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Far EasTone eager to boost 3G business

Far EasTone Telecommunications Co (遠傳電信), Taiwan's No.2 mobile carrier, is aiming to boost its third-generation (3G) subscribers seven-fold this year after more affordable 3G handsets hit the market, a company official said yesterday.

Far EasTone has gained 110,000 3G users since launching its service in July. This means that 3G users only account for some 2 percent of the overall 6.1 million subscribers to the mobile operator.

"Our target is to get 800,000 or more this year," said president Jan Nilsson at a lunch with reporters.

Nilsson said he expected growth to accelerate in the second half of this year, helped by the various mobile phone vendors' plans to launch more 3G handsets that will be similar in size, price and external design to 2G models.

Most wireless telecommunications service providers blame high price tags and the limited choice of handsets on the high-speed 3G network as one of the major factors behind slow adoption of the new services.

Most 3G mobile phones are priced at around the NT$20,000 (US$612) mark without subsidies from mobile companies, while most local consumers are only willing to pay NT$6,000 for a handset, according to Chunghwa Telecom Co (中華電信), the nation's largest telecoms operator.

Chunghwa Telecom said last week that it expected 3G phones to fall to around NT$10,000 apiece during the second half of the year, though this level is still higher than most consumers are willing to pay. But with operator subsidies at around NT$5,000 or more it is likely to make 3G phones more attractive, the company said.

Though a sharp fall in the price of 3G handsets would spur demand, Far EasTone did not expect the growth in 3G users to translate into similar growth in revenues for the time being, Nilsson said, citing nascent business.

He also said the entry of new 3G player Vibo Telecom Inc (威寶電信) and the launch of mobile number portability would have limited impact on the telecom market.

Far EasTone would have stable growth in revenue this year, he said.

"We'll beat inflation," Nilsson said.

That implies the company is looking at about a 1.52 percent year-on-year rise in revenue this year. The government forecast inflation would rise 1.52 percent this year.

Far EasTone would post equal or better profits this year compared with last year, Nilsson said.

Last year, the company hit a record high by pocketing NT$14.72 billion in net income, or NT$3.8 per share. Service revenue also set an all-time high of NT$63.54 billion.

"No surprise in last year's financials," said Citigroup analyst Anand Ramachandran in his latest report on Far EasTone dated Jan. 13.

He gave a "buy" rating for the company with a target price of NT$45.6, which suggests about a 15-percent rise from yesterday's closing price of NT$39.6 on the Taiwan Stock Exchange.

“Cheap valuation and sound, sustainable yield, at about 8.2 percent, keep us at Buy, but we acknowledge specific upside catalysts as lacking for now,” Ramachandran said. Far EasTone and its local peers said they would not dramatically adjust their dividend policy for now as the comfy return is a key factor in attracting cautious investors. Ramachandran predicted that Far EasTone would post mild growth in net incomes of around NT$15 billion, or NT$3.87 a share, for this year.
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