Tue, Nov 23, 2004 - Page 11 News List

Far EasTone says pickings slim

By Lisa Wang  /  STAFF REPORTER

A model displays a type of cellphone that is able to use a prepaid card promoted by Far EasTone Telecommunication Co. The plan is designed for children, with a 50 percent-off reduced rate for calls made between 4pm and 7pm during the week.

PHOTO: WANG YI-HUNG, TAIPEI TIMES

Far EasTone Telecommunications Co (遠傳電信) projects earnings to expand mildly next year as the company's planned third-generation (3G) mobile service is not expected to stimulate business in time to boost its profits, an executive said yesterday.

Without a new driving force in sight for next year, Far EasTone president Jan Nilsson expected earnings to "increase a few percentage points [from this year], mostly due to [better] cost efficiency."

Revenues will also inch up by less than 5 percent year on year, Nilsson said yesterday, on the sidelines of a ceremony to launch a pre-paid card service for kids.

The slow growth of Taiwan's No.3 mobile phone operator, however, is no surprise to most analysts.

"Growth for local mobile operators including Far EasTone will be very limited due to a lack of driving forces," said Chris Tan (譚志忠), an analyst with Yuanta Core Pacific Capital Management (元大京華投顧).

Third-generation services could be a cash cow for global telecom carriers when the services are fully adopted, but there is still a long and bumpy road ahead, Tan said.

"It can't be a factor driving up Taiwanese phone companies' profits next year as they are just entering into the difficult stage of luring users to switch to 3G services," he said.

Far EasTone is expected to earn NT$14.78 billion next year, up merely 2 percent from an estimate of NT$14.5 billion this year, Tan said.

Last year, the mobile carrier posted earnings of NT$8.19 billion, excluding unit KG Communication Co's (和信電訊) earnings. Far Eas-Tone merged with smaller rival KG Telecommunications, a venture with Japan's NTT DoCo Mo Inc, in October last year.

Nilsson admitted that the expansion of 3G subscribers would be very slow initially, but he did not expect the debut of the data-oriented service to erode the company's profits soon.

There will be new depreciation costs for equipment supporting 3G technologies and that's it, he said.

Far EasTone, which now has 6.58 million users, is scheduled to unveil its 3G services by the middle of next year.

"It is unavoidable for all mobile operators to sustain losses in the first couple of years, just like the process we went through when we first unveiled 2G services," said Shih Mu-piao (石木標), a spokesman for Chunghwa Telecom Co (中華電信), Taiwan's largest phone company.

The state-run telecom operator plans to roll out the data-oriented services in the first quarter at the earliest after several postponements, blaming limited availability of 3G handsets.

Shih said they would only be able to supply two or three mobile phones from Nokia Ojy and Motorola Inc for its subscribers to select from, if they started providing 3G services right now.

Taiwanese mobile companies are relatively disadvantaged in terms of getting more handset supplies due to their much smaller scale, compared to 3G giant Vodafone Group Plc based in the UK, though handset vendors are making gradual progress in manufacturing 3G mobile phones, Shih said.

But, local mobile-phone operators are required to unveil speedy services by the end of next year, or regulators will revoke the pricey 3G licenses that cost around NT$10 billion each.

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