'3' the magic number for Hutch Telecom


Hutchison chairman Li Ka-shing and managing director Canning Fok at Thursday's results announcement

CNN's Ravi Hiranand and wires

HONG KONG, China (CNN) -- At a time when telcos across the globe are scaling back plans for 3G mobile phone services, Hong Kong's Hutchison Whampoa stands alone in aggressively promoting the technology.

On Thursday, the company announced the purchase of Dutch drugstore firm Kruidvat, saying it planned to use the company's Superdrug stores in the UK to sell its 3G mobile service, known simply as "3". (Full story)

And it comes despite Dutch partner KPN Telecom announcing on Tuesday that it wanted to sell its 15 percent stake in the British arm of 3, as well as Hutchison posting a 17 percent drop in net profit for the first half of 2002 on a year-on-year basis.

"To be honest, we are not sitting on our 3G licenses. We are now going at full speed," said chairman Li Ka-shing.

Conservative forecasts

Despite Li's ebullience, Reuters reports that the company lowered forecasts for 3 down to one million customers by the end of 2003 in each of the two European launch countries, Italy and Britain, from the original 1.5 million each.

The company did stick to its goal of breaking even on earnings before interest, taxes, depreciation and amortisation (EBITDA) for its Italian and British 3G operations by 2005.

"That is a conservative forecast," said Li, Asia's richest businessman.

Hutchison plans to roll out 3 in Britain and Italy in October with a phased launch, with services in its home of Hong Kong following in early 2003.

The company's plan to sell handsets through Superdrug made waves on the London stock market, with shares of leading phone retailer Carphone Warehouse down six percent at one point and competing drugstore Boots closing 3.6 percent lower.

Managing director Canning Fok said, "The store-within-a-store concept will be our main distribution method for 3G. It's expensive to completely use our own stores for 3G. We'd go broke trying."

Picture messaging


Hong Kong, Hutchison's home, will see the launch of "3" in early 2003

Fok showed the press two 3G handsets manufactured exclusively for Hutchison from Japan's NEC and one from American company Motorola.

He declared "I'm glad to say the product works," as he displayed the phones, which have a built-in camera.

Mobile operators see picture messaging as one of the key applications of 3G services. (Full story)

"This is not a phone business. This is the smallest video camera, it's the smallest computer, smallest TV," said Fok.

However, the phones carry a price tag that lives up to Fok's billing, with the company announcing a price of approximately HK$15,000 ($1,923) for Hong Kong.

British consumers will get the phone for just under half that price according to Reuters, with Hutchison selling the phones near cost price.

Going it alone

Critics point out that Hutchison is only steaming ahead with its 3G plans because, unlike competitors, it does not have a 2G business in Europe to fall back on.

The company said it preferred to be the only one going ahead with 3G.

Fok said "It is more advantageous for us if there is less competition. To Hutchison, the less the better."

Despite all the doubts, Fok is confident that 3 will pay off for the company.

"I am not a bettor. I am a manager. We have a business plan... and we are going to deliver that business plan."