind of services over any kind of technology platform.

• Rules restricting Internet telephony have been relaxed

• M&A restrictions will be liberalised.

3. Enforcement action: The TRA is currently taking significant enforcement action: • against various licence holders for not meeting rollout obligations.

• against 3G roaming agreements which are alleged to be depriving the Government of tax revenue

.

India – recent developments

21

Hong Kong SAR Low regulatory

risk

200% MOBILE

PENETRATION

(POPULATION)

100% FIXED

PENETRATION

(HOUSEHOLD)

CS

L

27% 26%

HU

TC

HIIS

ON

CH

INA

MO

B

Mobile market

shares 2012

SM

AR

TO

NE

PC

CW

21%

13% 13%

1. Hong Kong has a population of 7 million and the second highest per

capita incomes in Asia, behind Singapore.

2. Hong Kong is one of the world’s most competitive mobiles markets and

has the worlds highest mobile penetration at 200% of the population.

Tariffs are among the lowest worldwide for some of the highest speeds

3. Broadband networks reach 85% of Hong Kong households, assisted by

Hong Kong’s high population density. Fixed network penetration is at

100% of households.

4. While the mobile market is saturated, new technologies and innovation

are continuing to drive growth. Mobile data has ben achieving

exponential growth rates. 4G LTE networks are currently being deployed.

5. Operators are launching triple and quad-play service offerings to drive

average revenue per user (ARPU).

22

Hong Kong SAR – recent developments

1. New regulator: A new ‘Communications Authority’ was established on 1 April 2012 which

merged the Office of the Telecommunications Authority (OFTA) with the Broadcasting Division

of the Television and Entertainment Licensing Authority.

2. New competition law: A new Competition Ordinance was enacted on 15 June 2012. The

competition law applies to the telecommunications sector and will give the new competition

regulator concurrent jurisdiction with the Communications Authority in relation to

telecommunications matters. However, various transitional provisions currently apply.

3. Next Generation Networks: OFTA is currently investigating whether further regulatory

measures and reforms are required to address the deployment of Next Generation Networks: • PCCW is at least halfway through migrating its voice network to a Next Generation Network.

4. New spectrum: New spectrum is being released to meet market demand for new spectrum in

order to supply mobile data services: • 20MHz of spectrum in the 850MHz band was auctioned in March 2011.

• 90MHz of spectrum in the 2.3GHz band was auctioned in Feb 2012. Very high prices were paid.

• Further spectrum will be made available in the first quarter of 2013.

23

China High regulatory

risk

73% MOBILE

PENETRATION

(POPULATION)

70% FIXED

PENETRATION

(HOUSEHOLD)

CH

INA

MO

BIL

E

66%

21%

CH

INA

TE

LE

CO

M

CH

INA

UN

ICO

M

Mobile market

shares 2012

13%

1. China has the largest population in Asia at 1.35 billion and also has the

greatest aggregate wealth by a very substantial margin. The individual

wealth of Chinese consumers is comparable with Malaysia and Thailand.

2. Telecoms in China is dominated by the Government which owns more

than 50% of each of the three key telecoms operators. Each of these

operators are joint fixed and mobile operators

3. While mobile penetration has not yet reached the levels of other

economies at 73% of the population, growth rates are significant. China

is the first economy to have over a billion mobile subscribers.

4. 3G networks have been deployed and are winning substantial

subscribers, but 4G deployment has been delayed by developments in

the Chinese TD-SDMA standard.

5. Fixed network penetration is relatively high and is being accelerated by a

variety of Government infrastructure rollout programmes.

24

China – recent developments

1. Next Generation Network rollout: ‘Three Networks Integration Project’ is underway with the

objective of a consumer connecting to only one communications network for their television,

Internet and telephone needs:

• one aspect of the Project is the deployment of Next Generation Network capabilities to reach 300

million users and 200 million households within the next ten years

• the project is one of several measures recently undertaken to achieve greater convergence

2. Internet service providers: The Ministry of Industry and Information Technology (MIIT) has

recently promulgated several codes of conduct for Internet information service providers:

• Codes are directed at types of conduct that may harm end users, such as deception and interference

• MIIT has also been more proactive in taking enforcement action against inappropriate content

3. Deregulation of tariffs: MIIT is seeking to reduce the price of fixed broadband services in the

same manner as has occurred in relation to mobile services. Further deregulation of retail

tariffs is likely to occur.

4. Broadband speed improvements: MIIT is also intending to implement a broadband

connection speed improvement project.

.

25

China’s licensing grey areas

• Chinese regime has many ‘grey areas’: activities of indeterminate legality.

• Activities may be tolerated by MIIT until such time as they are the subject of

complaint, typically when the boundaries are pushed too far by foreign firms.

At that point, public action is taken to regulate the conduct.

• Recent example – voice over IP services in China (VoIP):

• Technically – all VoIP offered by entities other than the Chinese

operators is illegal. However, all VoIP has been tolerated to date.

• December 2010 – MIIT announces it will take enforcement action

against foreign VoIP operators in China, presumably following concerns

by Chinese telcos that Skype was depriving them of revenue.

• January 2011 – MIIT is less absolute and announces it is supportive of

VoIP, but not illegal VoIP. What is illegal VoIP is not clearly identified.

26

Thailand Moderate to high

regulatory risk

1. Thailand has a population of some 70 million and hence is ranked 9th in

market size in Asia. It is also ranked 11th by individual income.

2. Thailand is heavily mobiles-focussed. Fixed network penetration remains

low at only 35% of households. Further fixed deployment has stalled.

3. By contrast, Thailand’s mobile market has around 72 million subscribers with

penetration at around 105% by population.

4. Thailand has not yet deployed 3G mobile services due to delays to 3G

spectrum auctions. In turn, this has lead to poor network quality and an

absence of mobile broadband.

5. In 2010, the National Telecommunications Commission’s ability to hold 3G

spectrum auctions was successfully challenged. As a result, the National

Broadcasting and Telecommunications Commission (NBTC) was formed as

a combined broadcasting and telecoms regulator with the relevant powers.

6. The pace of reform of telecommunications in Thailand has been slow.

AIS

44%

30%

24%

2%

DT

AC

TR

UE

OT

HE

R

Mobile market

shares 2012

117% MOBILE

PENETRATION

(POPULATION)

35% FIXED

PENETRATION

(HOUSEHOLD)

27

1. 3G spectrum auctions: Thailand’s National Broadcasting & Telecommunications

Commission (NBTC) has released draft rules for new 3G spectrum auctions:

• The rules are less stringent and permit bidding by telcos with less reserve capital.

• NBTC will impose a maximum 3G tariffs.

• NBTC will divide the 2.1-GHz spectrum into nine slots, each containing 5 MHz.

• A 3G licence auction will be scheduled for the fourth quarter. The event will feature

simultaneous ascending-bid auctions.

• Each bidder will be permitted to obtain a maximum bandwidth of 20 MHz under a

bandwidth cap restriction.

2. CAT-True 3G marketing investigation: The NBTC has determined that a 3G marketing

partnership between state-owned CAT Telecom and private sector operator True Corp

violates the Frequency Allocation Act. CAT is the only current holder of 3G spectrum in

Thailand and has put its 3G expansion plans on hold.

3. Delays to 3G number portability: NBTC’s mobile number portability regulation will allow

mobile subscribers to retain their mobile numbers while switching networks. However, CAT is

raising concerns of subscriber overflow.

Thailand – recent developments

28

Philippines High regulatory

risk

1. At 96 million people, the Philippines is the 7th largest market in Asia.

However, the population is poor by global standards.

2. The Philippines is heavily mobiles-focussed. Notwithstanding policies to

promote fixed network rollout, only around 17% of households are

currently served by fixed telephony services.

3. A historic problem preventing fixed network rollout was under-utilisation

of existing fixed network assets with only 50% utilisation rates.

4. Mobile penetration is around 107% of the population with 98 million

subscribers, but Internet access remains lower at around 20% of the

population. The Philippines is a heavy user of SMS and is a global

leader in SMS volumes.

5. Growth in mobile broadband is occurring, driven by smartphones and

social networking. The Philippines has 3G networks and is progressively

rolling out 4G (both mobile and broadband wireless).

PL

DT

68%

32%

GL

OB

E

OT

HE

R

>1%

Mobile market

shares 2012

107% MOBILE

PENETRATION

(POPULATION)

17% FIXED

PENETRATION

(HOUSEHOLD)

29

1. PLDT-Digitel: The National Telecommunications Commission (NTC) approved the merger

of PLDT and Digitel with the merger subsequently implemented in October 2011:

• The merger has left PLDT with a 68% market share in Philippine mobiles.

• The Philippines does not have merger rules, but Government approval was required.

2. 3G spectrum: A condition of the merger between PLDT and Digitel, was that PLDT would

return of 10MHz of 2.1GHz 3G spectrum to allow further market entry:

• The spectrum is due to be auctioned following its return in July 2012.

• Four 3G licences were awarded in 2005, but significant consolidation has

subsequently occurred, including the PLDT-Digitel merger.

3. New wireless entrants: NTC has approved licence applications by Multi-Lane and BellTel

to supply wireless broadband and local loop services in various locations. The NTC is

intending to introduce further competition following the PLDT and Digitel merger.

4. 4G rollout: Globe has deployed 4G LTE in Manilla City and is undertaking a broader

rollout. Previously, 4G services had been limited to broadband wireless.

Philippines – recent developments

30

Bangladesh Moderate to high

regulatory risk

1. At 142 million people, Bangladesh is the fifth largest market in Asia.

However, it is also one of the poorest, most densely populated, least

developed countries in the world.

2. Bangladesh has some of the most underdeveloped fixed telecoms

infrastructure in the world. Fixed line penetration remains at less than

4% of households and halved in 2010 when the regulator took action to

shut down 5 illegal VoIP operators.

3. However, Bangladesh does have a competitive mobiles market and is

heavily reliant on mobiles. Bangladesh’s mobile market has over 90

million subscribers with a penetration over 63% of the population.

4. Broadband internet remains almost non-existent in Bangladesh.

Broadband Internet penetration is in the order of 0.5% of the population.

5. The mobiles market in Bangladesh has 6 operators and is dominated by

Grameenphone with a 44% market share. Only 2G is supplied.

63% MOBILE

PENETRATION

(POPULATION)

4% FIXED

PENETRATION

(HOUSEHOLD)

GR

AM

EE

N

42%

27%

20%

7%

OR

AS

CO

M

RO

BI

AIR

TE

L

Mobile market

shares 2012

OT

HE

R

4%

31

1. 3G spectrum licences: The BRTC is proposing to award four 2100MHz licences (10MHz

each) for 3G/4G services:

• One will go to state-owned operator Teletalk, two will go to other existing mobile

operators, and the last one will be reserved for a new entrant.

• Spectrum auctions are due to occur in September this year.

• 3G licence holders would be able to upgrade their licences to 4G at no extra charge.

• The BTRC is proposing a fee USD 18 million for every megahertz of bandwidth, with an

auction floor price of USD 180 million.

• The BRTC has permitted Teletalk to trial 3G services for a 6 month period from July.

2. VoIP licences and issues: BTRC sent a draft guideline to the telecom ministry for issuing

licences to VoIP service providers, but a dispute within Government is delaying any licensing.

3. VoIP enforcement: BRTC has threatened to impose fines on any mobile operators supplying

VoIP services over mobile phones. A key concern has been the use of VoIP services by

foreign carriers to avoid payment of termination fees for inbound calls, an important source of

revenue. An estimated 20% of traffic terminated illegally using VoIP.

Bangladesh – recent developments

32

1. Most Asian jurisdictions are heavily focussed on mobiles-based competition, particularly

many of the developing economies with low fixed network penetration.

2. Many mobile markets have reached saturation with mobile penetration greater than the

number of users. In such circumstances, growth is still being achieved by the rapid

growth in mobile data, handset innovation and new technologies such as 4G.

3. Mobile spectrum is increasingly viewed as a scare resource, driving up auction prices and

leading to novel solutions (such as industry consolidation and spectrum sharing). Many

nations are seeking to release more spectrum, including by refarming existing spectrum.

4. A number of Asian jurisdictions are deploying Next Generation Networks (NGN) or have

programmes and incentives in place to encourage greater fixed network deployment.

5. A number of Asian jurisdictions are recognising the need for regulatory convergence,

particularly in relation to broadcasting and Internet technologies. As part of this trend,

difficult issues of Internet content regulation and VoIP technologies are being considered.

Summary of developments in Asia

33

Regulatory

developments

in Australasia

TELECOMMUNICATIONS, MEDIA & TECHNOLOGY

34

Australia Low regulatory

risk

126% MOBILE

PENETRATION

(POPULATION)

98% FIXED

PENETRATION

(HOUSEHOLD)

TE

LS

TR

A

45%

32%

23%

OP

TU

S

VO

DA

FO

NE

Mobile market

shares 2012

1. At 24 million, Australia has a modest population by Asian standards but

has the 6th highest aggregate income in Asia and the third highest

individual income, assisted by Australia’s substantial mineral resources.

2. Telecoms has traditionally been dominated by Telstra with a roughly 42%

share of all telecoms services, but current reforms will see a form of

structural separation occur. Telstra will close its fixed network and migrate

its fixed customers to the National Broadband Network.

3. Mobiles currently accounts for more than 50% of revenue in Australian

telecoms. Recent consolidation saw the merger of Vodafone and

Hutchison, leaving three key network operators.

4. Telstra currently has the only 4G LTE network. Optus and Hutchison are

currently in a joint venture to share mobile sites and improve coverage.

5. The National Broadband Network will result in broadband access being

deployed throughout Australia. 92% of the population will receive

broadband fibre. The remaining 8% will receive fixed wireless or satellite.

35

1. Next Generation Network: The National Broadband Network (NBN) is dominating issues:

• NBN Co will be a wholesale-only, open-access, state-owned, FTTH local access monopoly

• principal benefit is delivering superfast broadband to rural Australia, but at a high cost (USD 38 billion)

• network will cross-subsidise from metro to rural to achieve a uniform national price for basic access

2. Structural separation of Telstra: Telstra will migrate its fixed customers to the NBN over a

period of 8 years in return for migration payments: a form of structural separation:

• migration will ultimately be forced, but end users have around 18 months to voluntarily migrate

• regulatory impediments will exist to deter superfast fixed network build by NBN competitors

• regulation is heavily reliant on regulatory undertakings to the ACCC: a new regulatory paradigm

3. Content regulation: The Government is currently considering plans to reform the regulation of

broadcasting and content in Australia under a streamlined regulatory framework.

4. Mobile spectrum: The digital dividend 700MHz spectrum is due for auction next year.

Spectrum renewal fees for existing spectrum licences have been higher than expected, hence

Australia is considering implementing different models for spectrum licensing fees.

Australia – recent developments

36

New Zealand Low regulatory

risk

132% MOBILE

PENETRATION

(POPULATION)

100% FIXED

PENETRATION

(HOUSEHOLD)

VO

DA

FO

NE

48%

38%

14%

TC

NZ

2 D

EG

RE

ES

Mobile market

shares 2012 1. At 4 million, New Zealand has one of the smallest populations in Asia, but

has the seventh highest individual income.

2. The telecoms market one of the first in the world to be liberalised, but

historically suffered from an absence of Government intervention to

restrain the market power of the Telecom New Zealand.

3. Telecoms reforms from 2001 created a new framework formarket access

and competition. In 2011, Telecom New Zealand voluntarily demerged to

create Chorus as the structurally separated network business.

4. The New Zealand mobiles market was historically a duopoly. A new

mobile operator, 2degrees, was launched in 2010 and has been rapidly

gaining market share while creating significant price-based competition.

5. Mobile penetration rates are among the highest in Asia at 132% of the

population. Fixed network penetration is at 100%. A rollout by Chorus of

ultra-fast broadband will further increase broadband penetration.

37

1. Next Generation Network: The Ultra-Fast Broadband Network (UFB) and Rural

Broadband Initiative (RBI) have been dominating recent developments:

• UFB involves Government subsidy for deployment of FTTH to urban areas in New Zealand

• RBI involves Government subsidy for broadband deployment to rural areas in New Zealand

• Telecom NZ is rolling out most of the FTTH infrastructure, but some local fibre companies involved

• reforms are currently occurring to streamline USO levies

2. Structural separation: Telecom NZ structurally separated (via a voluntary demerger) in

order to win the UFB rights:

• Chorus is the network access entity and will deploy FTTH. It will also own legacy copper access.

• Telecom NZ will continue to own mobile networks but will be a fixed network retailer.

3. Content regulation: New Zealand Commerce Commission is currently undertaking

extensive public consultation to identify issues that may impede the uptake of broadband.

4. Spectrum: Digital dividend 700MHz spectrum is due for auction and will provide the basis

for LTE 4G deployments and wireless broadband deployments.

New Zealand – recent developments

38

1. Both Australia and New Zealand are rolling out fibre-to-the-home network infrastructure in

urban areas and mobile wireless in rural areas. However, significant differences exist in

relation to the extent of fibre rollout and the level of Government funding.

2. Structural separation of the incumbent fixed network owner is occurring in both

jurisdictions on a voluntary basis. While New Zealand has achieved this immediately via a

demerger of Telecom NZ, Australia will take 8 years to achieve this via a network

migration of end users from Telstra to NBN Co.

3. Further regulatory reforms are likely to occur in both jurisdictions to promote broadband

uptake. New Zealand is currently identifying impediments to uptake. Australia is seeking

to remove regulatory impediments by converging the regulation of digital media.

4. The NGN rollouts are providing an opportunity for both jurisdictions to refine and reform

some of the key historic regulatory settings applied to the telecommunications industry.

5. Digital dividend 700MHz spectrum will shortly become available and provide a basis for

further mobile competition in both jurisdictions. Mobile networks are being upgraded.

Summary of developments in Australasia

39

Regulatory

developments

in the Middle

East

TELECOMMUNICATIONS, MEDIA & TECHNOLOGY

40

1. Bahrain is ranked as the 12th most liberalised economy in the world,

reflecting its desire to attract international investment to achieve its

Economic Vision 2030.

2. Pursuant to its National Economic Strategy, Bahrain was one of the first

Gulf States to liberalise its telecoms market. While Bahrain has the

smallest telecoms market in the Middle East by population, its market is

now one of the most competitive.

3. Batelco is the incumbent operator in Bahrain and is subject to substantial

regulation based principally on dominance designations.

4. The Telecommunications Regulatory Authority of Bahrain takes a proactive

and strict approach to enforcement of that regulation, informed by

competition policy concerns.

5. The TRA often leads regulatory trends in the Gulf and recently won an

award as the most progressive regulator in South Asia, the Middle East,

and North Africa

.

. .

Bahrain Moderate to low

regulatory risk

41

Bahrain – recent developments

1. Bahrain is currently finalising its third Telecommunications (five year) Plan. • The Plan has been prepared and is currently awaiting Ministerial sign-off.

2. The Bahrain Electricity & Water Authority is deploying a fibre network, but deployment is not as

advanced as other Gulf States. Bahrain has instead favoured local loop unbundling of

Batelco’s legacy copper access network as an immediate means to promote competition.

3. Bahrain recently implemented both fixed and mobile number portability, being the first country in

the Middle East and North African to achieve this.

4. Bahrain has recently implemented detailed Consumer Protection Guidelines which are

unprecedented in the Gulf.

5. The TRA has recently undertaken one of the first complex competition investigations in the Gulf

in the context of an alleged vertical price squeeze…

42

Qatar

1. Qatar has the world's highest per capita GDP and is one of the world’s

fastest growing economies. During 2011, Qatar’s telecoms markets

experienced significant growth, driven by expansion of access to

broadband services and by increasing mobile subscriber penetration.

2. Around two thirds of telecoms services in Qatar are now mobile-based.

3. Qatar’s telecoms sector is not yet fully liberalised, but is still heavily

regulated. ictQATAR is the independent industry regulator in Qatar.

4. Qtel is the incumbent fixed and mobile network operator. The second

licensee, Vodafone Qatar, operates competing mobile infrastructure with

a fixed network deployment underway.

5. ictQatar has indicated it will consider licensing a third fixed operator

during 2012 and may also consider whether a third mobile operator is

required.

Moderate to low

regulatory risk

43

Qatar – recent developments

1. The Qatar National Broadband Network (QNBN) is currently being deployed using FTTH on a

fibre infill basis to supplement fibre rollouts by Qtel as incumbent. QNBN is state-owned. • QNBN will operate under a wholesale-only, open access model.

• QNBN will supply wholesale bitstream to the other fixed network licensees, Qtel and Vodafone Qatar.

2. Mobile number portability will shortly be launched in Qatar. ictQATAR as industry regulator will

then investigate fixed number portability.

3. As with Bahrain, Qatar has focussed on enhancing consumer protection: • A new consumer affairs department has been created within ictQATAR with call centre.

4. Qatar recently reviewed is historic market definition and dominance designations, but made no

material changes. This is not surprising given Qatar’s markets are not yet fully liberalised.

5. During 2011, Qtel was required to cease using the ‘Virgin Mobile’ brand as Vodafone Qatar

alleged that this mislead consumers into believing there was a third mobile operator.

44

1. The UAE is currently ranked as the 14th best nation in the world for doing

business, based on its economy and regulatory environment. The UAE has

relatively mature telecommunications markets serving business centres in

Abu Dhabi and Dubai that act as a hub for the Middle East region and

surrounding nations.

2. The UAE telecoms sector is not yet fully liberalised, but is heavily

regulated. The Telecommunications Regulatory Authority of the UAE is the

independent industry regulator.

3. Etisalat is the incumbent fixed and mobile operator. Etisalat provides fixed

access in most areas of the UAE and operates a 4G LTE mobile network.

4. The second licensee, Du, operates a rival 3.75G HSPA+ mobile network

and owns significant fixed infrastructure in the ‘free zones’ and new housing

estates of Dubai.

5. A number of satellite providers have also been licensed to provide services.

United Arab Emirates Moderate to low

regulatory risk

45

UAE – recent developments

1. The UAE will shortly become one of the first countries in the world to achieve full fibre coverage:

• Du deployed fibre in new estates in Dubai.

• Etisalat will shortly complete its upgrade from copper to fibre for the remainder of the UAE.

• As there is no need for a National Broadband Network in the UAE, the TRA has instead required

Etisalat and Du to provide each other with wholesale bitstream access.

2. Delays have occurred in implementing mobile number portability (MNP) in the UAE.

• Once MNP is implemented, the UAE will move to implement fixed number portability.

3. The Telecommunications Regulatory Authority (TRA) of the UAE is currently implementing

enhanced economic regulation and is in the process of issuing regulatory adjustments.

4. The TRA is currently undertaking public consultation on draft consumer protection regulations.

5. In 2010, the TRA threatened to suspend Blackberry services in the UAE until Research in

Motion complied with interception requirements.

46

1. Bahrain, Qatar and the UAE are each deploying fibre, but under different rollout models.

The UAE should achieve ubiquitous fibre deployment by early 2012. Bahrain and Qatar

will reach an advanced state of deployment by the end of 2012.

2. Fixed market competition will occur in each jurisdiction via wholesale bitstream access.

Given Bahrain’s more advanced state of market deregulation, it has also sought to achieve

immediate broadband competition via copper local loop unbundling.

3. Each of the Gulf States are implementing fixed and mobile number portability.

4. Economic regulation remains at different stages of evolution in the different markets. The

UAE will continue to implement regulation. Qatar and Bahrain will continue to refine its

application. Bahrain will also continue to assess whether selective rollback is required.

5. Each jurisdiction is focussing on consumer protection to a higher degree.

Summary of developments in the Middle East

47

Regulatory

risk profiles

TELECOMMUNICATIONS, MEDIA & TECHNOLOGY

48

Level of regulatory risk

New Zealand

Hong Kong

Australia

Singapore

Japan

Qatar

UAE

Bahrain Malaysia Thailand

Indonesia

Vietnam

India

China

Philippines

Bangladesh

All of the following:

• Rules are clearly defined

• Well resourced regulatory agencies

• Low risk of policy reversals

• Decisions are predictable

Any of the following:

• Rules are not clearly defined

• Less resourced regulatory agencies

• High risk of policy reversals

• Decisions can be unpredictable

LOW REGULATORY RISK HIGH REGULATORY RISK

49

Regulatory risk is factored into commercial risk

SEC filing by ChinaCache - the leading CDN operator in China…

“As of the date of this prospectus, there is no legal definition as to what constitutes a "content

and application delivery business," nor are there laws or regulations in China specifically

governing the content and application delivery business.

We cannot assure you that PRC governmental authorities will continue to deem our content

and application delivery business and any of our newly developed technologies, network and

services used in our business as a type of value-added telecommunications business

covered under the VAT license of Beijing Blue I.T.

As we expand our networks across China, it is also possible that the MIIT, in the future, may

deem our operations to have exceeded the terms of our existing license. Further, we cannot

assure you that Beijing Blue I.T. will be able to successfully renew its VAT license upon its

expiration, or that its VAT license will continue to cover all aspects of our content and

application delivery business and operations upon its renewal.

In addition, new laws, regulations or government interpretations may also be promulgated

from time to time to regulate the content and application delivery business or any of our

related technology or services, which may require us to obtain additional, or expand existing,

operating licenses or permits.

Any of these factors could result in Beijing Blue I.T. being disqualified from carrying out its

current business, causing significant disruption to our business operations which may

materially and adversely affect our business, financial condition and results of operation.”

50

Disclaimer

The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Norton Rose LLP, Norton

Rose Australia or Norton Rose OR LLP on the points of law discussed. No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of

Norton Rose Group (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to

a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose OR LLP

or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.