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Optimism seen for operators of 3G networks

HIGH-TECH PHONES: A lack of handsets and compelling content have put many off 3G services, but that will all change this year, an insider says
By Lisa Wang
STAFF REPORTER
Thursday, Mar 11, 2004,Page 10
Many telecommunication operators around the world have slowed the launch of third-generation (3G) networks amid questions about demand for the services. But Craig Ehrlich, chairman of the UK-based GSM Association, remains optimistic.

Ehrlich, also a board member of Hutchison Mobile Communications, said yesterday in Taipei that he believes the launch of 3G networks could pick up this year as a greater range of 3G phones enters the market. Hutchison Mobile is a wholly owned subsidiary of Hong Kong-based Hutchison Whampoa Ltd (©M°O¶À®H).

Third-generation technology is designed to provide faster delivery of e-mail, high-speed Internet surfing and live sound and image broadcasts to compatible handsets.

But the lack of 3G handsets and content has dimmed the hopes of operators and consumers about the potential of the service.

"We're very confident that these problems will gradually be solved this summer," Ehrlich told reporters yesterday in Taipei during his trip around Asia. "There are a lot of 3G handsets to be launched."

Ehrlich expects 40 more operators to start providing commercial services on 3G wireless networks this year.

The GSM Association is a trade group that represents GSM mobile operators around the world. Its members include 620 second- and third-generation mobile operators and 130 manufacturers and suppliers.

Taiwan's mobile operators are adopting the voice-based GSM standard for 2G phones and will migrate to GSM's 3G standard, called Wideband CDMA (WCDMA), which has been re-branded "3GSM," as the natural progression.

Despite Ehrlich's optimism, industry watchers still see a bumpy road ahead, with Hutchison Whampoa finally launching its "3 band" service last month only after several delays.

"It's not a technological problem, but we just don't see demand there," said Gary Lai (¿à´¸­·), a telecom analyst at Primasia Securities Co.

A lack of "killer" applications to lure customers and abundant content are the biggest obstacles to convince 2G subscribers to move up to 3G, Lai said.

"It's certainly a trend to migrate to data-based 3G services, but we don't yet know how long the transition will take. Five years? Perhaps," Lai said.

In Taiwan, only Motorola Inc's A835 and Nokia's 7600 support 3G technology. But international mobile-phone vendors are set to roll out more models in the second half of the year.

Taiwan's No.1 handset maker, BenQ Corp (©ú°ò¹q³q), said its first 3G model will not hit the market until the first quarter of next year at the earliest.

Foreseeing the difficulties, local operators have been slow in launching 3G services because of low demand for wireless Global Packet Radio Services (GPRS), a transition technology between 2G and 3G services, said Chris Tan (ÃÓ§Ó©¾), an analyst at Yuanta Core Pacific Capital Management (¤¸¤j¨ÊµØ§ëÅU).

Reduced spending on new 3G equipment is a sign of the problems, he added.

Chunghwa Telecom Co (¤¤µØ¹q«H) has slashed its spending on equipment by 20 percent to NT$3.8 billion this year, Tan said.

"Now, local operators hope only to safeguard their market position and wait for the launch of 3G to mature," Tan said.
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