Taiwan Telecommunications Report Q1 2008

There are two major movements sweeping across the Taiwanese telecoms industry; 1) The development and expansion of the 3G sector; 2) Government support for WiMAX service adoption and equipment manufacturing.

At the end of September 2007, there were 4.393mn 3G subscribers in the Taiwanese mobile market, against 3.633mn in the previous quarter, revealing an increase of 20.9%. Leading growth in the 3G sector for the first time has been FarEasTone (FET), with 329,000 net additions in the quarter, this accounted for 43.6% of the total 755,000 net additions. However, Chunghwa Telecom continued to dominate the 3G sector, with a 45.4% share of the overall market, driven by 308,000 net additions during the quarter.

The operator has promised to invest US$4bn over the coming five to seven years, as it looks to fend off rivals' FET and Taiwan Mobile, both of which have now crossed over the 1mn customer mark threshold.

The operator is intent on deploying additional handsets, of which 10 were expected to be launched in late 2007 or early 2008, and all with a subsidised price of under US$31. BMI is encouraged by this level of competition in the sector and believes that 2007 could end on 4.6mn 3G subscribers rising to 19.8mn at the end of our forecast period in 2012.

Since the WiMAX licences were awarded, FET has sought to deploy its network as quickly as possible.

The operator contracted Nortel Networks, Motorola and Alcatel-Lucent all in under a week to work on its WiMAX network. Although the operator does not face competition from its mobile rivals, there remain five other rivals in the sector. FET remains aware of the importance of WiMAX to the country's M-Taiwan project, with the government intent on turning Taiwan into a major hub for both WiMAX services and equipment. However, BMI notes the rising competition from the mainland and Vietnam, which have welcomed a growing number of vendor research and development (R&D) and production facilities. Indeed, this is not only the case for foreign companies, but increasingly for domestic companies as other locations offer low value-added production facilities.