The nation’s telecoms might see mobile revenue shrink by 5 to 8 percent this year as the NT$499 (US$16.66) per month unlimited data plans would hurt players in the highly competitive market, International Data Corp (IDC) said in a report on Tuesday.
More than 1 million people subscribed to the data plans, which were offered from May 8 to Tuesday last week, it said.
“It is rare to see any major telecom in the world initiating a price war, as a reduction in average revenue per user or a loss in market share would immediately cut into their free monthly cash flow,” IDC said.
Chunghwa Telecom Co (中華電信), the nation’s biggest telecom, was the first to unveil its plan, in a bid to counter competition from its rivals, which have been attracting subscribers with low-cost plans.
Chunghwa Telecom’s plan was originally only available to a small, select group of subscribers, such as government employees.
However, Taiwan Mobile Co (台灣大哥大) and Far EasTone Telecommunications Co (遠傳電信) followed suit the next day.
“Usually, smaller players or new entrants offer lower rate plans to solicit users from existing players,” IDC said.
Taiwan’s mobile market has been saturated since 2011, with five telecoms competing for a bigger share of 28 million mobile users, IDC said.
Escalating competition might be linked to a sector-wide 6.5 percent annual decline in mobile revenue to US$6.75 billion last year, it said.
Weakening revenue growth might delay the telecoms’ transition to 5G technology, which requires heavy investments in license acquisition and network deployment in the initial phase, IDC said.
“It is questionable whether Taiwanese telecoms could afford the heavy costs of 5G investment due to the non-stop pricing war,” the market research firm said.
Local telecoms are still paying depreciation and amortizations for the equipment and licenses they purchased for 4G technology, it said.
The companies have spent a total of more than NT$170 billion on purchasing 4G bandwidth and about NT$100 billion on 4G network deployment, it added.
The effects of the low-cost plan might spread to the handset market, as telecoms are the major buyers of mobile phones, offering them at subsidized prices in a bid to retain existing subscribers, industry observers said.
HTC Corp (宏達電) general manager and senior marketing officer Darren Chen (陳柏諭) said the low-cost plan might reduce demand for premium smartphones this year, the Chinese-language Apple Daily reported yesterday.
However, the company said it still expects its handset sales this month to grow from last month, as the subscribers to the plan need to buy mobile phones.
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