First International Telecom (FiTEL) recently announced its decision to issue 250m common shares to raise an estimated $91m in fresh capital. The funds will be used to set up and operate a WiMAX (worldwide interoperability for microwave access) network in Taiwan.
This announcement came after the Taiwanese telecom was one of six companies to be awarded a licence in July by the National Communications Commission (NCC) to build and operate a WiMAX network. According to its bid, FiTEL will pay 12.9% of its annual revenue for the right to provide WiMAX service.
A total of eleven local companies bid for WiMAX licences with Global On and a joint venture between Tecom and VIBO Telecom joining FiTEL in winning licences for northern Taiwan. Far EasTone, Vastar Cable TV Systems and Tatung won the permits for the southern part of the country Taiwan.
The lowest successful bid was 4.2% of annual revenue, made by Far EasTone.
The six companies were given 18 months to build their networks, with the possibility of a one-year extension, and are required to begin operating within six months of completing construction. The licenses are valid for six years and may be renewed only once. The NCC is expected to auction off a licence after June 2009 to operate a WiMAX network on an island-wide basis that would be valid for a period of 10 years. That auction is part of the government's plan to make WiMAX a primary feature of Taiwan's information and communications technology (ICT) industry.
In 2005 the state identified WiMAX as the preferred technology for the M-Taiwan programme, meant to bolster the nation's ICT infrastructure to deliver world-class wireless internet access.
WiMAX uses radio frequencies that can send data for up to 30 miles, significantly further than Wi-Fi technology. While WiMAX access can reach 70 megabits per second (Mbps), due to building obstructions, speeds of 10 Mbps are more common.
The rollout of WiMAX services across the island is expected to boost the overall value of the industry by attracting investment in research and development, infrastructure and applications. In support of these aims, the government has provided funding as well as tax incentives to industry investors. Prior to the licence allocation in July, a small number of companies were granted approval to develop WiMAX base stations and services for certain sections of the M-Taiwan programme. Taiwan Mobile Healthcare Services, for example, is a co-operative venture between Canadian telecom equipment supplier Nortel and Chunghwa Telecom that will use WiMAX technology to deliver remote medical care.
The government is hoping that the M-Taiwan programme will bring local and international companies into close working relationships. A number of global heavyweights have already expressed interest in the plan. Earlier this year Motorola voiced strong support for M-Taiwan and said it would co-ordinate activities with the ministry of economic affairs to help promote the programme. Recent media reports speculate that Motorola is also planning to participate in FiTEL's forthcoming share issue.
In June 2006 Nortel launched a WiMAX information and testing centre in Taiwan. NEC, Japan's largest computer manufacturer, will soon set up a WiMAX research and development centre on the island, which will allow local equipment vendors to run interoperability tests and to request technical support. The German electronics firm Rohde and Schwarz is considering setting up a similar facility.
Taiwan-based ICT industry research firm Market Intelligence Centre (MIC) predicts worldwide investment in WiMAX network deployment will reach $5.2bn by 2008, with a compound annual growth rate of 150% since 2006. MIC ranks Taiwan's WiMAX market in second place overall, with a predicted investment of $664m between 2006 and 2008. The US is ranked in first place with a predicted investment of $3bn over the same period.
WiMAX technology is steadily gaining global popularity. Taiwan's government is hoping the country's WiMAX equipment industry will reap the benefits of this boom. The sector is eager to replicate the success of local Wi-Fi equipment manufacturers, which currently supply 90% of the world's Wi-Fi products. Analysts anticipate Taiwan will supply at least this much of the WiMAX market by 2012. Shipping volumes of WiMAX customer premises equipment are expected to grow 800% year-on-year in the second half of 2007 to reach 651,000 units, according to MIC. The total shipment value for 2007 is expected to be around $159m, up from almost $23m in 2006.