Telecom Asia: Blaming it on the handset

Hong Kong conglomerate Hutchison Whampoa is sticking to its story that a handset shortage is to blame for its lackluster entry into 3G. It is outwardly pinning its hopes on new models from NEC and Nokia.

NEC's c616 3G handset was the cornerstone of Hutchison's December soft launch of the 3 brand in its home town, while in the UK it has struck a deal with the Carphone Warehouse Group to sell the teardrop-shaped Nokia 7600.

3 has so far been launched in Britain, Italy, Austria, Sweden, Denmark and Australia, but despite saturation media campaigns and a series of steep price cuts, it has garnered a mere 660,000 subscribers worldwide.

Hutchison managing director Canning Fok said last month that the company had 210,000 customers in the UK, 340,000 in Italy and 110,000 elsewhere. In Denmark, for example, where the service was launched in October, there were only 3,000 customers by December.

In Australia, meanwhile, where 3's massive summer marketing campaign built around the Australian cricket team has so far yielded only moderate returns in attracting subscribers, the NEC c616--originally due in shops before Christmas--is now expected to be available later this month.

3 has moved to strongly promote the Motorola A835 handset and is also hoping to start selling the new Sony Ericsson Z1010 handset soon.

Glitches and failures

Broking house UBS backed the company in blaming devices for its woes Down Under. It said in a recent research note that the "significant" handset shortage was damaging Australian sales, with sign-ons falling from 25,000 in July to less than 10,000 a month since September.

But other evidence has emerged of glitches and failures that are infuriating mobile users. A survey from the Australian Computer Society--described by Hutchison as "defamatory"--was highly critical of the 3 network's performance.

Australian newspapers have reported that angry customers are reporting frequent failures even of standard voice calls, while downsized staff complained of chaos in its shrinking call centers.

According to local analyst Paul Budde, 3 is "further slipping behind its targets" around the world.

"While some progress has been made, it is nowhere near the numbers that are needed to get a return on the massive investments they have made," says Budde.

Hong Kong's late January commercial launch, he says, would provide Hutchison management "with a good chance to get some first-hand experience.

"They will be able to judge for themselves if the customers are wrong in not embracing 3 of that they might have been wrong in making such heavy investments," says Budde.

"I expect that within six to 12 months of the Hong Kong launch the company will make a decision on what to do next, such as pull the plug of look for partners."

In Hong Kong, 3 will not have the luxury of being the only third- generation player in the market. Hong Kong rivals Sunday Communications, Smartone and CSL are expected to go to market with W-CDMA services this year.

The brand's problems around the world come despite a massive marketing campaign involving sports stars and other celebrities.

However, Fok and his boss, tycoon Li Kashing, may find salvation through other less traditional mass market services, like pornography and gambling. Hutchison has signed a global deal to give 3 subscribers access to more than 13 million photographs and 2,000 hours of video from Playboy.