ASIA China : CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), commented today through its Communications Industry Research Center that 3G telecommunications has a long way to go before it becomes profitable in Europe.

According to CCID, the expansion in market size expansion does not imply the start of profitability for 3G operators in Europe.

Europe is one of the major 3G services markets in the world. However, most mobile providers there have hesitated to introduce 3G services, the main reasons being high license fees and huge investment expenditures. Statistics show that telecom companies in Europe have spent $100 billion in the auctioning of 3G frequency bands alone. The negative effect of 3G has struck a heavy blow to some enterprises.

On the other hand, operators are looking for further evidence of the prospect of the 3G market. Currently, the market demand for 3G services is still insufficient. Only some 6% of the mobile users have such demand. Normally, operators can only break-even when this percentage reaches 33%.

However, 3G operators in Europe have started to introduce Japan's experience with the i-mode model and entered the low- and middle-end user market in the hope of adopting operational ways different from those in the past to transform the unfavorable situation of the traditional European model. By 2006Q3, there were already over 30 million WCDMA users in Europe, accounting for 51% of the world total. Meanwhile, 3G services have also become more widespread. It can be said that the 3G services market is gradually emerging in Europe.

However, market size expansion does not imply the start of profitability for 3G operators in Europe. In fact, European 3G operators still have a very long way to go to become profitable. In particular, the situation for Hutchison 3G UK which pioneered 3G in Europe is no cause for optimism. Because companies in Europe (including the UK and Italy) have long been performing poorly, Hutchison 3G UK, accounting for 74% of Europe's 3G market in early 2007, has intended to sell its 3G businesses in Europe to mobile operators such as China Mobile or Vodafone. To a certain extent, this reflects that Europe's 3G services market has yet to fully enter a stage of healthy development.

However, there has been a big rise in the use of 3G data services in Europe now. Taking Hutchison 3G UK as an example, data services accounted for 15% of the overall services in June 2004. By the end of the year, the figure rose to 21%. What is worth noting is the reason for this encouraging change is that consumers are now more accustomed to new products such as mobile TV and mobile music. This more or less brings a dawning light for 3G to become profitable in Europe.