Wait for 3G wireless not over, say analysts

By Staff and wire reports

SEOUL, South Korea (CNN) -- The rollout of third generation wireless technology in Asia is not just around the corner, despite hyped expectations, analysts say.

Korea's SK Telecom has poured cold water over rolling out third generation (3G) services by May next year, telling a conference in Tokyo it would delay it until at least 2003.

The caveat comes shortly after U.S.-based Qualcomm, which developed the Code Division Multiple Access (CDMA) platform on which 3G services operate, said it would be years before 3G services became commonplace in Asia.

Similar predictions have come from equipment makers such as France's Alcatel and telecoms companies including NTT DoCoMo and Telecom Italia.

Recoup costs of 2G, 2.5G first, then comes 3G

The Financial Times reports Tae Jin Park, a manager at SK Telecom, as telling a Credit Suisse First Boston conference the group planned to recoup its costs on the existing second generation and so-called 2.5G technology before fully adopting 3G services.

He told the conference SK Telecom would not launch 3G services until 2003 at the earliest, the FT says.

SK Telecom is the biggest wireless telecommunication services provider in South Korea. Formerly known as Korea Mobile Telecom, it boasts more than 11 million cellular users, or 44 percent of the market.

Mobile phones and other wireless devices such as personal digital assistants equipped with 3G technology allow users to surf the Internet at high speeds.

Europe's telecoms will lead the way

Analysts say the high cost paid by European telecoms for 3G spectrum will force them to push services out early, allowing carriers in other markets -- such as Asia -- to sit back and wait for equipment costs to come down.

The auction of 3G licenses in the U.K. and Germany raised more than $90 billion alone, but in Asia, spectrum for 3G will be sold for significantly less.

"The rollout for 3G in Asia is going to be somewhat later than first thought, and in a way there is a silver lining to that because the regional providers -- when they do roll out the services -- will enjoy lower costs for spectrum and lower equipment costs," says Singapore-based SG Securities analyst Michael Miller.

With all the concern over how European telecoms are going to recoup their massive investments in 3G, that will come as good news to investors in Asian telecoms, which should be able to turn a profit from 3G sooner than their European counterparts.

NTT DoCoMo, Japan's largest mobile carrier, plans to unveil the world's first 3G services in May, and when more carriers begin the rollout, analysts say they will not suffer the difficulty experienced in previous deployments of technology such as wireless application protocol (WAP).

"In the case of WAP there was a shortage of handsets, which didn't help boost demand for the technology," says Miller.

"But with 3G, if the European carriers push it out as fast as they are expected to do, Asian telecoms shouldn't suffer any shortage of hardware because it will already be out in the market."

South Korea leading the way with 3G

South Korea was one of the first markets to allocate 3G spectrum, providing SK Telecom and Korea Telecom with licenses last December to use wideband CDMA (W-CDMA), which was originated by Qualcomm.

W-CDMA is the standard being adopted by Europe's wireless providers.

However, the South Korean government has yet to allocate a third license because it wants the third provider of 3G services to use CDMA2000, which is the platform Qualcomm owns outright and would prefer all wireless providers use.

Meanwhile, state-run Korea Telecom, the largest fixed-line provider in South Korea, is said to be scouring for buyers of its 13.39 percent stake in SK Telecom, according to a company official.

"Our planned SK Telecom stake sale is not only aimed at raising funds needed for new investment," Reuters news service quotes company official Lee Jae-won as saying.

"We may hand over our stake in SK Telecom to strategic foreign partners or swap it with other companies' shares."

Shares of SK Telecom were slightly lower at 209500 won in morning trade Friday.

Reuters contributed to this report.

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