2002 looks set to witness Asia Pacific operators going head-to-head with mobile data applications in a bid to raise the number of mobile data users and that all-important ARPU figure, says Elizabeth Hall, analyst at EMC World Cellular Database

April 1st saw the launch of Japan's second 3G offering with the start of KDDI's CDMA2000 1x services. With greater coverage than NTT DoCoMo's FOMA, KDDI is hoping to take the lead in terms of total 3G users in the country during 2002, by means of a rapid, nationwide service roll-out.

The CDMA operator aims to have 90 per cent of the country's population covered by the end of 2002, compared with NTT DoCoMo's roll-out schedule of 97 per cent coverage by the end of 2004. The limitations of FOMA's geographical reach, and the lack of a new dual-mode handset that can roam between the 2G and 3G network, mean that a FOMA subscriber in want of national coverage currently needs two handsets. Combine this with the fact that a FOMA handset costs on average twice as much as one used on KDDI's 3G network and perhaps KDDI's plan to overhaul NTT DoCoMo's lead in the mobile internet market appears achievable.

Despite being faced with new opposition from CDMA and achieving only 89,000 of its 150,000 subscriber target at the end of Q1 2002, though, NTT DoCoMo is not about to throw in the towel. The world's third largest operator remains optimistic, still aiming for the six million subscriber mark by the end of March 2003. DoCoMo is hoping that subscriber growth will pick up during the year as a wider range of cheaper handsets becomes available and more services are launched. FOMA's network coverage, which stood at approximately 22 per cent at the beginning of 2002, is scheduled to reach 60 per cent of the population at the end of April 2002. The 3G service is currently able to offer data speeds of up to 384kbps compared to 100kbps achieved on KDDI's CDMA1x network using a Kyocera A1012K handset.

However, NTT DoCoMo's superior data speeds are set to be left far behind when KDDI eventually moves onto CDMA1x EV-DO, with data speeds of 2.4Mbps. The first measurement of the success or failure of KDDI's 1x data service will be how quickly it enables the carrier to regain the number two spot in the mobile internet subscriber rankings, which it lost to J-Phone's J-Sky service at the end of 2001. J-Phone's recent success - achieving over 9.5 million mobile internet subscribers at the end of 2001 - may be short-lived, with full commercial launch of J-Phone's 3G service now not expected until the end of 2002. J-Sky's photo and mail service, Sha-Mail, which was singled out as the leading light among the operator's successful data services at a recent J-Phone/Vodafone press conference, is set to be challenged by both DoCoMo and KDDI, which are planning to launch similar digital picture email services during the summer.

Meanwhile, in Korea operators are scrambling to get enhanced 3G services off the ground before the World Cup kicks off in May. SK Telecom launched its CDMA1x EV-DO data-only network at the end of January, and KTF and LG Telecom are due to launch in Seoul by May. With a theoretical maximum transmission speed of 2.4Mbps on the EV-DO network, compared to 144kbps provided by current services, all three operators are aiming to boost their reputation on a global scale this summer by highlighting their leading position in the high-speed wireless data market. While KTF has secured the sponsorship for the World Cup, SK Telecom is planning to provide multimedia broadcasting of football games via PDAs, video-on-demand game highlights, and PDA-based location services for foreign visitors. Tourist information about Korea and the World Cup via wireless internet services will be available from LG Telecom, which is planning to allow visitors to rent PDAs from the Inchon International Airport and major hotels.

In Malaysia, the five operators are still making the most of the explosion of SMS traffic that has occurred since September 2001. But the government is keen to set the 3G ball rolling by awarding three UMTS licences in July 2002. Any roll-out of 3G networks in the next two years will be regarded as premature as the three operators need to establish a culture of wireless data usage through 2G and 2.5G applications before they can ever hope to succeed with the more costly 3G networks and services.

Speculation is continuing as to how many players will be forced off the pitch when the three licences are awarded, a move designed by the government to force the consolidation of the cellular market into three operators.

The announcement that DiGi.com and Celcom will bid together for a 3G licence was initially seen as a saving grace for Celcom, whose parent company TRI owes MYR3.8 billion worth of long-term debts. The move does not appear to have deterred state owned Telekom Malaysia, however, which is continuing to wait in the wings for the right price before it launches its take-over bid for Celcom. With TIMECel's parent, Time dotCom, 30 per cent owned by the government of Malaysia, three mobile operators could soon become one giant state operator, holding over 57 per cent of Malaysia's total mobile subscribers.

In contrast to Malaysia, the Philippines has already gone through a period of consolidation through the merger of Globe Telecom and Islacom and the tie-up between Smart Communications and Piltel. Globe, Smart and the National Telecommunications Commission (NTC) seem to be in no rush to dive into 3G auctions until at least 2003, with president and CEO of Smart Communications, Napoleon L. Nazareno, recently stating that the company was committed to 3G but was in no hurry to implement it. Instead, Smart is currently focusing on creating a '3G environment' on 2G and 2.5G services by continuing to explore ways of making the most out of its existing applications and network infrastructure.

Philippine operators have excelled in their development of new and innovative mobile data services, building on the country's reputation as the text messaging capital of the world. Operating either via SMS or WAP, 'Smart zed' and 'Smart Money', which were introduced by Smart Communications in early 2001, had managed to increase the non-SMS revenue proportion of total wireless data revenue generated by the Philippines' largest operator to 19 per cent by the end of 2001, compared to 6.5 per cent a year earlier.

Many within the cellular industry predict that, although the Philippines has yet to commit to rolling out 3G services, the country's subscribers will be among early adopters of devices and applications made possible by 2.5G and 3G technology within the next five years.

Meanwhile, China Unicom's CDMA2000 service is taking its time to get off the ground, which has prompted Unicom to extend its promotional offers for CDMA subscribers to cover all the major cities within China. In March 2002, 62,000 new users signed up for the CDMA service, pushing the total up to 510,000 subscribers. Unicom recently bought 500,000 CDMA handsets in a move that was designed to demonstrate that the operator still believes CDMA services will take off, and to encourage the main vendors - Motorola, a joint venture between China's Hisense Group and Japan's Hitachi, and domestic manufacturers Haier Group and Eastcom - to increase their production of CDMA handsets.

However, there are still no signs of any infrastructure contracts being awarded for Phase II of the CDMA network roll-out and Unicom has revised its capex spending downwards by 22 per cent for the period 2000-2002. Despite critics arguing that there is no real incentive for existing high-end GSM subscribers to move over to CDMA, China Unicom is forecasting seven million subscribers on its CDMA network by the end of 2002. EMC's World Cellular Forecast, by contrast, indicates a much lower figure of four million users for the year end.