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Alcatel turns its eyes to 3G sector

French telecom firm Alcatel may be switching its business focus to sell third-generation (3G) network equipment as profits from the fixed-line market dry up, an industry pundit said yesterday.

"For telecom equipment vendors, in the short term, it's easier for them to make a buck from the wireless sector, especially 3G, than from the fixed-line market," said Ann Liang (梁嘉玲), a telecom market analyst at Gartner Dataquest in Taipei. "That's why Alcatel is upbeat on promoting 3G products."

Alcatel already holds significant market share in the fixed-line infrastructure sector. For example, equipment for more than 69 percent of ADSL lines currently in use in Taiwan was made by Alcatel.

In addition, because most fix-line operators have over-invested in equipment in the past few years, this year and next year may be difficult for Alcatel to make money from the fixed-line sector, Liang said.

But with Taiwan finally issuing its five 3G licenses in February, the new money may be in 3G.

"Setting up networks for 3G operators is a new and profitable business opportunity," Liang said.

Before providing high-speed mobile Internet services, 3G companies must purchase equipment, set up base stations and establish transmission networks.

According to Gartner's report released last month, the telecom infrastructure sector is likely to be the last telecom sector to recover from the downturn, with the business environment for vendors such as Alcatel expected to be sluggish through 2004.

To demonstrate its growing commitment to the Taiwan market, Alcatel has invested about US$3 million to build a 3G application center, launched in Taipei last week.

"Our center is the only such [3G testing] center set up in Taiwan that brings high-speed mobile communications to life on a real platform," said Jean-Philippe Benoist, president of Alcatel Taiwan Ltd.

The working 3G model will serve as a marketing tool demonstrating how a 3G network functions to all "potential" partners.

The company plans to show off the center to mobile operators and content providers. One such company, Taiwan 3G Mobile Network Inc (聯邦電信), one of the nation's 3G license holders, has been in close talks with Alcatel Taiwan recently, according to William Lue (呂禧鳴), a public relations executive associated with Alcatel Taiwan.

Meanwhile, Alcatel Taiwan's new chief is optimistic about Taiwan's 3G market potential.

"The nation is poised to become one of the leading telecom countries in Asia Pacific, along with Japan and South Korea," Benoist said.

He explained that, with the number of broadband Internet subscribers and mobile-phone users growing rapidly, demand for mobile Internet services in Taiwan is high.

"I estimate by the end of next year, all 3G licensees will begin to offer services," he said.

Meanwhile, another market watcher said launching service and gaining popularity are two different things.

"The market demand won't really pick up until 2005," said Nathan Lin (林宗賢), a telecom analyst at National Securities Corp (建弘證券). He predicts even if all license holders launch services by next year, the penetration rate of 3G service will still be less than 10 percent by the end of that year.

Lin said currently public demand for mobile data service is still very limited.
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