Wed, Feb 02, 2005 - Page 10 News List

Taiwan Cellular says 3G outlook still uncertain

MOBILE SERVICES The company plans to roll out 3G service by mid-year, but is `less than optimistic' on the overall outlook for winning new subscribers

By Amber Chung  /  STAFF REPORTER

The outlook for third-generation (3G) mobile phone services remains less than bright this year, even though user numbers are edging up worldwide, Taiwan Cellular Corp (台灣大哥大) said yesterday.

"The incremental increase in user numbers was largely prompted by subsidies on new handsets or preferential rate plans, instead of a differentiation of services from the existing service offerings," Cheng Hui-ming (鄭慧明), chief financial officer of Taiwan Cellular, said yesterday.

The outlook for the market this year remains less than optimistic, Cheng said.

Even so, the nation's second largest mobile-phone operator by number of subscribers plans to roll out its 3G services by mid-year and will spend half of its planned NT$5.1 billion capital expenditures on 3G equipment this year.

Cheng however shied away from giving projections for 3G user numbers for the first year.

Taiwan Cellular yesterday said its fourth-quarter profits dropped by 15 percent from a year ago to NT$2.72 billion on revenue of NT$11.42 billion, up 4 percent year-on-year, owing to a one-time write-down of NT$942 million for obsolete equipment and a higher tax rate, due to the deferral of some tax credits until this year.

Annual profits last year soared by 25 percent from the year earlier to NT$16.66 billion, or NT$3.55 per share, on annual revenue of NT$45.09 billion, which remained almost unchanged from 2003, the operator said.

Subscribers fell to 4.83 million last year from 5.81 million in 2003 after the company's clean-up of inactive users, which in turn raised the average revenue per user to NT$693 from NT$582, it said.

At a meeting yesterday, the company's board approved the issuance of a cash dividend of NT$2.5 per share.

A new accounting rule, called the Statements of Financial Accounting Standard 35, which demands that companies write down assets that have a face value which is lower than the market value, would not impact the company, he said.

Still, Taiwan Cellular decided to allocate NT$2.2 billion in special reserves this year and another NT$3 billion in the next two years in case of any future asset impairment losses, Cheng said.

Looking ahead, the company may have a rough ride this year, as growth in the increasingly mature telecom market is expected to slow, a market watcher said.

The new accounting rule could have a large impact on telecom operators, as the value of much of the equipment purchased during the telecom boom in 2000 has shrunk to around one-sixth to one-seventh of its original level, said Chris Tan (譚志忠), a telecom analyst with Yuanta Core Pacific Capital Management (元大京華投顧).

The launch of 3G services, which will focus on voice services in the early stage, could lead to price competition and in turn have a negative effect on voice revenue, Tan said.

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