Newcomers Look To Seize 4G Opportunities
Taiwan's National Communications Commission (NCC) has received seve n applications for 4G spectrum. Among the list of applicants there are several new faces - electronics giant Hon Hai Group (parent company of Foxconn ), food manufacturer Ting Hsin International Group and Shingkong Synthetic Fibers Corp . BMI believes new entrants face cost disadvantages against incumbents with ready networks and sizeable subscriber bases. To generate positive returns, newcomers need to have clear business strategies and consider cooperating with second-tier operators to increase scale. BMI does not expect the oligopolistic telecoms structure to change given unsuccessful attempts to break the incumbents' strangleh old by past entrants .
Besides the incumbent 3G operators - Chunghwa Telecom, Taiwan Mobile, Far EasTone and Asia Pacific Telecom - three newcomers, including Hon Hai, have expressed interest in acquiring 4G spectrum. BMI believes Hon Hai's bid is an attempt to leverage its mature personal computer and phone manufacturing business by giving it a direct stake in the fast-growing mobile services market. We expect latent 4G demand in Taiwan given its above 100% mobile penetration rate and high data usage.
That said, newcomers face cost disa dvantages against incumbents which have scale in both network and subscriber bases. New entrants without prior 2G or 3G experience will need massive investment to roll out 4G networks and attract large customer bases to achieve economies of scale needed to be commercially viable. That means incumbents can launch 4G operations in 2014, at the earliest, but new entrants may not be able to begin operating until 2017 if they win the 900MHz or 1,800MHz frequencies. Incumbents will enjoy advantages because existing regulatory laws allow them to allocate 4G services via a combination of 3G and 4G networks, giving them critical first-mover advantage to capture market share.