Hutchison Running Out Of 3G Time

Dow Jones covers a recent report from U.K. firm Visiongain that claims Hutchison Whampoa need to get its act in gear and transition 10 million subscribers to higher margin data plans in order "to make its US$25 billion bet on 3G technology successful."

Adam Walkden at Visiongain said, "What is critical is how 3G services take off in the next 18 months. The key is their positioning, whether they can achieve increasing data usage in their markets."

According to Hutchison, "the company had 10 million 3G subscribers in its various markets - but at a heavy cost in terms of operating losses." In the first half of 2005, only 23% of Hutchison's 3G revenue in six markets was derived from data services.

Walkden said, "In Europe they are well known for low-cost calls and not 3G services, which is really what they should be known for."

He predicted Hutchison's subscriber base would increase "to 13.9 million in its nine 3G markets, which include Hong Kong, Australia and Israel."

Although Walkden said Hutchison has been looking for the elusive 3G killer app, he opined, "Music downloads and music videos could become a big thing. There are quite a lot of applications out there and nothing has taken off for them so far."

Walkden also noted very little competitive differentiation between Hutchison and other network operators. He stated, "Looking at the 3G market there isn't that much difference between the 3G offerings of Vodafone Group PLC (VOD) and Hutchison."

And with US$1.4 billion spent "in the first half of 2005 acquiring 3G customers," Walkden added, "It's difficult to see how they can continue to grow their subscriber base without continuing to offer handset subsidies. A market share of 15% is being bandied around as necessary for their profitability. It doesn't look promising at the moment but it all depends on how 3G takes off."