Thu, Sep 14, 2006 - Page 12 News List

Card crackdown hurts Far EasTone

LIMITED IMPACT Although the ban on convenience stores selling pre-paid cards has hit the company, president Jan Nilsson said revenue gains elsewhere would make it up

By Lisa Wang  /  STAFF REPORTER

Far EasTone Telecommunications Co (遠傳電信), the nation's second-largest mobile service operator, yesterday said a decline in pre-paid card subscribers would offset revenue growth in other business areas this year, but it expected the impact to be limited.

Far EasTone now only has 1.32 million pre-paid card subscribers, down 34 percent from 2 million, after the government last year banned convenience stores from selling pre-paid cards in a crackdown on phone scams.

Far EasTone has about 5.8 million mobile users.

"We took a big hit from the government's pre-paid card move, because Far EasTone was dominant in this market," Far EasTone president Jan Nilsson said after a press conference to launch the nation's first 3.5-generation (3.5G) data cards for computer users.

"This affected our EBITDA (Earnings before interest, taxes, depreciation and amortization) margin and top line," he added.

Nilsson said Far Eastone's service revenues would continue to grow, but "the decline [in pre-paid card business] would take away any growth."

As the government only allowed telecom operators to offer pre-paid cards at their own stores, the inconvenience has caused a decline of NT$2.5 billion (US$76 million) in revenue for Far EasTone since the beginning of the year, Nilsson said.

"The days of decline are over," Nilsson said, adding that the impact would bottom out during this quarter.

Far EasTone, which has a 60 percent share of the nation's pre-paid card market, suffered the brunt as it projected that revenue for the third quarter would amount to NT$11.1 billion, down about 40 percent from NT$18.6 billion a year ago.

Pre-tax income would likely slide 18 percent annually to NT$3.76 billion from NT$4.6 billion, the company forecast last month.

The popularity of Internet calls and a reduction in revenues from pre-paid card users were the main reasons behind the decline, Nilsson explained.

Industrywide, this year would be a flat year for Taiwanese mobile telecom service providers in terms of revenue, Nilsson said.

Nilsson said the data-oriented 3.5G, or High Speed Downlink Packet Access (HSDPA) service, would spur revenue growth and boost 3G subscription, but he declined to give a specific forecast.

Far EasTone planned to launch its 3.5G service by the end of the year bundled with a Motorola handset.

The service enables data transmission at 3.6 megabytes per second, 1.8 times faster than 2 megabyte ADSL connections that most people have at home.

Far EasTone subscribers in the Greater Taipei area are now able to enjoy fast transmission speeds and high bandwidth.

The company hopes to complete its 3.5G deployment within the next six months, earlier than its bigger rival Chunghwa Telecom Co (中華電信).

Chunghwa Telecom aims to upgrade all of its 3G network equipment by the middle of next year.

Far Eastone shares dropped 0.43 percent to NT$34.3 on the Taiwan Stock Exchange yesterday, underperforming against the benchmark TAIEX index's 0.59 percent gain.

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