3 reaches pivotal juncture - report

December 1, 2005

Hutchison 3G (H3G) needs to concentrate on promoting 3G data services at the expense of low-cost voice calls, or risk continuing the losses accrued by some of its operations. That is the opinion of the latest study, "Hutchison's 3: Market dynamics and opportunities for growth" published by industry research company visiongain.

The study also found that H3G's subscriber figure would slow in growth due to less aggressive customer acquisition techniques, reaching 12.3 million by 2007. Growth had been dramatic through 2004-2005 due to the strategy of offering low-cost voice calls and heavily subsidised tariffs, but to turn subscriber figures into a lucrative data service usage must increase.

"The next 18 months are critical for the success of H3G," comments report author Adam Walkden. "It has done well to achieve 10 million subscribers in a relatively short period of time, but the downside of this is that H3G are recognised more for low cost pricing than 3G services. The challenge now involves being less aggressive in pricing strategy whilst increasing data usage."

H3G has operations in the UK, Italy, Sweden, Denmark, Austria, Ireland, Australia and Hong Kong. However, whilst the Italian operation has broken even and is listed for IPO in early 2006, the only other operation to be nearing break-even is in the UK. As a result, the strategy of moving from aggressive voice pricing to pushing data services is needed to improve revenues in the business. H3G has slowly begun doing this, as reflected in its recent advertising campaign highlighting its multimedia services, such as music and TV.

This latest report from visiongain analyses Hutchison Whampoa's 3G operations by financial performance and positioning in markets of operation. It also evaluates the evolution of H3G's strategy, including services, pricing, partnerships and likely future scenarios, presenting forecasts until 2010.