Telecoms merger spices up market for 3G services

By Jessie Ho  /  STAFF REPORTER

Thu, Oct 09, 2003 - Page 10

The merger between Far EasTone Telecommunications Co (遠傳電信) and KG Telecommunications Co (和信電訊) Tuesday will bring in more competition in the nation's telecom sector, market watchers said.

The proposed merger between the nation's third and fourth largest telecom operators will also speed up the introduction of high-speed wireless mobile phone -- also known as third generation (3G) -- services here, they added.

"Service is absolutely the key for telecom operators to expand market share," said Gary Lai (賴晴風), a researcher at Insight Pacific Investment Research (月涵證券) in Taipei. "In the future, price is no longer a viable card to play by for the nation's three major telecom companies."

The combination of Far EasTone and KG Telecom will create the nation's second-largest mobile-phone carrier after Taiwan Cellular Corp (台灣大哥大), and ahead of state-run Chunghwa Telecom Co (中華電信).

Far EasTone is banking on the merger to establish a close partnership with NTT DoCoMo Inc of Japan, which is a minority stakeholder in KG Telecom and will own 4.9 percent of the combined company. The transaction is expected to be closed by March next year.

"This relationship will add tremendous value to our multimedia mobile services and future 3G related developments," Far EasTone chairman Douglas Hsu (徐旭東) said in a statement issued on Tuesday.

The deal also benefits DoCoMo, as the agreement provides the Tokyo-based company with a local partner that has a license to provide 3G services in Taiwan, the analyst said.

"DoCoMo has been longing to promote its service, especially the `i-mode' multimedia mobile data service, to Taiwan ... That's why it was keen to push KG Telecom so hard to team up with larger partners like Far EasTone," Lai said.

DoCoMo yesterday also gave a green light to the merger. In a statement on its Web site, the company said it has concluded a memorandum of understanding with Far EasTone to collaborate on the W-CDMA third generation and i-mode mobile phone businesses in Taiwan.

KG Telecom, in which DoCoMo currently holds a 21.4 percent stake, introduced i-mode services in June last year. I-mode allows users to browse the Internet, exchange e-mail and download applications via i-mode handsets. Currently, there are 150,000 i-mode subscribers in Taiwan, the company said.

The agreement will also pave the way for more 3G services to be introduced from DoCoMo in the future, Lai said, saying that DoCoMo launched its FOMA, or Freedom of Mobile multimedia Access, 3G service last week in Japan, which features a downloading speed of 384kbps, and an uploading speed of 64kbps.

Alex Wu (吳興國), a telecom analyst at China Securities Corp (中信證券), shared Lai's view, saying that operators need to come up with value-added services.

"These services, namely 3G service, should be strong enough to persuade consumers into going through the hassles of switching their phone numbers," Wu said.

But the Far EasTone's 3G timetable is yet to be fully worked out, as the acceptability of 3G services by Taiwanese consumers is still low, analysts said. Companies need to educate consumers by explaining the benefits of 3G, they added.