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Despite Losses, Hutchison Sticks with 3G Strategy

Despite mounting losses from its investment in next-generation wireless services, Hong Kong-based Hutchison Whampoa is sticking with its strategy to roll out 3G, or third generation mobile services, ahead of a fall marketing offensive in Europe and parts of Asia.

The wireless provider is also sticking with its aggressive expectations for new subscribers by ordering 3 million more 3G handsets in preparation for its plans to deliver new services in the United Kingdom and Italy.

Hutchison has stated it plans to have a million subscribers in both countries before the end of the year. Currently, Hutchison has signed up 155,000 3G customers in the U.K., and 300,000 in Italy.

To achieve its goals, Hutchison will have to boost its uptake rates in the last four months of the year, which could include price cuts to entice new users -- a move that rival wireless providers would be eyeing closely.

But even as it moves forward with its 3G plans, the company reported a $500 million loss for the first half of the year, caused primarily from its massive 3G investments. Despite the losses, however, its sales rose to $47.4 billion, up from $33.3 billion the year before. Hutchison still has $5.2 billion in credit borrowing facilities for its 3G expansion plans.

There are also signs that Hutchison's 3G services are starting to gain traction. The company reported it has signed up close to 400,000 customers to the sophisticated mobile phone service during the past three months.

Upon reporting financial results on Thursday, Hutchison's Chairman Li Ka-shing said while 3G is only currently offered in parts of Europe and Australia, the company's ambitious plans to roll it out elsewhere are moving forward. He said Hutchison previously announced target of signing up two million global 3G customers before the end of 2003 still stands. Hutchison says it currently has a total of 520,000 3G customers.

But despite Hutchison ambitious 3G targets, the company continues to post mounting losses from operations for the advanced mobile service. The company said losses at its telecom division continued, in part, because of the costs of setting up its 3G networks in the U.K. and Italy.

While several other international wireless carriers paid huge fees for 3G licenses, many have scaled back their 3G rollout plans, but Hutchison seems to be staying with its plan. The company says it plans to spend $17 billion in a combination of licenses, network construction, handsets and marketing in nine countries where it plans to deliver 3G services in the future.

Li Ka-Shing admits the company's ambitious 3G strategy has been costly, but it also positions Hutchison for the future, if and when mobile subscribers decide to adopt the 3G handsets and services.

In addition to Hutchison's initial 3G customers in the U.K. and Italy, the company also said it has signed up 50,000 customers in Australia and 15,000 in Sweden and Austria combined. The company will rollout 3G in Hong Kong and Denmark later this year, and in Ireland sometime in 2004.

A new report released by the research firm Telecompetition says it will be the Asia Pacific region which will drive worldwide adoption of "advanced mobile data services. The group says the Asia Pacific region will generate $19 billion in annual revenue and a 40 per cent share of the world market for mobile multimedia services by 2005.

The report goes onto said that the Asia Pacific region will add more than 600 million new mobile data subscribers through 2010, which result in annual revenues of $142 million before the end of the decade.

Telecompetition says mobile data subscribers will quadruple in China to 256 million subscribers, which will make it the biggest mobile market in the world by 2007. The research says by 2007 the U.S. will slip to being the second largest mobile data subscriber market with 211 million subscribers. The report China and the U.S. will be followed by Japan with 102 million subscribers and it expects India to grow significantly, as well.