Experimental feature

Listen to this article

00:00
00:00
Experimental feature
or

Douglas Hsu's energy seems infectious. The stout, spirited chairman of FarEastone, Taiwan's third-largest telecoms company, strides back and forth on the stage to the hammering beat of music under a shower of laser lights, shaking his cell phone in his fist, and shouts: “Can you not have it?”

FarEastone on Wednesday became the first of the island's big three mobile operators to launch third-generation mobile services. It will be followed by Chunghwa Telecom, the state-owned market leader and second-ranked Taiwan Mobile over the next few weeks.

But it may require more than Mr Hsu's energetic appeal to convince consumers that they must have the new service. Over the past three years since 3G licences were awarded to five operators, the island's consumers have been lukewarm.

Asia Pacific Telecom Group, a small new entrant which offers 3G services only and so far enjoys a monopoly position in the segment, has signed up no more than 600,000 customers since launching in 2003, a reflection of the limited demand for 3G in Taiwan's market of more than 20m mobile subscribers.

The main reason for the concerted roll-out is that the deadline for starting services is up, under the terms of their licences.

Taiwan is a 3G latecomer, trailing Japan and South Korea by several years and behind Singapore, Hong Kong and several European markets, in spite of its record of quick adoption of new technological applications in other segments.

But in the eyes of many telecom experts, that is a good thing. Analysts say that by moving slowly on 3G and consolidating the sector first, Taiwan's main operators have saved themselves from cut-throat competition in a new market before it promises big returns.

Over the past two years, three smaller mobile operators merged with Taiwan Mobile and FarEastone. Since then, the big three mobile companies have cleaned up their customer bases, cutting subscriber numbers but increasing average revenue per user (Arpu), and divided more than 90 per cent of the market almost evenly among themselves.

“Thus, we are now set to enter a benign 3G development in which the main players are profitable, applications have had enough time to mature to give providers the hope of making money,” says one analyst.

Unless Asia Pacific Broadband Wireless, Taiwan's early entrant, and Vibo, a Greenfield operator set to launch in October, start a price war, cut-throat competition is unlikely.

Markets and companies which launched 3G early have paid a price that Taiwan's big three may be able partly to avoid, observers say. APBW reported a loss of T$2.8bn ($88m) last year and does not expect to break even before 2007. Therefore, analysts view the slow movement by Taiwan's main operators as natural market-driven behaviour, in contrast to the strong political push behind the global pioneer role played by Japan and South Korea in 3G.

Separately, the reluctance of Taiwan's consumers to jump on the bandwagon is due to the quality of mobile services they enjoy. “So far, 3G clearly has not made enough of a difference to the 2.5G services we already have,” said Jeffey Gee, vice-president at FarEastone.

One more reason Taiwan has been so slow in adopting 3G may be its extreme emphasis on a convenient lifestyle, said Dominic Grant, a telecoms analyst at Macquarie Securities in Taipei. The island has high PC broadband penetration rates, a fast-growing network of wireless online hot spots and is highly urbanised. Moreover, most Taiwanese do not commute. “The 30 minutes Japanese spend commuting on average a day provide plenty of opportunity for wireless services consumption,” says Mr Grant. “You don't have that in Taiwan.”

FarEastone and its peers are remaining cautious with their expectations towards the new era. It has set a target to win 50,000 3G users by the end of the year. Chunghwa Telecom and Taiwan Mobile aim for 100,000 each.

Over the next few years, 3G could become the key area to test the real strength of the big three. With 8.5 per cent, FarEastone has the highest revenue contribution from non-voice services and the highest Arpu. Market research shows that the company enjoys the strongest image among young, affluent consumers who are more likely to use 3G.

Copyright The Financial Times Limited 2017. All rights reserved.
myFT

Follow the topics mentioned in this article

Comments have not been enabled for this article.