Japanese firm's link-up with SmarTone is part of a three-pronged move in Asia Japanese consumer electronics manufacturer Toshiba is to enter the Hong Kong mobile phone market via a new partnership signed last week with local 3G operator SmarTone-Vodafone. Staring with a 2.5G handset - the TS10 - Toshiba will in the coming months launch new 3G handsets available exclusively to SmarTone-Vodafone subscribers. SmarTone has similar arrangements with two other Japanese suppliers, Sanyo and Sharp. 'This collaboration with SmarTone-Vodafone marks an important milestone in fulfilling our business strategy of expanding our mobile business in Asia-Pacific,' said Seiji Yasunaga, chief marketing executive for Toshiba Mobile Communications. Last week's announcement is further evidence of the increased leverage SmarTone has derived with handset manufacturers via its network partnership with Vodafone. Toshiba is the second-largest supplier to Vodafone KK in Japan and is already marketing handsets to Vodafone subscribers in European markets. SmarTone has long followed a policy of launching exclusive handsets to its network subscribers as a means to gain market share in Hong Kong's ultra-competitive market. The company now has more than 50,000 3G subscribers compared with Hutchison Telecommunications' 400,000 but reported a 12 per cent increase in handset and accessory sales in the past financial year to $985 million at least partly due to a number of exclusive handset deals with Sharp, Sanyo and Samsung. However, the motivation to enter the Hong Kong market is less obvious for Toshiba. The company is already the largest supplier to Japan's second-largest carrier, KDDI Corp and claims to hold the country's fourth-largest mobile market share at 14 per cent despite not supplying by far Japan's largest operator NTT DoCoMo. Mr Yasunaga said the company's entrance into the Hong Kong market was part of a three-pronged move into the Asia market that would also see product launches in Taiwan and Singapore in the coming months. But he also acknowledged that building customised phones for Hong Kong could not be justified 'solely in terms of returns on investment'. 'Hong Kong is important as a showcase from which we can expand our business to other parts of Asia,' he said. Mr Yasunaga declined to comment on whether recent market consolidation in Hong Kong had had any impact on Toshiba's decision to enter the market. PCCW's acquisition of Sunday Communications, the proposed merger between CSL and New World Mobility and the $3.6 billion purchase of China Resources Peoples Telephone by China Mobile have all fuelled speculation that SmarTone may be next in line, potentially fulfilling China Mobile's requirement of a 3G license. Such a deal arguably could improve access to the mainland market for suppliers such as Toshiba. 'For the time being our focus is on Hong Kong, Taiwan and Singapore,' Mr Yasunaga said. 'Once the 3G market in China becomes more clear then we would have to rethink.'