Chunghwa's NGN plans

06 Sep 2006

Chunghwa Telecom, Taiwan's largest telecom service provider, plans to invest NT$50 billion ($1.5 billion) over the next five years to build its first next-generation network (NGN) as it seeks to upgrade its technology capability and fend off rising competition in one of Asia's most mature markets.

Due to declining fixed-line revenues, Chunghwa Telecom, like many peers in the region, has to consider next-generation technologies such as WiMAX, IPTV and VoIP, which offer customers innovative service packages, to drive revenue growth.

Chairman Ho Chen-tan of Chunghwa Telecom told reporters recently the state-run company planned to spend NT$50 billion over five years to build up an NGN, which includes FTTH and fiber-to-the-building (FTTB), to provide services such as digital homes, home security and Internet video phones.

'Everybody understands that you cannot rely on the traditional telecom business to boost revenues anymore,' said Shen Fu-fu, Chunghwa Telecom's director of investor relations. 'NGN is the global trend. We believe that's the way our three rivals will go, too.'

Some analysts agree, saying Chunghwa Telecom has no other choice. 'Taiwan is already late in building NGN. Japan, South Korea, Hong Kong and Singapore have started or will start to build theirs,' said David Shang, an analyst with Prudential Securities Investment Trust.

While service providers in China and India are anxious to deploy 3G services, their counterparts in South Korea, Singapore, Hong Kong and Taiwan are looking at media-rich 3G applications to boost revenues. But Taiwan has been slow in attracting 3G users.

Shang says competition is coming at Chunghwa from all directions. 'Demand for 3G has been sluggish amid lack of sufficient bandwidth. On top of that, Taiwan Cellular, First International Telecom and some others are vying to get WiMAX licenses, which the NCC [National Communications Council] is set to grant next March.'

According to a recent research report, the penetration rate of 3G in Asia excluding Japan would hit 12% in 2009, or 142 million subscribers. Taiwan's subscribers would only reach four million by then, or 2.9%. Currently, Taiwan has 2.2 million 3G users, according to the NCC.
Chunghwa Telecom said the investment will help increase its coverage ratio of FTTH and FTTB to 75%, compared with very little now. Excluding the planned spending for the NGN, the company will spend at least NT$26 billion in capex next year, flat from this year's and up 22% from 2005, Shen said.

The company has set a goal similar to that of U-Japan, having more subscribers in FTTH than ADSL in 2010. Chunghwa Telecom now has about 3.84 million ADSL subscribers.

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