Case Study: 3G: A Cell Phone Too Far?
Source: M W Peng (2006)
The third generation (3G) wireless technology is promising yet risky. In addition to being a cell phone , it can take pictures, send e-mails (including the pictures just snapped), play video games, display maps (using the global positioning system), download media (both video and music), and hold videoconferences (see the person you are talking to). The problem is that there seems to be little demand for it. This is a painful conclusion reached by the European telecommunications industry that burned $150 billion bidding for 3G licenses, but wrote off plans for network roll-out. Similarly, the performance of NTTDoCoMo (http://www.nttdocomo.com) and KTF (http://www.ktf.com), which recently launched 3G in Japan and South Korea, respectively is not encouraging.
However, Hutchison Whampoa (http://www.hutchisonwhampoa.com), a conglomerate controlled by Hong Kong’s most influential tycoon, Li Ka-shing, begs to differ. It is charging into 3G at a breakneck speed by spending $17.5 billion to set up nine operators (through JVs and WOSs) in Australia, Austria, Denmark, Great Britain, Hong Kong, Ireland, Israel, Italy, and Sweden. As a first mover, Hutchison is betting that it can pioneer and dominate a new business. Its global brand is simply called “3.” Except Hong Kong and Australia, where Hutchison has been a telecom player, 3 will be a first –time entrant not only in 3G, but also in the entire telecom industry in the other seven countries. Therefore, 3 will confront the “double whammy” of having to overcome both the liability of foreignness as an unknown player and the liability of new technology.
The countries Hutchison seeks to enter are developed markets saturated by strong local competitors. The number of cell phone users there has peaked, and 3 will have to take market share away from incumbents, an