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To: ms.smartest.person who wrote (1020)	4/7/2001 10:26:56 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

3G Opportunities in Hong Kong and Singapore By Jean Hydleman, AsiaWise 4 Apr 2001 12:30 (GMT +08:00) This time last year the world's leading mobile phone operators were paying billions of dollars for 3G mobile licenses. At the height of the Internet stock craze, the prospect of users being able to access the Internet, transfer data and carry out videoconferencing on the move was attractive to operators and their investors alike. A year on, there could be fewer bidders than licenses at 3G auctions in Asia. Asia's operators are going lukewarm on 3G and expressing a lot more enthusiasm for an interim solution like 2.5G -- which they believe will deliver almost everything 3G offers. Publicly, at least, 3G-network ownership is no longer seen as a prerequisite for staying in the game and the markets have accordingly devalued operators with 3G licenses. However, this ignores the fact that, as 3G prices come down to attract mass-market users, 2.5G will only provide a short-term solution. Longer-term telecoms users will move on and adopt 3G, as operators roll out their networks and reduce their tariffs and equipment costs. Cost is a key short-term factor -- European operators will need to spend billions of dollars on licenses and networks for untried technology. It is unlikely that this sort of funding will be available from equity markets. Banks are also negative about the investment needed, and we are seeing downgrades from the credit rating agencies. The funding crisis has even led the EC to ask European governments to delay payment demands for 3G licenses. Caught between a rock and a hard place, global operators with a presence in Europe's 3G markets are showing little enthusiasm for Asia's auctions. The prospect of both cheaper licenses and potentially higher 3G take up could well make Hong Kong and Singapore network licenses the bargains of the century. Hong Kong and Singapore's social and economic conditions make both excellent target markets for 3G take up, especially as Internet access inside the home will be comparatively limited. Although both are small markets, they have shown a high propensity to consume new technology, especially Singapore where the government actively promotes take up. With their high population densities, operators should have an easy time rolling out networks, especially given their already comprehensive second-generation mobile networks, which should make renegotiating cell sites for 3G almost redundant. Hong Kong shows exceptionally high mobile subscriber penetration rates. Around 61% of Hong Kong's population of 6.8 million currently subscribe to a digital mobile service and there are a further 1.06 million pre-pay subscribers according to statistics provided by Hong Kong's telecoms regulator, Office of the Telecommunications Authority (OFTA), on their web site. Local industry figures also indicate Hong Kong users change their handsets about twice a year, partly because of fashion, but also suggesting a society that uses the mobile as its primary communications device. Singapore boasts similar figures with Infocomm Development Authority (IDA) of Singapore claiming mobile penetration rates as high as 65% on their web site. Local operators in both Hong Kong and Singapore are likely to gain from a shortage of global competition. International operators look unlikely to have either the will or the funds to participate in 3G auctions in these seemingly competitive and saturated markets. In Singapore there are just four approved bidders for four licenses: Sunday Communications and the three Singapore telecoms companies; Singapore Telecommunications (SingTel), MobileOne and StarHub. Licenses will almost certainly be sold off at the floor price. Hong Kong's auction is scheduled for mid-year with six operators possibly bidding for four licenses. At least three of these are ambivalent about paying significant amounts for network licenses. After all, they will still have the fall back option of operating as virtual mobile network operators where they will be able to lease bandwidth from the network license holders. This will give the smaller operators an opportunity to build their 3G brands with minimum risk. Looking beyond the immediate prospects for 3G, Hong Kong and Singapore could well prove to be prime markets for 3G technology. The companies that participate now at relatively low entry points are likely to emerge as winners or, at least take-over targets, four or five years down the line when they realize their investments at far higher rates of return than could ever be achievable in Europe. Part Two: 3G Operators Face Big Pressures: The hurdles operators must overcome to make money asiawise.com