Hutchison holds breath, counts to three

Third generation video handsets became available from midday today at Hutchison stores, which operate under the name “3", the global brand adopted by Hutchison's parent company, Hutchison Whampoa. The new mobile phones allow users to make live person-to-person video phone calls as well as send voice emails, text messages, play games and get news, sport, mapping services and finance updates.

Beating market speculation that earmarked 3's handsets to be in the $1000 ballpark, the handsets unveiled today range from $480 for the Motorola A30 to $768 for NEC's e606. Video calling within Australia will cost 50 cents for 30 seconds, plus flagfall.

Chief executive officer Kevin Russell said the strategy behind the pricing model is to “make the service affordable for everyone from day one.”

Hutchison is betting on a pent-up demand for these services and the low price point to be compelling factors for early adoption. The company has invested around $3 billion in its 3G network in Australia, with $1 billion coming from Telecom New Zealand, which owns a 20 per cent stake in Hutchison's Australian business.

Russell would not offer market projections on the expected take up, nor when Hutchison expects to see a return on this investment in Australia, saying “we will wait until the year unfolds”.

However, Russell expects “certain demographics” including the 20 to 30 year old demographic, to be early adopters of the technology, with the low price point on handsets being a compelling attractor.

“3 services are being introduced into Australia one to two years ahead of when our competitors believed possible,” Russell told the assembled media. “How could we achieve this? Through a combination of Hutchison global leverage on suppliers, out global development co-operation across time zones and our determination and focus. I believe that these factors will sustain 3's service leadership in Australia long after this initial one to two year window.”

“Voice tariffs are going to come down over time. Why not bring it down today to encourage take up?,” he added.

In February, Hutchison Telecommunications reported its losses had blown out by more than $60 million to $197.3 million in calendar 2002 because of the hefty start up costs from launching the new high-speed 3G network.

Russell said Hutchison's global parent, Hutchison Whampoa is a “rock-solid supporter” of the Australian business.

The launch of Hutchison's new video phone in Australia comes after recent launches in the United Kingdom and Italy. The service will expand from metropolitan Sydney and Melbourne, and roll out to Brisbane, Adelaide and Perth in July this year. 3 will also operate in Austria, Denmark, Ireland, Hong Kong, Israel and Sweden.

Russell said Hutchison's 3G mobile offering will move into other dealerships apart from 3 stores in the future, starting with Orange and Vodafone stores.

Hutchison's 3G service is based on wideband CDMA technology.

What is 3G?

Third generation (3G) is the next generation of digital mobile networks which allows higher speed data transmission than its predecessors 1G, 2G and 2.5G.

The first generation of mobile network was rolled out in the late 1970s and lasted through the 1980s. These networks used analogue voice signaling. The 2G phase began in the 1990s. 2G mobile devices, which are most commonly in use today, use digital voice encoding, including Code- Division Multiple Access (CDMA) and Global System for Mobile communications (GSM). Since its introduction, 2G technology has steadily improved with increased bandwidth and the introduction of multimedia.

Standards body the International Telecommunications Union (ITU) defines 3G as offering speeds of at least 128Kbps.

Hutchison's newly launched 3G service is based on wideband CDMA technology.