Why are video services key in the newly consolidated mobile market of Taiwan?

Over the past decade, Taiwan’s mobile telephony market has been highly competitive, with five distinct operators: Chunghwa Telecom (the market leader), Far EasTone, Taiwan Mobile, T-Star, and Asia Pacific Telecom (APT). However, in 2022, Taiwan’s mobile market has seen a wave of consolidation: by the end of the year, Taiwan Mobile and Far EasTone will have acquired T-Star and APT, respectively. As a result, the mobile market in Taiwan looks set to be split fairly evenly across the three remaining operators, according to Ampere Analysis.

As challenger operators, T-star and APT have primarily competed on price. Their aggressive race-to-the-bottom pricing strategy has impacted the big three operators, leading to an overall drop of their prices too: Chunghwa Telecom, as a result, saw its mobile ARPU drop from US$21 in 2017 to less than US$15 in 2021. Other subscription benefits and perks such as unlimited data packages or bundled video services have also become commonplace in Taiwan, further squeezing the financials of mobile operators.

However, the removal of a cheaper competitor was not the only reason for this M&A activity. By acquiring the smaller operators, Taiwan Mobile especially will gain access to a larger portion of the mobile spectrum bands, allowing it to provide faster speeds for data-consuming applications such as video streaming. Indeed, the provision of video services has become increasingly important not just to consumers in Taiwan, but by extension to mobile operators and the video services themselves.

All big three mobile operators in Taiwan have established their own subscription OTT services: Taiwan Mobile with market leader myVideo; Chunghwa with Hami Video; and Far EasTone with FriDay. The three operators have also been actively bundling their on-demand video services with their mobile, IPTV and broadband services as their main tactic for attracting and retaining customers. However, at the same time, they have also been building partnerships with international OTT services by becoming their exclusive distributor in Taiwan and bundling them with their multiple business lines. For example, Chunghwa Telecom has partnered with Netflix, while Taiwan Mobile has forged deals with Disney+ to enable carrier billing and offer a favorable price.

“It seems the Taiwanese operators are not aiming to build their own platform as the exclusive destination of video consumption but are looking to promote both their own and international OTT services to appeal to the widest possible audience. Therefore, the recent merger will create a much more expanded customer base for Taiwan Mobile to leverage and capitalize on. However, in this updated round of competition, Far EasTone faces a bigger challenge than its two main rivals, because of its lack of partnerships with international players. As Taiwanese mobile consumers’ appetite for video services continues to grow, access to online video has become a necessity, not a bonus. Operators must therefore continue to develop partnerships with those services to remain competitive in the long term,”  observed Orina Zhao, Senior Analyst at Ampere Analysis and the author of the report.