Sony's foray into Hong Kong's online services market has been disappointing, but the firm remains a staunch believer in the 'convergence' of mobile telephone and computing services. Sixteen months after launching its So-net service in Hong Kong, the Japanese electronic giant's broadband Internet service has won less than 10 per cent market share despite the power of its name and furious marketing gimmicks. Sony has bet on its ability to cross-sell hardware and software services but has struggled to achieve a foothold in a market where broadband providers are charging as little as HK$68 a month. In its latest marketing push, the loss-making operation offered one-year subscribers, willing to pay HK$188 a month, a free PlayStation 2 system worth about HK$1,500. The strategy typifies the approach of tying customers to software services through must-have products such as televisions and its successful range of handheld devices such as digital cameras and personal computer assistants. That, at least, was the plan when it chose Hong Kong as a test site for using Internet connectivity as a channel for selling hardware. Sixteen months into the experiment, the firm's Hong Kong managing director, Susumu Kitadai, described the project as 'challenging' but said Hong Kong remained well-suited to the business model. 'We believe in the mid and long-term strategy,' Mr Kitadai said. 'Broadband is coming, and there is going to be 10 megabits per second, and wireless connectivity. 'The true broadband big bang will come maybe after 2005, but we don't want to sit idle before that. We feel we need to take a punch now. That's why we launched So-net, and this reason has not changed.' Unlike its broadband rivals, Sony is betting on selling broadband-linked products rather than earning a return from operating telecom services. Despite having committed an unspecified sum, described by Mr Kitadai as a substantial investment, So-net is apparently in solid financial shape. 'I believe So-net will play a key strategic role in enhancing all of our hardware,' said Mr Kitadai. 'We are on the right track, and we want to further accelerate our business.' The number of broadband subscribers in Hong Kong grew about 43 per cent in the first 10 months this year, adding 256,000 to the 872,300 residential users in October. So-net had less than 10 per cent of the market, but in recent months, it has seen its share of new customers rise to about 15 per cent. 'Because of our positioning, not as a mass, but a premium provider, we would be satisfied to capture between 10 and 20 per cent market share,' Mr Kitadai said. Mobile multimedia applications are expected to achieve mass appeal next year and So-net has signed content deals with dominant operators Hutchison Telecom, CSL and SmarTone, allowing movie trailer, downloads and Java-based games. Its roll-out of new services would be synchronised with its feed of games to the dominant Japanese operator, NTT DoCoMo, he said. The firm was open to forming more alliances with partners and prepared to even make acquisitions in Hong Kong in order to popularise So-net. 'As long as it makes business sense, yes, it is possible,' Mr Kitadai said in response to acquisition plan. Sony has a chequered record of extending into new business areas. Sony-Ericsson, its mobile phone venture with Ericsson last year, has struggled to achieve profitability and lost market share. The reason, Mr Kitadai said, was that Sony-Ericsson ran its marketing and distribution arms independently and had yet to achieve synergies in its product lines. However, he said the Japanese-Swedish link remained an extremely important expansion vehicle for Sony.