Metaverse in Asia: telecom operators step up investments

Last week, SK Telecom (SKT) and NTT Docomo, the leading mobile operators respectively in South Korea and Japan, signed a Memorandum of Understanding to team up on several aspects of their respective businesses, most notably on metaverse-related developments. Their collaboration could go as far as merging their two metaverses in the future (Ifland for SKT and XR World for NTT Docomo), whether industry, company, or recreational-oriented. An essential part of Web3 along with blockchain, NFTs and cryptocurrencies, metaverse has been a highly debated topic for over a year. Whether a buzzword or not, tech giants are pouring tremendous amounts of money into it, spearheaded by Meta, whose $3 billion investment in Q1 2022 hasn’t borne fruit yet. Although such investments are not surprising coming from tech giants or companies operating in the gaming and the entertainment industry such as Bandai Namco (Pac-Man franchise holder, Shônen Jump license rights holder), which unveiled its Gundam metaverse project in March this year, one may wonder what role telecommunications operators are to play in this field, as they are increasingly investing and partnering with each other to enter this business. The growth observed in East Asian telecom operators’ revenues has been decreasing in recent years following the rise of competition and progressive market saturation.. Through bundling their connectivity services with content offers, they have sought to grow ARPU, engagement and to tighten direct link to customers while driving churn rates down. Therefore, opportunities to take part in the metaverse can be seen as a natural continuation of their involvement in video services provision and positioning as gateways for content. Since East Asian markets spearhead the mobile networks’ upgrade to 5G, metaverse related initiatives there may pave the path for operators globally. So far, estimates of its future market size have been quite uncertain, but too huge to be ignored. Telecommunications operators cannot remain indifferent to forecasts amounting to $8 trillion for the sole Chinese virtual market (Morgan Stanley), or $13 trillion for the global metaverse market, gathering 5 billion users in 2030 (Citibank). Consequently, they are incentivized to invest even without a clear position in the value chain, simply to avoid being excluded from it by tech giants. So far, connectivity and content aggregation have been the key areas of focus for them, being the closer realms to their core business. Against this backdrop, initiatives proliferate, notably thanks to proactive authorities and a favorable macroeconomic environment. In China, where the digital RMB has been the strategic contender to US dollar hegemony, the metaverse is a potential major gateway to extend its use to other countries, even more since the government banned private cryptocurrencies in 2021. As Chinese consumers widely use digital payment and are...