Page 25 - Sphere No.8 (Mar 2003)

SPHERE
1223
scratch is an enormous undertaking – in some ways comparable
to the complexity of space exploration. But the Group has
already built and tested the “vehicle” and believes it has the
vision, stamina and the financial heft to now make the journey.
“Yes, there have been difficulties,” says ColinTucker, CEO of
Hutchison 3G UK. “This is cutting-edge technology and we’re
innovating every single day.The key point is that we overcome
those difficulties, we focus on them like a laser beam, one by one,
until they’re fixed. Like any good consumer-facing business we
will use ongoing research to fine-tune our proposition on a
rolling basis.”
Inevitably, the Group’s progress has been under intense
scrutiny by partners, investors, competitors and the media.
The big question has been: “Why is Hutchison so bullish
about 3G when others are not?”
Apart from the company’s financial security, it’s in large part
a matter of experience and perspective. “You have two of the
most successful consumer technology revolutions in the history
of mankind brought together in one device,” commented
Hutchison Chairman Li Ka-shing.“We are not sitting on our 3G
licences.We are now going at full speed.”
Revered in Hong Kong for his business prescience,Mr Li has
travelled several times to Italy and the UK for detailed reviews on
3’s progress. Group Managing Director Canning Fok is an even-
more-frequent flyer.
“They know every detail of the operation,” commented one
insider.
With a strategy that stretches at least 20 years into the future,
the Group is well prepared to meet the considerable challenges –
and seize the opportunities – inherent in such a huge
undertaking.
The company has conducted extensive consumer studies
globally (see sidebar, p.16) and has a clear picture of the potential
marketplace. And while it is impossible to exactly predict the
future, it’s nevertheless instructive to cast an eye on the recent
past.
It was as recently as 1980 that IBM approached Microsoft to
develop its personal computer project, unleashing its first PC in
August the following year.
The World Wide Web was born in
1990 and in just its third year in existence
was growing at a rate of more than
3000%.
Whereas in the late ’80s, a mobile
handset was a bulky symbol of wealth
and status, today’s much smaller
version is an essential, everyday part of
life, almost as common as fixed-line
phones.
More than a billion people
globally now use mobile phones,
with around 400 million handsets
sold in 2002 alone.
SMS was once derided as a
peripheral feature with limited
potential, yet 366 billion messages
were sent in 2002. SMS currently
generates an estimated £100
million a month in the UK
alone.
These changes have all occurred in spite of the ups and
downs of economic cycles. With a longer-term perspective, a
bright future for 3G is highly feasible.
London-based consultancyThinking Box believes that in five
years 3G penetration will hit 50% in Europe and could be as high
as 75% in some countries.That’s a lot of potential revenue.
The UMTS Forum also sees plenty of upside:
“Acknowledging the substantial investments in network
infrastructure and the high cost of licensing in some countries
in Western Europe, the market opportunity for 3G is
nevertheless massive.”
Mobile users would double to two billion in ten years with
a substantial proportion using 3G technologies, the UMTS
Forum predicted. “Thanks to the extended appeal of 3G’s
increased speed, capacity and value-added capabilities, service
revenues will grow even more spectacularly.”
STEP BY STEP
Hutchison has remained steadfastly upbeat about the business
proposition of 3G, and has moved quickly to establish itself as a
serious global contender.
It has acquired licences in nine countries, shopping more
wisely than competitors and paying far less on average for
spectrum. (The company’s attributable licence cost in the UK,
for example, is more than 40% lower than that of the other four
incumbents.)
While investment costs have been substantial (approximately
US$17 billion in total), the Group is within its budget, deploying
part of the proceeds from sales of 2G assets, forming strategic
partnerships with global players like NEC and DoCoMo,
and securing adequate bank financing (see sidebar, p.14) in an
extremely difficult market.
The Group is far more focused than competitors, who plan
to gradually migrate but are currently torn between collecting
the 2G dollar and preparing for a 3G future. Unencumbered by
the old technology, 3 has forged ahead to master the new.
“In Europe, we have the opportunity to be a ‘pure 3G player’
with no legacy network and therefore can employ cutting edge
technology from day one,” says Novari.
Hutchison understands that it is very important to maintain
first-mover advantage by doing all it can to deliver on customer
expectation. In the long term, the Group is confident that 3 will
prevail.
“There have been so many milestones along the way for us
to celebrate,” said Bob Fuller, Joint CEO of H3G
Italy. “And all the while the world has had its
nose pressed to the glass, eager to find out what
we are doing and see a slice of the action.”
3G