AFTER the lukewarm reception to SmarTone Telecommunications Holdings' initial public offering, does this mean that investors think the party is over for cellular telephone operators? According to analysts, the answer is yes but the news is not all bad.
Until recently, mobile telephone prices in Hong Kong were among the highest in the world, with profit margins close to 50 per cent.
Despite SmarTone's high profile publicity campaign, its offer was less than three times oversubscribed and the company was forced to price the shares at the very bottom of its offer range.
It faced an uphill battle convincing investors that its strong profit growth can be sustained in the face of what promises to be intense competition over the next two years.
Six new personal communications service (PCS) operators are due to launch next year with a promise of bringing down the costs of mobile telephones.
'We see slowing earnings growth as the market moves into a position of oversupply between next year and 1999. There will come a day of reckoning,' SBC Warburg analyst Jason Billings said.