Demand for 3G services seen to pick up strongly

Demand for third generation (3G) mobile communications technology is expected to significantly pick up beginning this year after the country’s major 3G service providers and their counterparts in other countries have joined an effort to produce low cost 3G handsets for emerging markets including the Philippines.

Smart president and chief executive officer Napoleon Nazareno, who also heads Smart parent Philippine Long Distance Telephone Co. (PLDT), said in an interview that one of the deterrents to the growth of 3G in the country will hopefully be resolved this year when LG starts making 3G phones at a price of around $130 per unit.

Twelve leading mobile operators belonging to GSM Association (GSMA) have selected a slim, multimedia phone developed by LG Electronics as the winning handset to spearhead a campaign called 3G for All which aims to make third-generation mobile services accessible to a much wider base. GSMA is a global trade association representing 700 GSM mobile phone operators across 217 countries around the world.

By agreeing on a common set of requirements, the 12 operators will enable LG to achieve major economies of scale in manufacturing, logistics and marketing. The LG-KU250 handset will be available at a wholesale price that is about 30 percent less than the typical entry-level 3G phone and fully-competitive with the multimedia second-generation handsets of today.

Unveiled to CEOs from across the mobile industry at the Leadership Summit of the 3GSM World Congress in Barcelona, the LG-KU250 handset will be available to all 3GSM mobile phone operators from the second quarter.

The 12 operators that selected the winning handset included Smart, Globe Telecom. Cingular Wireless, Hutchison 3G, KTF, MTN, Orange,Telecom Italia, Telefonica, Telenor, T-Mobile and Vodafone. Bharti Airtel acted as an observer.

Nazareno explained that as part of the contract, 3G service providers in the Philippines who are members of the GSMA will have to commit to sell certain volumes of 3G-enabled LG phones although this will not stop the likes of Smart and Globe Telecom from getting 3G handsets from other vendors.

The current high price of 3G handsets (around $300 per unit at least) has been identified as a major stumbling block in the development of the 3G market, although in the Philippines, mobile subscribers basically use their phones for voice and text communications, with still very few availing of 3G applications such as video calling. This despite the fact that 3G service providers have brought down the video calling rates to as low as P6.50 per minutes, or almost the same as an ordinary mobile call.

At present, only about 10 percent of Smart’s 3G capacity (1,200 base stations in major cities) is being utilized. As of the third quarter of 2006, Smart had invested around $60 million in 3G and this figure has not changed as of the end of last year, Nazareno said.

Globe Telecom president Gerardo Ablaza was quoted as saying that this breakthrough initiative of the GSMA will enable the company to improve handset affordability, one of the barriers to 3G service adoption in the Philippines. "We believe that there is a huge un-served, mass-market segment in the Philippines which this "3G for All" initiative will address; we look forward to 3G becoming a mass-market proposition within the next years. We commend the GSMA in its efforts to support the industry with a timely and effective market intervention ensuring that the price gap between 2G and 3G handsets is being narrowed by the delivery of this affordable, feature-rich 3G handset," he said.