HELSINKI, Finland-Hong Kong-based Hutchison Whampoa and Swedish venture group Investor are planning a spring launch for their so-called 3 mobile telephony service in Sweden. Company chiefs insist the new mobile service will return a profit on operations within five years.
Hutchison and Investor are partners in Hi3G, the third-generation (3G) joint venture company required to have a 3G network in place by year-end 2003.
3 will initially offer nationwide mobile coverage of Sweden through Vodafone’s existing Swedish countrywide network. The company plans to move all traffic to its own 3G network, enabling live video on handsets, by 2004.
For Swedish mobile users, the 3 launch will lack the dynamic of price competition. According to Hi3G, the company has no plans to start a price war with rivals. Instead, 3 will strive to focus the market’s attention on the value-added dimension of its products and services.
“Quite frankly, for 3G operators in Sweden to engage in a fierce price war would be tantamount to cutting their own throats. All of them are eager to recoup their investments in the fastest time possible. There will be no price war, although there may be some marginal differences in tariffs charged to customers,” said Lars Stenholm, a telecom analyst with NordKapital, the Stockholm, Sweden-based investment bank.
“The only question that really matters is can Hutchison Whampoa and Investor get the 3 network’s operating platform and cost structure right so that the business can generate a profit within five years.”
Hi3G Chief Executive Officer (CEO) Chris Bannister said 3 can meet profit targets in this timeframe.
“The five-year timeframe for generating a profit is very realistic. We will be doing everything we can to reduce that timescale and get the business to return a profit even sooner. It is not our intention to engage in a price war. This would not be in our best interests. If there is a war, it will be on the applications side,” said Bannister.
The probability is that 3 will enter the Swedish market with prices on voice calls 5 to 10 percent lower than the competition and lure subscribers with attractive applications, such as person-to-person video calls, as well as game clips of various sports, including ice hockey and soccer, said Bannister.
The 3 launch will impact the market shares of existing mobile network operators, TeliaSonera, Tele2 and Vodafone, given that the market is already saturated and 3 will be required to build what customer base it can by poaching customers from existing providers.
According to Bannister, 3 wants to offer its subscribers the possibility to watch sports games on their terminals in addition to place bets on them, and “dialogue” in chat rooms about these games.
It is anticipated that the first 3G phones from 3 will be available in most Swedish cities by May. 3 will not subsidize the Motorola and NEC handsets. According to Bannister, the company secured the handsets from the two manufacturers “cheaper than many existing handsets on the market.”
Bannister said his company would have tens of thousands of subscribers in 2003, but he would not give a precise figure.
3 expects to secure significant market share in 2004. The company is targeting a 25-percent share of the teenage and 20- to 30-year-old markets, achieving revenue per user 20 percent higher than Vodafone or TeliaSonera.
