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Suzanne Harrison

Telecommunications companies in Asian markets will face pressure to join forces with larger operators as global competitors come knocking on the door for new licences, according to Morgan Stanley Dean Witter.

 Regional telecommunications analyst Mark Shuper said that under further liberalisation plans in the region, global companies would increasingly look to Asia for opportunities.

 In April, British Telecommunications announced it had bought a 20 per cent stake in Hong Kong's SmarTone Telecommunications Holdings.

 Morgan Stanley has strong buy recommendations on SmarTone, Asia Satellite Telecommunications Holdings and Korea Telecom Corp.

 Mr Shuper said the consolidation trend was highlighted at Morgan Stanley's first Global Telecom Primer Day held late last month in New York.

 'I don't think anyone will dispute that this (Asia) is one of the fastest-growing regions in the world,' Mr Shuper said. 'As the Asian markets deregulate, we'll see the providers entering the market.

 'Asia's operators will have to plan their defences either via a 'walled' strategy of protecting their home market, or through an 'attack' strategy of making themselves a more attractive partner - or a more fearsome one.'  Morgan Stanley said in Asia, only Nippon Telegraph and Telephone Corp of Japan had the scale to become a global player in its own right.

 'Virtually every other operator will face increased pressure to join forces with a larger operator, either individually or after developing its own pan-Asian footprint,' the investment bank said.

 Mr Shuper said within the region, Japan was the most deregulated telecommunications market. Australia and Hong Kong were not far behind.

 'Hong Kong is getting there,' he said. 'I think the final step for deregulation for Hong Kong is 2003.'  Outside Japan, only 37 per cent of Asia-Pacific telecommunications revenues were open to competition across all sectors, he said.

 Taiwan and Singapore plan further deregulation next year, raising the 'competitive' figure to 48 per cent.

 If the mainland becomes a member of the World Trade Organisation, there could be greater liberalisation, especially in emerging Asia, by 2004 to 2006.

 'In developing markets, we're probably about three to five years away,' Mr Shuper said.

 The consolidation process is well and truly alive in the United States.

 Morgan Stanley said there had been the emergence of the 'Big Four' following a spate of mergers and acquisitions - AT&T-MediaOne, MCI WorldCom, Bell Atlantic-GTE and SBC-Ameritech.

 Mr Shuper believed the same thing could eventually happen in Asia.

 'Four mega-carriers have emerged in the US,' he said. 'Can this happen in Asia?'  'Regulations only make it possible in a little over a third of the markets today.'  Although in its infancy in the region, consolidation and branding are expected to play a growing role in corporate and operating strategies of Asia-Pacific telecommunications.

 The renaming of Hongkong Telecom to Cable & Wireless HKT is an example of the move to global branding.



Global link-up seen way to go for Asian telecoms companies