A week in tech, September 26 - October 2

A roundup of all the latest tech news.

ò Sony Corp. announced its plan to launch an electronic book store on the internet and start selling a device that displays e-books purchased from the store beginning in October. Dubbed the Sony Connect book store, it will carry about 10,000 books from the top six publishers, including News Corp's HarperCollins and CBS Corp\'s Simon & Schuster. The company said the launch of the store coincides with the official debut of its highly anticipated electronics book reader, which reviewers have said mimic the quality of regular paper. The "Sony Reader Portable Reader" system will sell for about $350. Sony's latest generation reader attracted attention for the electronic ink technology it employs made by E Ink of Cambridge, Massachusetts. It uses new technology that allows digital text and graphics to be displayed without back-lit screens. Much like regular paper, the Sony Reader screen is not back-lit and requires a light source in the room to view the page.

ò Softbank Corp said it plans to raise about $12 billion via securitization of its earnings of the cell phone unit it bought from Vodafone Group. The move would allow it to secure funds at a lower rate than would have been possible with conventional bank loans. Softbank bought Vodafone Japan for 1.8 trillion yen ($15.2 billion) after borrowing 1.3 trillion yen ($11 billion) in short-term bridge loans, which was arranged by 17 banks led by Mizuho Financial Group, Deutsche Bank and Citigroup. The scheme would set aside cash from Vodafone Japan for interest and principal payment and would mean that a huge part of its profit would be used to repay debt at a time when it faces tough competition from Japan's two largest mobile-phone operators NTT DoCoMo and KDDI Corp. Securitization of individual businesses is rare in Japan, with Softbank being the first company to securitize the cash flow of a particular business arm for such a large amount.

ò Japan Net Bank, a specialised internet bank affiliated with Sumitomo Mitsui Banking Corp (SMBC), announced that Yahoo Japan Corp has obtained a 40 percent equity stake in the bank. Under the deal, Japan Net Bank issued new shares worth 34.5 billion yen ($292 million) in total to the internet portal and SMBC under a third-party share allotment scheme. The share allotment to Yahoo is based on their business and capital tie-up, agreed in March. Besides common shares, Yahoo purchased preferred shares. The new share issuance brought Yahoo Japan's stake in the bank to 40 percent from zero percent and reduced SMBC's stake to 40 percent from 57 percent. According to Japan Net Bank, when Japanese authorities give approval for Yahoo Japan to become a major shareholder of a bank, it plans to convert the preferred shares into common shares. For the new shares, Yahoo Japan paid 25.8 billion yen ($218.3 million), while SMBC, the core unit of Sumitomo Mitsui Financial Group Inc., invested 8.7 billion yen ($73.6 million). Japan Net Bank disclosed that it plans to use the fresh capital to eliminate its cumulative losses.

ò Hitachi announced that it is considering partnerships in the LCD television sector, even as it aims to bring its loss-making flat-screen television business back to profit. Hitachi said it plans to turn its flat-screen television business around by the January-March quarter. To lower per unit costs, Hitachi has invested in an LCD venture along with Matsushita Electric Industrial and Toshiba, that aims to produce five million LCD panels by the half year starting from October next year. A top company official said that more partnerships may be needed to boost Hitachi's share of the LCD television market to 7 percent by 2010. According to DisplaySearch, Hitachi ranked 20th in LCD televisions, and fifth in plasma television sets. The company is reportedly losing money on both LCD and plasma TV sets.

ò Tokyo Electric Power Co., Asia's biggest power producer, revealed that it may sell its fiber-optic networks to KDDI Corp, Japan's second-largest mobile phone operator. Earlier, sources indicated that KDDI has agreed to buy Tokyo Electric Power's fiber-optic communications business for about 100 billion yen ($847.2 million) in shares. With the deal, the utility company will become the third-largest shareholder of KDDI, increasing its stake to about 8 percent from 4.8 percent. An insider source mentioned that the two companies are in discussion although no details about the negotiation have been released. A spokesperson for the Tokyo Electric Power also said that no official agreement to sell has been reached yet. If the deal pushes through, the acquisition will make KDDI Japan's third-biggest provider of fiber-optic networks, helping it challenge larger rivals Nippon Telegraph & Telephone Corp. and Usen Corp. Fiber-optic Internet services transmit movies, music and other data faster than conventional copper wires.


ò The countryÆs three major portals are reportedly gearing for their entry into the Japanese market. Daum Communication, which currently provides a mini homepage service "Cafesta" through its Japanese JV Taon, plans to revamp the site in December this year. The companyÆs top official said that the company will work on recreating the web site for the next two to three months and then start massive promotion. SK Communications revealed its plans to start the full service of Cyworld in Japan next month. SK Communications said it is also making constant changes to its web site to cater to the needs of its Japanese users. An official at SK Communications stated that the Japanese market is a tough one to penetrate and did not expect rapid growth any time soon. NHN has not talked about details regarding its plans in Japan but analysts are considering it significant that the companyÆs founder and CSO is heading the taskforce for a portal service in Japan.

ò LG Dacom stated that regulatory issues regarding IPTV will be resolved within the first quarter of 2007 even as it plans to start providing IPTV service in August next year. According to the company and with data from industry sources, LG Dacom will set up an IPTV taskforce and develop an IPTV set top box by April next year. After a pilot service earlier in the year, with the company initially targeting its broadband subscribers, which is expected to grow to 1.7 million users by August next year. Analysts, however, say that LG Dacom will need to adjust its plans if regulatory issues surrounding IPTV are not solved by the second quarter of 2007.

ò SK Telecom, South Korea's top mobile carrier, said that the number of customers using its mobile service has exceeded 20 million this month for the first time since it launched the wireless communications business. The company, which started its analog mobile service in 1984, advanced into enhanced code division multiple access (CDMA) operation a decade ago. SK Telecom leads the South Korean market with a 50.7 percent stake as of the end of August, followed by KTF with 32 and LG Telecom with 17.3, according to data released by each company. Responding to local market saturation, SK Telecom said that it is also stepping up its efforts to expand into the overseas markets, opening its service in China, Vietnam and the United States.

ò Industry sources declared that a wide range of digital handsets supporting Wi-Bro are expected to hit the market at the end of this year. Industry sources said small and medium-sized communications module and equipment makers are now making moves to develop a variety of mobile handsets such as notebook PCs, PDAs. Small and medium firms like Solitech and Moda Information Communication said they are ready to launch all-in-one Wi-Bro handsets designed to be installed in portable digital devices such as notebooks, portable multimedia players and digital cameras around the end of this year. Some of the new products are expected to improve power consumption and heat generation of the existing PCMCIA cards, increasing chances for link with 3G wireless communication (WCDMA/HSDPA) handsets. Repeater manufacturer Solitech said it is working on a Wi-Bro handset chipset used for mobile handsets like PDAs through Amicus, a subsidiary it established in the U.S. Convergence mobile handsets are also expected to hit the market, with Moda Information Communication now developing a handset with a wide range of communications interfaces such as Wi-Bro, wireless LAN, Bluetooth, electronic tags, DMB and geographic positioning systems.

ò SK Telecom Co. announced that the number of its customers in Vietnam has exceeded 1 million in three years since it launched mobile service in the Southeast Asian country. SK Telecom, which controls more than 50 percent of the local wireless communications sector, started an operation in Vietnam called S-Fone in July 2003 as part of its overseas expansion efforts. To boost its business in the emerging market, SK decided in November last year to invest an additional US$2.8 billion, which the company said helped strengthen its presence there. Analysts say Vietnam is one of the markets for mobile communications operators with high potential, as around one out of every 10 of its people carries a mobile phone. The pace of growth in mobile phone use in the country with a population of 80 million has been accelerating. The company said that, as of the end of 2005, the penetration rate more than doubled to 12 percent from 5.8 percent a year ago. SK Telecom forecast that the number will grow to 1.2 million by the end of this year. The company plans to unveil video-on-demand service for its Vietnamese customers in October, providing movies, dramas, music videos and as many as six TV channels, which it expects will increase its average revenue per user.

ò Industry sources said eBay China revealed that it is in early part of negotiation with Hutchison Whampoa's media flagship Tom Group to sell or merge part of the company with internet portal business Tom Online. For a long while now, eBay China has been the subject of rumors that it is looking to sell or merge its online auction business following its loss of market leadership to Alibaba.com's Taobao.com. The rumors came also after the mainland government issued news about plans to control foreign ownership of mainland Internet payment services. In 2005, the central government said that it will issue rules this year under which all Internet payment service providers, including eBay's 100 percent-owned PayPal, would have to have a mainland partner to offer such services in country. The news said that Tom Group may transfer eBay Eachnet operations to Tom Online so as to generate more users while the broader revenue base would help to support the auction business. According to China Internet Network Information Center, Taobao maintains about 67.3 percent of the mainland online auction market in the first six months, compared with eBay Eachnet's 29.1 percent. In other reports, Tencent Holdings, the mainland's largest instant messenger service provider with over 400 million users, is also identified as a potential buyer of eBay Eachnet.

ò The China Internet Network Information Centre put the number of blogs in China as going beyond 34 million, a number that is more than 30 times as many as the country had four years ago. The report said that about 17.5 million people in China consider themselves web log writers, with some 55 million regularly reading them. Industry observers see blogs as extremely popular in China as they provide people the only public forum for expressing their thoughts amidst the government control of media. Blogs in China generally deal with travel, pop culture and other non-political matters. China remains the world's second-largest population of Internet users after the U.S., with 123 million people online.

ò Alibaba announced its plans to go into internet services, with the plan to include the country's largest online auction site available to mobile-phone users. The announcement was made even as service providers have issued profit warnings amidst policies that require double confirmation from clients before they can subscribe to new services. The policies were said to be aimed at protecting users of mobile value-added products. Tom Online, the largest service provider by revenue, said third-quarter revenue could decline between 31 percent and 35 percent from the previous quarter. The top official of Alibaba, however, maintains that mobile-related services hold potentials, proof of which is in the short messaging and ring tones which posted a 44 percent growth to Rmb48.3 billion ($6 million) in 2005, according to Analysys. The official said his other business units are considering offering mobile services. These units include online auction site Taobao, the online payment division Alipay, and Alibaba, the business-to-business marketplace. No details about the plans were released by Alibaba.

ò China Unicom, the nation's second-largest mobile-phone operator, said it is going to focus on neighboring countries as it tries to expand through strategic alliances with overseas operators. China Unicom and bigger rival China Mobile Ltd. said they are seeking foreign partnerships to expand overseas and to develop local technology. Earlier in June, China Unicom disclosed that Korea's SK Telecom Co. will buy as much as $1 billion of its bonds convertible into a 6.7 percent stake. The two companies said they would co-develop handset and network technology and new services. In August, SK Telecom said it will help China develop its own standard for wireless networks, the first alliance China's government has signed with an overseas operator for 3G technology. China has not, however, said when it will grant licenses for 3G, or how many it will permit. The nation had 437.5 million cell-phone subscribers by the end of August, according to the Ministry of Information Industry.

ò China Unicom and SK Telecom announced that they made a joint purchase of over 1 million mobile phones ever since they forged a partnership earlier this year. At present, the two companies said they are negotiating with Samsung Electronics, Motorola and LG Electronics on buying six types of middle and high-end mobile phones, with the plan to purchase low-end mobile phones from other mobile phone manufacturers.

ò ZTE announced that its subsidiary has secured a contract to provide its 3G wireless technology to Copper Valley Wireless (CVW), an Alaska-based mobile phone operator. ZTE said the deal will help CVW, a subsidiary of Copper Valley Telephone Co-operative, launch a digital wireless service early next year. No financial details of the deal were announced. With competition intensifying in the local market, ZTE said it is looking to expanding overseas. The company said its domestic sales went down by 8.8 percent to 6.5 billion yuan (US$822 million) from a year earlier, with the mainlandÆs contribution to its total revenue declining from 69.5 percent to 62.2 percent in the first half of 2006. Analysts are saying that ZTE will have a tough time competing in the foreign market with companies such as Alcatel, Sony-Ericcson and Siemens, with some observers downplaying the benefit that may be derived from the deal with the Alaskan firm.

ò Piper Jaffray & Company announced the opening of its new investment banking and research office in Shanghai. The firm said the new office is part of its global expansion in Asia and Europe, with the firm offering service in investment banking and research. The firm has been active in the financial markets in Asia since 2000, having completed six IPO and follow-on transactions year-to-date and 20 transactions overall. The firm's first transaction for a company with China-based operations was a US IPO for UTStarcom in 2000, followed by transactions for other leading Chinese technology companies including: Baidu.com, Ctrip.com and Tom Online.

ò BenQ disclosed that its German mobile phone arm has filed for insolvency. The action was reportedly met by protests from unions and politicians who raise their concerns regarding some 3,000 employees losing their jobs. BenQ said that it was withdrawing funding from the unit. A year ago, the Taiwan-based company after acquired it from German group Siemens. BenQÆs top official said that it had placed a big amount of capital and resources into the subsidiary but the losses incurred pushed it to decide to close the German-based firm.

Hong Kong

+ PCCW disclosed that it plans to make an offer to buy all the network assets and mobile-telephone operations of Sunday Communications, its listed subsidiary. In December of 2005, PCCW also offered but failed to buy out minority shareholders in Sunday. The deal will require the approval of only a simple majority of independent shareholders present and voting at a special meeting, rather than the 90 percent required for a formal takeover. The source said that in the event that PCCW succeeded in buying Sunday's telecommunications assets, it might then revive a formal takeover offer for the company. Under Hong Kong takeover rules, PCCW cannot launch another offer for Sunday until one year after the failed bid. Huawei Technologies, the mainland-based telecommunications equipment supplier, owns 9.9 percent of Sunday, giving it almost enough shares to block a sale. Huawei could not be reached for comment although analysts note that the firm did not publicly oppose the earlier privatization move. PCCW offers 3G services under its own brand using Sunday's network.

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