Wireless profit 'easier in Asia'

December 6, 2000
Web posted at: 11:24 AM HKT (0324 GMT)

By Nic Hopkins
CNN Interactive Writer

Hong Kong (CNN) -- Asian mobile phone companies will have a smoother path to profitability than their Western counterparts with third generation (3G) wireless services linking users to the Internet via handsets.

That is the view of David Almstrom, the Beijing-based vice president of business strategy of Swedish wireless technology giant Ericsson. He says Western mobile users "expect everything to be free" on the Internet while millions of Asian users have yet to get online.

Almstrom says Asia will be the dominant mobile region in the world from 2002 thanks to the explosive growth of the Chinese market.

It has grown from almost nothing to more than 70 million users in two years and is tipped to hit 270 million users by 2004.

He says it could be a goldmine for providers of Web-enabled wireless devices.

"Westerners have grown used to everything being free on the Internet, but in Asia the impression is that you have to pay for services," Almstrom told CNN.com at the International Telecommunications Union's Asia 2000 conference in Hong Kong.

"This makes it harder for Western companies to profit from 3G services.

"The average revenues per user in Asia might be lower because there is a lower gross domestic product per capita in many markets here, but there are and will be more flexible billing systems that will allow people to pay for what they can afford, and they will be more inclined to pay.

"All companies will need to be inventive if they are to make money from 3G, but Western phone providers will find it hardest," Almstrom says.

The services likely to be available from Internet-enabled 3G phones will range from financial information and mobile banking to video streaming of news and the download of movies and songs.

"The mix of products and services will not be much different to what people have on their existing phones, it will just be greatly enhanced," Almstrom says.

South Korea and the U.S. have already launched limited 3G services using the Code Division Multiple Access (CDMA) digital wireless technology, for which Ericsson is a major developer.

The growth will shortly spread to other markets and Almstrom says: "It will be 2003 or 2004 when there are more people in Asia accessing the mobile Internet than the PC-based Internet".

The distinction between the two "types" of Internet will be made by the two different ways in which people surf the Web. Most people today access the Internet through PCs with large download capacities, large screens and diverse multimedia functions.

Internet phones will have much smaller screens and different capabilities, meaning that Web sites will have to be tailored just for them.

Despite the massive growth expected from the introduction of 3G technology, Ericsson has stepped back from producing 3G handsets in favor of producing the network infrastructure for the technology. It is also maintaining its strong business of producing older generation handsets.

"We don't make money from making CDMA phones, our focus for the time being is on building for the mainstream and in the short-term at least the present generation of phones will continue to dominate," Almstrom says.

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