Chunghwa eats away at cellphone market

Year-to-date sales at Taiwan Cellular Corp (TCC, 台灣大哥大) were sluggish as rival Chunghwa Telecom Corp (中華電信) successfully grabbed up the mobile carrier's market share, industry pundits said yesterday.

"Taiwan Cellular used to be the nation's number one mobile carrier, but early this year Chunghwa surpassed Taiwan Cellular in terms of user numbers," said Alex Wu (吳興國), a telecom analyst at KGI Securities Corp (中信證券).

In 2000, TCC had a 29 percent market share and Chunghwa had 26 percent. However, as of August this year, TCC's market share had dropped to only 26 percent even as Chunghwa's moved upward to 30 percent.

"Chunghwa Telecom is getting stronger and stronger," said George Wu (吳裕良), an IT-industry analyst at Primasia Securities Co in Taipei.

In addition to aggressively expanding market share, Chunghwa also did well in cutting costs.

An early retirement plan for employees helped Chunghwa remain profitable.

Sales at Chunghwa in the first nine months were NT$132 billion, nearly a 5 percent drop from the same period last year, while its profit jumped 32 percent to NT$37 billion.

In the same time frame, Taiwan Cellular also reported a 5 percent drop in sales, and its profit was down 16.2 percent to NT$11.6 billion.

"This is because in the third quarter of this year, we spent NT$1.5 billion on handset subsidies and that move allowed us to gain 350,000 new users," said Chen Chin-hsing (陳進興), TCC's general manager.

Many telecom firms use handset subsidies which offer consumers free or reduced-cost handsets to win over new users.

Chen stressed that the company will see significant sales growth near year end because of these new subscribers.

However, another analyst expressed skepticism, saying the contribution from new users would be limited.

"With Taiwan's mobile phone market nearly saturated, most new customers TCC gained in the third quarter were using [the new phone numbers] as their second mobile phone, said Edward Jeng (鄭宗豪), an investment officer at Taian Insurance Co (泰安產險).

"Therefore, the usage won't be high," Jeng said.

That reduction in average revenue per user is expected to hurt sales growth, Jeng added.

According to Chen, TCC's average revenue per user has declined from nearly NT$700 earlier this year to about NT$500 in August.

Chunghwa's average revenue per user was NT$780 as of the third quarter of this year.