BUSINESSWEEK ONLINE : JUNE 19, 2000 ISSUE
COVER STORY Asia Gets Hooked on Wireless And in the catbird seat: The companies that supply mobile-phone and Internet services in Korea, Japan, and China For a year, Choi Won Hee, a 21-year-old law student at Yonsei University in Seoul, had been resisting pressure from classmates and friends to buy a cell phone. She had grown attached to her pager and didn't think she needed a phone, too. ''I was the only one in my class still carrying around a pager, and they complained that I was out of touch,'' says Choi. And she was. One day in April, Choi waited for hours for some friends who had changed their meeting spot by zapping e-mails through their mobile phones. Choi, phoneless, never got word of the switch. Soon after, she bought a cell phone from sk Telecom, South Korea's largest wireless operator. ''Funny, but I got so sucked into it that I can't do without it anymore,'' says Choi with a grin. Wireless fever is seizing Asia. The region has long been considered the most promising wireless market in the world--thanks to its 3.3 billion people, who represent 58% of the world's population. Yet only about 5% of Asians have wireless phones, compared with 40% in Europe. Now there are signs that Asia is moving into the vanguard of the wireless industry: Penetration rates have hit 46% in Japan and are close to 60% in South Korea and Hong Kong. That's approaching the 70% rate in Finland, the world's most cell-phone-crazy country. The number of wireless users is expected to just about double in the next three years, to 350 million, more than any other region in the world. And in one important respect, Asia has already claimed leadership: NTT DoCoMo of Japan has the largest wireless Internet service anywhere, with 7 million users. The boom is doing wonders for the region's wireless phone companies. Three out of the top five telecom companies in this year's Info Tech 100 are Asian mobile carriers. China Telecom (Hong Kong) Ltd. (CHL), the leader of the group, at the No. 21 spot, is the dominant wireless provider in China. Its revenues surged 47% last year, to $4.7 billion, and its stock soared 235% for the 12 months ended May 15. NTT DoCoMo ranked No. 40, thanks to a 19% increase in revenues last year, to $34.4 billion, and a 158% stock market return. And SK Telecom (SKM), the leading wireless provider in Korea, nabbed the No. 53 spot. Its revenues rose 28%, to $3.8 billion, while its stock popped 146%. MOBILE WEB. The Asian companies are beginning to rival Scandinavia for technological leadership in the wireless world. NTT DoCoMo, for example, has set the standard for wireless Net access with its ''i-mode'' service. The company is providing the only commercial network in the world today that allows subscribers constant access to the Net from their mobile phones--letting them browse Web pages, reserve airline tickets, or play video games. It is the largest Internet service provider of any kind--fixed or wireless--in Japan. And it's a gold mine for DoCoMo: I-mode users pay about $80 a month for service, a quarter more than customers who just use their cell phones for voice calls. The wireless Net shows great promise in other parts of Asia--especially the huge China market. The Chinese government thinks mobile phones may be the cheapest and fastest way to get many people online, because much of the country still lacks traditional phone service. China Telecom (Hong Kong) already operates in 1,700 cities, and many of its customers want to get onto the Net through their handy little mobile phones. Now the government is encouraging such multinational giants as Motorola Inc. (MOT) and Nokia (NOK) to roll out products that can help China officials meet their public policy goals. China has staggering potential. Although China has the same number of subscribers as Japan, the country's huge population means its wireless penetration is just 4%. China's negotiations with the World Trade Organization may open up the market to mobile phone competitors, such as Britain's Vodafone AirTouch (VOD) and NTT DoCoMo. Even with competition, analysts think China Telecom (Hong Kong) Ltd.'s prospects are strong, thanks in large part to its close ties to the Chinese government (page 112). The company's earnings and cash flow are expected to grow 15% annually over the next three years, says analyst Hani Abuali of Donaldson, Lufkin & Jenrette. FIRM GRIP. Yet when it comes to the explosion of wireless usage, few have succeeded in as dramatic a fashion as SK Telecom. A wireless company rarely noticed outside Korea, it controls an overwhelming 58% of the country's mobile-phone market, or 16 million subscribers. Once a simple paging company called Korea Mobile Telecommunications Co., the company was taken over in the mid-1990s by SK Group, the nation's fourth-biggest industrial conglomerate. That gave it the financial and political backing to dominate the mobile market as it exploded over the past few years. Revenues have soared fivefold from 1994 to 1999, to $3.8 billion. Now, with 6 out of 10 Koreans using mobile phones, SK Telecom is looking to wireless Internet services to keep boosting revenues. ''The next engine for growth is data services,'' says SK Vice-President Song Hyo Sup. It's off to a promising start. Already, SK Telecom has upgraded its system to let subscribers send data at speeds of 64 kilobits per second, surpassing DoCoMo's peak speed of 28.8 kbps. The services are proving attractive to customers. Less than three months after the Net features appeared, 2 million subscribers are using them. The Asian mobile market won't lack for heavyweight competitors. Thanks to its government backing and political clout, China Telecom is likely to dominate its domestic market for years to come. After its success with i-mode, NTT DoCoMo aims to compete more broadly in the region. And major global players, such as Vodafone AirTouch, are looking for further ways to expand in Asia, probably by partnering with a native company. With the biggest mobile-phone market on the line, the vanguard of the wireless world world may be shifting to Asia. By Moon Ihlwan in Seoul, with Alysha Webb in Shanghai and Warren Caragata in Jakarta _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Asia Gets Hooked on Wireless TABLE: Top of the Telecom World Making All the Right Calls ONLINE ORIGINAL: Powerwave: Amplifying the Wireless Revolution INTERACT E-Mail to Business Week Online

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