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about Asia Buzz
Asia
Buzz: Going Once, Going Twice...
Third generation mobile phones could lead to Asian industry shake-up
By
ERIC ELLIS
May
4, 2000
Web posted at 4:30 p.m. Hong Kong time, 4:30 a.m. EDT
Asian governments will soon be confronted with a significant test
of their commitment to post-crisis economic reform and corporate transparency.
The test will come in the shape of licenses granted to telecom companies
to operate the new "3G," or Third Generation, phone and data sets
that are about to swamp consumer attention. A mobile phone? A medium
for political change?
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For a guide, look to London, where the Labour Government is banking
checks for up to $40 billion from many of the world's biggest operators
for the new licenses. Interestingly, the Brits offered licenses via
an auction system: they originally thought they would get a few billion
dollars for the licenses. But after two months of frantic bidding,
the number has careered away into the stratosphere.
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So why did these companies pay so much? The new 3G will deliver the
Net, e-mail and video images. You can bank online, pay bills, shop,
buy stock and videoconference all from your mobile phone. It's a potential
e-commerce bonanza.
It seems that in Britain it was a case of whoever has the biggest
bank account gets the deal. A number of major players fell by the
wayside as the numbers got too dizzying. They couldn't afford the
license and then operate the service. For many it was a stark choice:
buy or be bought.
I believe the process will lead to yet another shakeout in the industry,
such as the one we saw in the past year with the takeovers of Germany's
Mannesmann and AirTouch in the U.S. by Britain's Vodafone (which happened
to be one of the successful bidders). That's capitalism, in one of
its rawest forms, as practiced in a reasonably open democracy where
voters, shareholders and consumers grizzle and take action if they
are not happy. And the British experience is soon to be followed by
France and Germany.
The big question is, Will it happen in Asia, a region where we've
become accustomed to cozy deals handed out to cronies by friendly
governments. But the financial crisis was supposed to have changed
all that. Remember Indonesia, where the tendency of the former President
to grant his cabinet-minister daughter a juicy government franchise
ignited riots that got him kicked out of office. Across the
region, governments started talking about accountability and transparency
and in some places there have been true, lasting changes.
But old habits are also dying hard. Interestingly, one of the players
that bid and won a British license is Li Ka-shing's Hutchison Whampoa.
Here is a man who is used to getting his own way. His young son Richard
is also used to getting what he wants from the Hong Kong government.
A year ago, he was embroiled in a controversy over a cozy deal in
which he was appointed the developer of a "Cyberport" in the SAR.
No one else was asked. A year later, he is poised to take control
of Hong Kong's biggest telecom.
At Hutchison, managing director Canning Fok has let it be known he
would take a dim view if Hong Kong were to auction its 3G licenses
the same way Britain did--as it happens the same way Hutchison sought
a license. He prefers a "beauty contest." Implicit is the suggestion
that Hutchison fully expects to receive a license in Hong Kong.
This is extraordinary hypocrisy. Why should Hong Kong be different
from Britain, France or Germany in this case? Those governments will
enjoy massive windfalls from the bidding process; new hospitals, schools
and art galleries will be built from the proceeds.
True, Hong Kong will likely get some cash, but the question to be
asked is, Will it be the appropriate amount? To be sure, there is
a fine line between over-the-top spending and then being able to deliver.
But if companies can't deliver, then they will be out of business.
And Asia will be the more open for the experience.
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