3GScottishUser
6th December 2005, 11:33 AM
From Dow Jones Newswires (06/12/2005):
HONG KONG (Dow Jones)-Hutchison Whampoa (0013.HK) is running out of time to make its US$25 billion bet on 3G technology successful. The Hong Kong conglomerate needs to quickly wean its 10 million subscribers off cheap voice calls and get them using higher-margin data services, says the author of a new report.
"What is critical is how 3G services take off in the next 18 months. The key is their positioning, whether they can achieve increasing data usage in their markets," said Adam Walkden, a telecommunications analyst at British consultancy Visiongain, who authored a 123-page report on Hutchison's 3G operations.
Hutchison has been a pioneer in the mobile-technology, building businesses in a string of countries around the world, with by far the most important being Italy and the U.K. In October, two and a half years after launch, Hutchison said it had 10 million 3G subscribers in its various markets - but at a heavy cost in terms of operating losses.
Mobile users have still not warmed to 3G, which has fast Internet connections and video calls among its features, resulting in Hutchison having to build its subscriber base through aggressive pricing on ordinary voice calls.
"In Europe they are well known for low-cost calls and not 3G services, which is really what they should be known for," said Walkden.
He forecast that in 2008 Hutchison's subscriber base will grow to 13.9 million in its nine 3G markets, which include Hong Kong, Australia and Israel. But he still expects the company's 3G operations to make an operating loss then if customer acquisition costs are factored in.
In the first half of 2005, only 23% of Hutchison's 3G revenue in six markets was derived from data services, company figures show. While Hutchison has a wealth of 3G offerings, none has emerged as a "killer application" to match text messaging, which helped enhance 2G operators' revenue, said Walkden.
But some 3G products could yet take off, helped by improved handset design and performance, which could transform the picture for Hutchison. "Music downloads and music videos could become a big thing. There are quite a lot of applications out there and nothing has taken off for them so far," said Walkden.
Even if Hutchison does find a winning-formula application, it will likely have to share the spoils with other 3G providers.
"Looking at the 3G market there isn't that much difference between the 3G offerings of Vodafone Group PLC (VOD) and Hutchison," said Walkden.
For now, Hutchison, which spent US$1.4 billion in the first half of 2005 acquiring 3G customers, will have to keep spending to expand its business. "It's difficult to see how they can continue to grow their subscriber base without continuing to offer handset subsidies," said Walkden.
The U.K., where Hutchison has 3.2 million 3G customers, remains one of its toughest markets with rising competition on cheap voice calls from virtual operators such as Virgin Mobile (VMOB.LN) and Tesco Mobile, which lease space on other companies' networks.
The intense battle for low-end customers means that 30% of Hutchison's U.K. subscribers could quit to join other networks next year, warned Walkden, causing Hutchison to work hard just to keep its subscriber numbers at current levels.
Hutchison can't afford to tread water as its subscriber base in individual markets has yet to reach a financially viable scale. "A market share of 15% is being bandied around as necessary for their profitability. It doesn't look promising at the moment but it all depends on how 3G takes off."
In the U.K., Hutchison has a 5.3% market share; in Italy a 7.8% market share. In smaller markets such as Austria, Denmark and Sweden, the share is only 2-3%.
Walkden believes Hutchison may decide to sell its 3G operations in the smaller markets, such as in Sacandanavia, in a couple of years if they were still not performing well.
Hutchison recently signaled a likely delay in the listing of its Italian 3G operations from this month to the first quarter of next year, blaming regulatory hurdles.
Walkden believes that behind the scenes the delay may also be due to differences of opinion between Hutchison and its bankers on how high the spinoff could be valued when it is offered to institutional money managers.
http://sg.biz.yahoo.com/051206/15/3x2av.html
HONG KONG (Dow Jones)-Hutchison Whampoa (0013.HK) is running out of time to make its US$25 billion bet on 3G technology successful. The Hong Kong conglomerate needs to quickly wean its 10 million subscribers off cheap voice calls and get them using higher-margin data services, says the author of a new report.
"What is critical is how 3G services take off in the next 18 months. The key is their positioning, whether they can achieve increasing data usage in their markets," said Adam Walkden, a telecommunications analyst at British consultancy Visiongain, who authored a 123-page report on Hutchison's 3G operations.
Hutchison has been a pioneer in the mobile-technology, building businesses in a string of countries around the world, with by far the most important being Italy and the U.K. In October, two and a half years after launch, Hutchison said it had 10 million 3G subscribers in its various markets - but at a heavy cost in terms of operating losses.
Mobile users have still not warmed to 3G, which has fast Internet connections and video calls among its features, resulting in Hutchison having to build its subscriber base through aggressive pricing on ordinary voice calls.
"In Europe they are well known for low-cost calls and not 3G services, which is really what they should be known for," said Walkden.
He forecast that in 2008 Hutchison's subscriber base will grow to 13.9 million in its nine 3G markets, which include Hong Kong, Australia and Israel. But he still expects the company's 3G operations to make an operating loss then if customer acquisition costs are factored in.
In the first half of 2005, only 23% of Hutchison's 3G revenue in six markets was derived from data services, company figures show. While Hutchison has a wealth of 3G offerings, none has emerged as a "killer application" to match text messaging, which helped enhance 2G operators' revenue, said Walkden.
But some 3G products could yet take off, helped by improved handset design and performance, which could transform the picture for Hutchison. "Music downloads and music videos could become a big thing. There are quite a lot of applications out there and nothing has taken off for them so far," said Walkden.
Even if Hutchison does find a winning-formula application, it will likely have to share the spoils with other 3G providers.
"Looking at the 3G market there isn't that much difference between the 3G offerings of Vodafone Group PLC (VOD) and Hutchison," said Walkden.
For now, Hutchison, which spent US$1.4 billion in the first half of 2005 acquiring 3G customers, will have to keep spending to expand its business. "It's difficult to see how they can continue to grow their subscriber base without continuing to offer handset subsidies," said Walkden.
The U.K., where Hutchison has 3.2 million 3G customers, remains one of its toughest markets with rising competition on cheap voice calls from virtual operators such as Virgin Mobile (VMOB.LN) and Tesco Mobile, which lease space on other companies' networks.
The intense battle for low-end customers means that 30% of Hutchison's U.K. subscribers could quit to join other networks next year, warned Walkden, causing Hutchison to work hard just to keep its subscriber numbers at current levels.
Hutchison can't afford to tread water as its subscriber base in individual markets has yet to reach a financially viable scale. "A market share of 15% is being bandied around as necessary for their profitability. It doesn't look promising at the moment but it all depends on how 3G takes off."
In the U.K., Hutchison has a 5.3% market share; in Italy a 7.8% market share. In smaller markets such as Austria, Denmark and Sweden, the share is only 2-3%.
Walkden believes Hutchison may decide to sell its 3G operations in the smaller markets, such as in Sacandanavia, in a couple of years if they were still not performing well.
Hutchison recently signaled a likely delay in the listing of its Italian 3G operations from this month to the first quarter of next year, blaming regulatory hurdles.
Walkden believes that behind the scenes the delay may also be due to differences of opinion between Hutchison and its bankers on how high the spinoff could be valued when it is offered to institutional money managers.
http://sg.biz.yahoo.com/051206/15/3x2av.html