Uncertainty Colors Asia Telecoms Industry Meeting

By Tony Munroe, Reuters, Saturday 2 December 2000, 8:07 PM ET

HONG KONG (Reuters)—Telecoms executives and regulators from Asia and elsewhere converge on Hong Kong this week for a massive industry gathering at a time when the sector that once promised limitless opportunity is in a state of shell-shock.

This is the industry that will change the future, said ABN AMRO telecoms analyst Joe Locke, ahead of the International Telecommunications Union’s (ITU) Asia conference, which begins Sunday. But the problem is that the revenue model is not quite there yet.

Global telecoms valuations have taken a beating in recent months as investors—once beguiled by the prospects of third-generation (3G) mobile phone networks—have grown skittish over the high cost and unclear revenue opportunity of 3G and the intense competition carriers will face.

Under that backdrop industry insiders will talk about 3G—which intends to bring the high-speed Internet to mobile phones—Internet protocol (IP) technology, and the finer points of regulation. Numerous vendors plan to show off their latest wares.

Land Of Opportunity, And Risk

Despite the gloomy global landscape, many in the industry say that Asia—where telecoms valuations were often less stratospheric than in Europe, competition is less intense (or non-existent), and capacity often lags demand—is the land of telecoms opportunity.

It is opportunity, and it is risk, said Charle Peza, telecoms analyst at Lehman Brothers in Hong Kong.

And Asia boasts the only large-scale example of the wireless Internet, in NTT DoCoMo (news—web sites)’s (9437.T) hugely popular proprietary i-mode system, which boasts 14 million users. Tokyo-based DoCoMo is the world’s biggest carrier by market value.

Many in the industry say that Asia, where in some markets mobile phone penetration is extremely high but comparatively few people have personal computers, will be a hotbed for the development of applications for mobile commerce.

If the last two years were about Europe, the next two years are about Asia, ABN AMRO’s Locke said.

Mystery Solved

One question investors hoped to have answered at the ITU meeting was resolved on Friday when China’s top telecoms regulator, said no changes in billing policy would be implemented before 2002 in what has quickly become the world’s second largest wireless market.

The clarification by Ministry of Information Industry chief Wu Jichuan, which included an extraordinary meeting with fund managers in Hong Kong, helped lift the battered shares of mainland wireless giants China Mobile (Hong Kong) Ltd (0241.HK) and China Unicom (0762.HK), by seven percent and 15 percent, respectively, on Friday.

Investors had been spooked by mixed signals from Beijing that so-called calling party pays mobile-to-mobile billing, which would hurt short-term revenue, would be imposed in early 2001.

Worry had centered largely on the reminder that investing in emerging markets carries regulatory risk, investors said.

Separately, dealmaking was proven to remain alive on Thursday when DoCoMo agreed to buy a 16 percent stake in AT&T Wireless Group Inc (NYSE:AWE—news) for US$9.8 billion.

Confident To Queasy

Still, queasiness pervades an industry that was once so confident. Where dealmakers a year ago labored through the year-end holidays, plenty will spend family time this season.

A lot of people are re-writing their game plan ... people are going to be very, very prickly about talking about next year in any meaningful way, one insider said.

The ITU event will be kicked-off Sunday with a speech by Richard Li, chairman of Hong Kong’s Pacific Century CyberWorks (0008.HK), which nine months ago pulled off Asia’s biggest-ever corporate takeover deal with a US$28.5 billion buyout of Hong Kong’s dominant phone carrier.

But PCCW, whose shares reached HK$28.50 early this year as investors bought into the firm’s converged Internet and telecoms vision, demonstrates just how skeptical investors have become. Despite a boost of 11.34 percent on Friday as Hong Kong stocks surged, PCCW shares ended the week at just HK$5.40.