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SCMP Reporter

The bearish outlook for the telecoms sector has KG Telecommunications, Taiwan's No 3 mobile operator, holding fire on a NT$45 billion (about HK$10 billion) third-generation (3G) investment plan.

'Now we don't want to invest in 3G because the investment is huge but without much return,' said KG Telecom chairman Leslie Koo.

KG Telecommunications originally budgeted NT$45 billion to invest in 3G mobile services in the next three to five years. But the company pulled out of bidding for a 3G licence in February.

Mr Koo doubted if the potential business prospects for 3G in Taiwan would be sufficient enough for operators to generate profit.

'NTT DoCoMo's i-mode is the only mobile data services platform that has proven to be successful. By successful we mean that it can generate profit,' Mr Koo said.

'Even having 30 million i-mode users, NTT DoCoMo only expects six million of its i-mode users will become 3G subscribers after three years.'

For operators that did not have similar experience, it would be difficult to do better than NTT DoCoMo, said Mr Koo.

Mr Koo blamed Taiwan's telecoms regulator for granting more 3G licences and spectra than the market could absorb. As a result, it limited business prospects for operators, he said.

The use of an auctioning method to allocate 3G licences also made it too costly for investing in 3G.

'All the five licences were at least 50 per cent higher than the floor prices,' Mr Koo said.

In February, the Taiwanese Government raised NT$48.90 billion from the five 3G licence winners - Chunghwa Telecom, Taiwan Cellular, Far EasTone Telecommunications, Taiwan PCS Network and Asia-Pacific Broadband Wireless Communications.

Because of the limited prospects for the 3G business market, Mr Koo said, KG Telecommunications would focus on 2.5G services and on developing a successful wireless data services model before moving on to 3G services.

'I believe 3G is Ferrari and Porsche. For those who can't drive, there's no point in giving them a Ferrari,' Mr Koo said.

KG Telecommunications plans to launch an i-mode-like service in Taiwan in June, partnered by its 21.43 per cent shareholder NTT DoCoMo. Mr Koo said the carrier planned to build a solid foundation for wireless data services base on 2.5G technology before moving on to 3G services.

Instead of directly investing in a 3G network, KG Telecommunications would choose to lease 3G capacity from licensed operators and operate as a mobile virtual network operator if the 3G business opportunity arose.



KG holds back on investment in 3G