3G Breakthrough


Economic News

22 Jul 2010
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The launch of fully-fledged third generation (3G) mobile telecommunications in Thailand gives operators the chance to seek new streams of revenue as the traditional market approaches saturation point.

On August 22, Thailand's two leading mobile phone operators announced that they would be launching 3G services in the first quarter of 2009. A few days earlier, mobile firms were given the all clear to import 3G equipment by the National Telecommunications Commission (NTC), the telecoms regulator.

Both market leader Advanced Info Service (AIS) and second-placed Total Access Communication (DTAC) will launch the new technology in Bangkok early next year, before rolling it out across the country. AIS expects to have 3G operating in "major cities" by the end of the first quarter. The firm, in which major regional player Singapore Telecommunications has a 21.4% stake, already operates 3G in the northern city of Chiang Mai through high-speed packet access (HSPA), even though coverage remains limited.

Meanwhile, DTAC, which is indirectly owned by Norwegian outfit Telenor, has said that it will focus on covering Chiang Mai and Phuket in the south once it has installed 3G in the Bangkok area. The third operator, True Move, a subsidiary of Charoen Pokphand Group, Thailand's largest corporation, also has the right to deploy 3G. It has yet to announce specific plans, though it has been looking at developing wireless internet coverage.

DTAC has announced that it will be investing some $150m in upgrading its 850 MHz frequency network to handle 3G communications, and up to $35m in importing other necessary equipment. So far, Finland-based Nokia Siemens Networks, Swedish technology firm Ericsson and China's Huawei Technologies have expressed interest in supplying the operator.

DTAC is not expecting to generate a great deal of revenue in 2009, partly because of the scale of the investment, and partly because it will take time to develop the market. "We would start realising revenue from 3G in 2010. The first year should be for positioning as technology leader in the market," Sigve Brekke, the chief executive of DTAC, told the international press.

The NTC decision to launch 3G comes as a fillip to the operators and consumers alike. AIS had been planning to formally launch 3G in seven cities this year, but the process was held up by delays in importing the required equipment. Progress on setting up a 3G regulator has also been slow. Brekke has said that the 2100 MHz international-standard bandwidth for 3G would probably not be allocated until the end of next year, given this delay.

Despite these glitches, the 3G technology is considered a major step forward from "second-generation" telecommunication as it allows video calls and internet connectivity, as well as offering significantly higher capacity. Furthermore, the introduction of 3G licensing in Thailand will see firms pay a large up-front fee for the right to operate the technology, rather than being taxed on their revenues. This is seen as a fairer system - after all, the network equipment is paid for by the operators - and an incentive to optimise profitability, given the fact that, once the licence is paid for, the firm in question is not obliged to hand over a portion of its earnings to the NTC.

Perhaps most importantly, the launch of 3G offers mobile operators the chance to expand their revenue base at a time when growth in the conventional mobile sector is slowing as the market saturates. Penetration is expected to reach 95% by the end of this year, and while this figure may be inflated by some people owning more than one subscription, there is no doubt that room for 2G growth is ever more limited. AIS and DTAC are expecting revenue growth of 7-8% and 5% respectively this year.

Scope for market share competition also seems limited - a recent forecast by IE Market Research suggests that AIS's share will decrease only slightly from a forecast 44.5% in 2008 to 43.7% in 2010.

Given the fact that 3G services tend to generate higher margins and increase the scope for selling new products to customers, thus helping boost average revenue per user (ARPU), the launch of the new technology has come not a minute too soon.

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