Darwin G. Amojelar
Manila Times

WHEN the Philippines’ leading telecommunication companies introduced 3G (third generation) technology service, Cristina was one of the early subscribers who bought a handset to benefit from the new service the telcos called the next big thing in the industry.

“Since I bought my 3G handset, I can’t remember using my phone to have a video call because some of my friends don’t have one and I can’t even call other networks,” she said.

Celine, who also owns a 3G phone, said her calls to loved ones in Batangas were always cut off. “The image in the screen was garbled and the sound is not clear,” she said.

“It should be Globe to Globe or Smart to Smart subscribers to make video calls,” she added, referring to the country’s two biggest telcos, both of which bagged two of four hotly-contested 3G-service permits the government issued earlier.

Smart Communications Inc. and Globe Telecom Inc. admitted 3G demand has yet to pick up in the country since it was introduced early last year.

The country’s two largest mobile-phone service providers are also uncertain when the market will flourish, since the prices of 3G-capable handset have yet to come down.

In other countries, Austria’s Telefonica Moviles, Sweden’s Orange, Norway’s Sonera and Tele2 returned their licenses.

Napoleon Nazareno, Smart president said the take up of the 3G service depends on the affordability of the handsets.

“Its really a handset driven [market],” he said.

Ferdinand de la Cruz, Globe consumer wireless group head, said demand for 3G services will be driven primarily by phone prices, adding 3G-enabled phone handset prices will go down to between $100 and $200 apiece.

A 3G-capable handset sells for $300 to $400. Video calls are one of the capabilities unique to these units. They also include Internet browsing, downloading and video streaming, among others.

In June, LG Electronics Philippines Inc. introduced the LG KU250, the most affordable 3G handset costing about $128, or P6,290. Twelve operators, including Globe and Smart, agreed to offer the LG KU250.

But of the estimated 250,000 3G phones on its network, Globe said about 50,000 to 60,000 subscribers use the service. For its part, Smart said its 3G users stood at more than 200,000 out of 500,000 3G-enabled handset users on its network.

Too early to say a failure

Both telcos said “its [too] early to say” that their 3G ventures are a failure.

“Its only two years. We continue to roll out. Once the network is there and the handset becomes affordable, we will see much richer take up of subscribers,” de la Cruz said.

Nazareno said his company’s investment in 3G would depend on the market growth. Earlier, Smart was forced to scale down spending on its 3G network on which it has so far invested $60 million out of the P33-billion planned capital expenditure in six years because its tax incentive was recalled.

For its part, Globe invested more than P4 billion last year when it committed to rollout its 3G network.

Of the four telcos that obtained a 3G license, only Smart, a Philippine Long Distance Telephone Co. unit, and Ayala-led Globe have begun operating their services. Under the National Telecommunications Commission (NTC) rules, the four firms have a year to start their roll-outs. Gokongwei’s Digital Mobile Philippines Inc. and new player Connectivity Unlimited Resources Enterprises (CURE) of the Ongpin family are still testing their 3G networks.

Industry sources claimed that besides expensive 3G handsets, interconnection among telcos and killer applications prevent the service from booming.

A Globe executive also admitted the top two players have yet to interconnect to allow other subscribers to make calls on its network.

“Not yet. We will concentrate first on the rollout of our network. We need to grow first on our base like GSM, there’s still opportunity, but maybe it would come, “ he said, referring to the second generation technology prevalent in the market.

Under the NTC’s memorandum circular, interconnecting among 3G networks is mandatory.

Telcos need killer application

Edgardo Cabarios, NTC director for common carrier and authorization, said telcos need to find a killer application to increase 3G subscriber growth.

“If you look on the subscribers take up talagang mababa pa [its still too low]. There must be a killer application,” he said, disputing telcos’ insistence that handset price is key to growth.

“If you based it on the GSM, its not true. In [the] late 90’s the GSM handsets [were] expensive compared to analog. It took text messaging service [for GSM to] pick up,” the NTC official said.

“That is why [telcos] are now looking [at] mobileTV,” he said, adding industry players are banking on this service to grow the 3G market.

De la Cruz admitted Globe is looking at mobile TV using its 3G network. “We’ll see if there is a market for mobileTV. We will push for mobileTV using [the] 3G network,” he said, adding mobile TV will work with most 3G handsets that can place video calls.

The country’s two leading mobile-phone service providers have begun their venture into mobileTV, albeit on a limited promotional basis. Unfortunately for the two players, the promise of mobileTV boosting the growth prospects of their 3G offerings remain unfulfilled as regulators have yet to issue guidelines on the service.