The 3G race heats up as we enter 2006. With little to separate Maxis and Celcom and two other possible rivals due soon, the race is finally on!

Oon Yeoh

When asked recently about whether a price war would emerge between 3G service providers, Celcom CEO Datuk Shazalli Ramly responded with a laugh, “I think the war has already started!”

Then he promptly corrected himself to say that the war is really a marketing battle. Speaking at the Xpax 3G Media Launch in Kuala Lumpur last month, Shazalli went on to say that price is only one element. Promotion, strategy and location are also important he said.
He added that the service providers should offer wider coverage and more content rather than compete on price in order to win customers’ hearts.

Currently, Celcom users are able to access 30 different content offerings, which include Nanyang Online, the King Kong movie trailer, My Style My Show, CNBC, Bloomberg TV and My News Network by NTV7. Celcom hopes to increase its 3G content offerings to about 50.

Celcom was the first to offer 3G in May, but only to postpaid customers. Maxis followed suit with 3G for both postpaid and prepaid users in July. Last month, Celcom made 3G available to prepaid users. Price at RM28 Xpax 3G would offer rates of one sen per SMS and 10 sen per minute for voice and video calls. The company currently has close to 20,000 3G subscribers.
The other 3G player is Maxis, which has fewer 3G coverage areas than Celcom. But it plans to double the number of 3G sites built. It has already extended its services to Penang and will soon be doing so for Johor Bahru too.

While standard video call rates are double voice call rates, Maxis is offering video calls at voice call rates for an extended one-year promotion. Video content packages are priced at between RM8 and RM15.

While Celcom initially emphasized its wide coverage, Maxis had positioned itself with the widest range of content offerings.

Among its content offerings are Disney Mobile Portal, traffic video feeds and static images, radio stations (Era, hitz.fm, Mix Fm, Light and Easy and MY FM), EMO Push E-mail, a service that pushes e-mail directly to your mobile device, and mobile blogging (Mblog).
Maxis and Celcom had received a 2x15 MHz paired spectrum plus a 5 Mhz unpaired spectrum in 2002, which can be utilized for 3G services for a duration of 15 years. Each telco paid RM50 million for the licence. Each company has about 20,000 3G subscribers according to recent press reports.

The country’s third telco, DiGi is not sitting still. It has also submitted an application for a 3G licence.

“DiGi aims to use 3G to create a vibrant, exciting and enriching experience for the Malaysian mobile consumers,” Morten Lundal said. “It will complement DiGi’s existing engines of growth built upon a passion to innovate.”

DiGi has been using its EDGE service to support 3G-type services, specifically broadband Internet access. DiGi will further enhance 3G by implementing high speed downlink packet access to provide even faster throughput for its services. 

Assuming DiGi gets its 3G licence by February, it will take probably another half a year for it to start rolling out its 3G services. That means the third quarter of next year, is when the 3G race really hots up because DiGi with its track record of innovative pricing could force the two incumbents to lower their rates.

Granted, some of the rates for video calls and so on are already fairly low but the rates that really matter are the all-you-can-eat unlimited access packages. Maxis offers it at RM120 while Celcom’s is at RM150. Both of these prices are high when compared to fixed broadband, Streamyx’s unlimited package price of RM88.

Will DiGi be the one which comes up with a disruptive pricing for unlimited data access? It’s certainly a strategy that could instantly convert all its EDGE users over to 3G and attract a fair bit from Maxis and Celcom as well.

Judging by DiGi’s current strategy of promoting EDGE as a form of broadband rather than focusing on content, there’s a strong likelihood it will do the same thing for 3G. Yes, there will be content, applications and services on offer but the focus will be on providing data access; pure and simple.

If DiGi offers an unlimited data package that’s the same as its current RM99 package for EDGE, or better yet, RM88 like Streamyx, it becomes a no-brainer for people to sign up for its 3G service.

The eventual winner of the 3G race will be the one which has the most number of unlimited access customers because these are hard core consumers of Internet access. They are the ones the telcos need to maximize their average revenue per user (ARPU) as these are the consumers who will eventually pay for rich-media content, applications and services that 3G can provide. But to get there, the telcos need to give them what such consumers want most right now, which is broadband.

The other thing that needs to be done is for handsets and data cards to be heavily subsidized. Maxis and Celcom are doing that a bit but they need to do more.  

Think about it. If the cost of 3G service is the same as that of Streamyx and the handsets/3G data cards are roughly the cost of a ADSL modem, then it suddenly becomes a no-brainer to subscribe to 3G. The telco that fully understands that will be the winner.