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Roaring start not expected for 3G service
[February 23, 2006]

Roaring start not expected for 3G service

(Business World (Philippines) Via Thomson Dialog NewsEdge)The take-up of third-generation (3G) mobile phone services in the Philippines will likely fall short of initial expectations.

"The potential market for 3G services is currently very small, and it will require some years for demand on content services to grow substantially to merit offering 3G," information technology (IT) research and consulting firm XMG, Inc. said.

Canada-based XMG's outlook comes as four companies - Smart Communications, Inc., Globe Telecom, Inc., Digital Mobile Philippines, Inc. (Digitel) and Connectivity Unlimited Resources Enterprises (CURE), Inc. - pour in significant investments for the roll out of the next generation mobile telecommunication service.

In essence, 3G is designed to allow mobile phones to handle larger amounts of data. The speed of the service is being likened to an internet broad-band connection, this time using mobile phones and personal digital assistants, not laptops or desktop computers.

This early, 3G players are thinking of leveraging on "large and rich" content such cuts from movies, television and Japanese anime shows; news updates for business users; music tracks for audiophiles; sports clips for athletes and sports enthusiasts; and interactive games.

But for 3G to gain market success, XMG said consumption of data services per individual subscriber has to be substantial enough to automatically consume 3G capacity the moment it is offered.

"This might not happen in the Philippine market, however, as the low- bandwidth SMS service [or texting] remains the dominant source of revenue for local service providers," XMG said.

For instance, Smart's 2004 annual report showed the company derived at least 88% of its data revenue from SMS. "This suggests that a majority of subscribers still find SMS to be sufficient for their needs and would not immediately adopt 3G technology," XMG said.

Still, XMG said local prospects for 3G are bright, albeit not immediate.

"Although SMS remains the dominant form of data service consumed by mobile subscribers in the Philippines, the growth in consumption of value- added data services is slowly outpacing the consumption of SMS services. This would indicate the potential market demand for 3G services in the future."

It is estimated that earnings from value-added services such as ringtones and wallpapers increased by more than 100% last year, while SMS revenues continued to grow at a slower pace of 30%.

"It has only been in the last two years when the Philippine market experienced a surge in the consumption of mobile content services -from ringtones and wallpapers, to games and screensavers," XMG said.

3G service providers, another research firm said, should therefore leverage on hybrid 3G/WiFi phones to allow them to absorb the slow uptake of 3G use.

"WiFi technology could well kick-start the floundering 3G market," The Butler Group said.

WiFi is a technology that lets users surf the internet via wireless connections through access points called hotspots.

The recommendation is "Based upon the presumption that users of wireless hotspots will become addicted to the broadband speeds and the untethered access afforded by this technology, and so will then be much more amenable to the idea of a combined WiFi/3G tariff from their mobile phone service network provider," Butler senior research analyst Richard Edwards said.

Jay Fajardo, president of WiFi provider AirborneAccess, said cellphone makers such as Nokia and Motorola recently unveiled WiFi-capable GSM phones with the Skype internet telephony service.

Arcelio J. Fetizanan, Jr., general manager of mobile content development firm Icon Interactive Inc., said 3G firms should make the technology more market-friendly.

"They must make the service more affordable. The existing GPRS service is billed per kilobyte of use. More people will surely avail of the 3G service if they would offer it for monthly subscription or use prepaid cards," he said.

And aside from the local market, Mr. Fetizanan said overseas Filipino workers are another potential market for 3G.

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