Macau mobile monopoly on the way out

By CNN's Kristie Lu Stout and reports

MACAU -- Two new entrants in Macau's telecom sector are expected to break down the Macau Telecommunications monopoly.

Hong Kong's Hutchison Telecom, a unit of Hutchison Whampoa, and SmarTone Telecommunications were selected last year by the Macau government to operate in the former Portuguese colony.

Macau Secretary for Economy and Finance Francis Tam Pak Yuen said competition between the three companies would improve the situation in the telecom market and benefit customers, the Xinhua news agency reports.

Government blessing

Yuen said the special administrative region government would provide Hutchison and SmarTone with necessary support.

The Macau Legislative Assembly will soon deliberate on a service and charging policy that encourages competition and protects consumers' interests.

Both companies have promised to employ about 100 people in the first year, and 70 of them will be Macau residents.

Hutchison plans to invest $25 million in Macau in five years, according to Xinhua.

SmarTone is investing $12.8 million this year on its newly launched GSM service in the former Portuguese colony, and will spend about $3.8 million each year in the next two years.

Return on investment?

SmarTone Macau chief executive Alex Ip told reporters it was hard to say how long it would take for the company to see a return on its investment.

But he was confident it would be able to achieve a market share in Macau similar to its 20 percent Hong Kong share in a few years.

Analysts are questioning why SmarTone and Hutchison are investing in Macau, a small Chinese territory of only 438,000 residents.

"In cellular, what you need is scale. It's such a small market it's difficult to see why they want to get into such a small market," Gartner Group telecom analyst Andrew Chetham told CNN.

"But there is quite a lot of mobile traffic back and forth between Macau and Hong Kong, and I suspect they are trying to catch a bit of that traffic."

Reuters contributed to this report.