Taiwan's 3G License Auction Settled, Comments Mixed
nikkeibp.asiabiztech.com
February 14, 2002 (TAIPEI) -- The third-generation (3G) mobile communication license auction was
eventually settled on Feb. 6, after 19 days and 180 rounds of bidding.
The five winners are Far EasTone Telecommunications Co. for license A, Taiwan PCS Network Inc. for
license B, Taiwan Cellular Corp. for license C, Chunghwa Telecom Co., Ltd. for license D and Eastern
Broadband Telecommunications Co. for license E. The winning bids totalled NT$48.90 billion, up 45.5
percent from the previously-targeted floor price of NT$33.6 billion. However, it's equivalent to NT$13
worth of unit bandwidth price, the world's most cheapest price. The 3G telecommunication service is set
to start up at the beginning of 2003 at soonest. (NT$35.03 = US$1)
After the long 19-day auction, the five licenses eventually were awarded at the 180th round of bidding.
However, pessimists have begun to worry that the 3G telecommunication in fact is not mature enough to
provide well-developed services in lack of 3G-enable systems, handsets and contents, and the consumer
potential remains unclear.
After the completion of 3G license auction, winners are expected to start up the service as soon as
possible at the beginning of 2003, elevating Taiwan to the position as one of the world's
telecommunication-advanced countries. However, the experience of NTT DoCoMo Inc. may suggest that
the optimistic view for the 3G business expected to be promising will be probably premature.
The wideband code division multiple access (W-CDMA) service promoted by NTT DoCoMo has receipted
just over 10,000 subscriptions. Separately, the CDMA 2000 1XRTT delivered by Korean
telecommunication carriers however has yet to be recognized by international telecommunication-related
companies. Accordingly, it is being said that the local 3G telecommunication market may take three years
to five years to become ripe.
The forerunners' experience shows that the 3G telecommunication business will not be a success around
the corner. The expenditure of over NT$10 billion in license acquisition is just an outset before the costly
investment on 3G system installation at value of several tens of billions of NT dollars. On the assumption
that the 2G telecommunication system installation throuout Taiwan costs a company around NT$25 billion
to NT$30 billion, the 3G license winners will face a huge investment, around double their investments in
running 2G business.
However, what will face them after the huge investment remains questioned. As the introduction into 3G
service, the General Packet Radio Service, 2.5G telecommunication version promoted by KG
Telecommunications Co., Chunghwa Telecom Co., Ltd. and Mobitai Communications Co., Ltd., goes its
way harder than have been expected in lack of mature environment and consumers. Taiwan Cellular
Corp. and Far EasTone Telecommunications Co. even have no attempt to announce the start of GPRS
service. This suggests that 3G operators may find it difficult to break even.
On the other hand, optimists are claiming that the 3G license acquisition was a worthwhile investment.
Firstly, taking the franchise fee in the view, every 2G telecommunication company has to pay 2 percent of
its total sales every year to the government. On the basis that a 2G company racks up NT$40 billion for
annual sales, it should pay NT$12 billion in total as franchise fee for the 2G license valid 15 years. Since
3G licenses are free from franchise fees, the payment for bidding 3G licenses, of which the most
expensive is NT$10.57 billion by Eastern Broadband Telecommunication Co., Ltd, is not so expensive
than have been expected.
Next, compared with other regional countries, Taiwan's 3G licenses are priced relatively reasonably. The
Ministry of Transportation and Communications (MOTC) entrusted Nomura Research Institute Ltd. to
estimate the value of Taiwan's 3G licenses. The study result is over NT$30 billion for each of licenses.
Besides, the MOTC said the winning bid of each of Taiwan's 3G licenses was only a sixth of that paid in
Europe, and half the cost of licenses in Hong Kong and Singapore. Also, it is said that the winners are
expecting one or other will eventually drop out the 3G market due to the difficulty of raising funds.
To the fixed-line network companies, such as Eastern Broadband, it must be worth a try to use the funds
raised previously on lucrative mobile phone business rather than plough the money into hard-effort
road-digging fixed-line installation.
As far as the industrialists in traditional business behind the telecommunication investment are
concerned, they are reluctant to place their bet on sunset industries any more, and are inclined to raise
the value of the dumpling shares of their companies by developing high-tech business.
(Commercial Times, Taiwan) |
