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Andrew Chetham

HONG KONG'S cellular phone market takes another big step in its development tomorrow with a move that is likely to hit the margins of established operators and offer the best chance yet for newer companies to poach subscribers.

 Analysts agree that in headline terms the most likely effect of the introduction of mobile number portability is for the SAR's six mobile operators to converge in terms of subscriber numbers. In other words, the likes of Hongkong Telecom, Hutchison Telecom and SmarTone will lose subscribers while the others gain.

 'It's a big step in developing full competition,' HSBC Securities telecoms analyst David Gibbons said.

  Portability allows customers to swap networks while keeping their personal phone number. Reluctance to lose their personal number is often seen as a big factor stopping people changing networks, or churning.

 Churning averages about 5 per cent of the market a month.

 'Clearly churn rates are going to be driven higher,' Mr Gibbons said.

 Government research last year suggested that portability might push churn rates as high as 20 per cent.

 With recent sharp tariff cuts by the established and generally higher-priced operators, however, this figure could now be much lower, Mr Gibbons said.

 Dresdner Kleinwort Benson analyst Andrew Hall said the introduction of portability was going to be 'less exciting' than the build-up would suggest.

 The most interesting thing was going to be what measures the big players would use to retain customers.

 'We may see the effect more in their profit and loss accounts than the effect on their subscriber base,' Mr Hall said.

 For the smaller companies such as Peoples Telephone, Sunday and New World Mobility, the next few months would seem to offer their best chance since their launch 1997 to draw subscribers away from the bigger companies.

 They all have customer bases of about 200,000 to 300,000.

 According to official figures, Hutchison Telecom has most subscribers with 880,000 at the end of December.

 Hongkong Telecom has not released figures since its interim results when it said it had 830,000 mobile customers at the end of september.

 A Telecom spokesman said it had recaptured the 'market leader' position from Hutchison but would not give a figure.

 A sign of possible things to come came earlier this month when SmarTone reported it had lost customers during the second half of last year. Until then its subscriber base had continually grown.

 Sunday chairman Rick Siemens said portability would level the playing field in the market to the extent that all the networks would become close in terms of pricing and coverage.

 'If I'm right, by the end of this year all six guys will be more or less the same level, give or take 100,000 to 150,000 subscribers,' he said.

  Mr Gibbons is less optimistic for the new players.

 The older networks with the larger bases of subscribers would find it easier to keep the high value 'premium' customers, he said.

 Mr Hall at Dresdner Kleinwort Benson said if the smaller networks did not break-even in the coming months, consolidation in the industry would look a possibility.

 The eyes of the international mobile industry will be on Hong Kong for clues as to how portability plays out in the world's most competitive cellular market.



Portability spells sink or swim time for small mobile networks