Still room for growth

Victor Liu
14 Feb 2006

This year marks the tenth anniversary of personal handyphone services (PHS). Thanks to the remarkable technological advancement and impressive marketing efforts by the whole value chain, PHS evolved from simply a low-cost wireless voice communication tool to much more.

Today PHS is among the high-speed package data products that attract lots of attention in Japan, an excellent integration of fixed-line telephone services and wireless extension through intelligent network architecture in Thailand, as well as a cost-effective mass-market mobile service for tens of millions of Chinese who might otherwise not have a phone.

PHS has grown tremendously from only a few million subscribers in a single country just a few years ago to over 80 million subscribers across the region today. Despite speculation of a dim future for PHS under the great competitive pressure from 2.5G and 3G cellular technologies, PHS is expected to remain viable and reach an ultimate subscriber base of 110 million users toward the end of this decade.

With 15.6 million net adds in the first nine months of 2005, China further strengthened its dominant position in PHS market development. Amid the anxious waiting for 3G licensing by the government, China Telecom and China Netcom have kept pushing the sales of PHS to sustain their business growth. PHS service is expected to continue for the next eight to ten years and the subscriber base is expected to escalate until 2009.

Since 2003, Japan's PHS market has entered the consolidation phase. NTT DoCoMo and ASTEL announced plans to gradually cease PHS while Willcom, which is under the direct control of PHS gear-maker Kyocera, took over the PHS business of KDDI and strategically announced flat-rate calling and flat-rate data usage plans to revitalize the business. In the third quarter of 2005 PHS subscribers in Japan increased by 25,500 after the long decline since its peak in 1997. As Willcom is confidently mapping it services to the demand of such cost-effective wireless communication services, its PHS business is expected to continue strongly for the next three to five years.

In Taiwan, FITEL hit its year target of one million subscribers in August 2005. Its solid business growth is built on top of smart marketing strategies to address the demand for low-cost, low-signal interference wireless communication by enterprises and lower-tier customers. In Thailand, True reversed the decline of its PHS subscriber base by introducing more attractive pricing plans, and now both ARPU and revenue are on the up-swing. In Vietnam VNPT continues to woo subscribers with lower calling rates and the convenience of GSM-PHS dual-mode phones - its subscriber surpassed 200,000 in August from just 100,000 last year.

Overall, as subscribers were expected to grow from 71.2 million in 2004 to 92.2 million by the end of 2005, the service revenue generated will surge to $6.9 billion in 2005 and $8.2 billion by 2009, despite the continuous price erosion rooted in the drastic competition in the wireless arena. On the other hand, PHS gear-makers have to find a way out soon as investments in new infrastructure dry up. Service providers are set to realize the maximum return on existing networks before PHS is finally pulled from the market.

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