Co-chief executives Supachai Chearavanont (left) and Richard Moat discuss the outlook for CP Orange-soon to be named TA Orange-at its launch on Dec 13.

CP Orange began a soft launch of its GSM 1800 mobile phone service on Dec 13, using the 60,000 employees of the Charoen Pokphand Group, its major shareholder, as guinea pigs to test the network and services.

The general public will be able to sign up for CP Orange starting on Jan 15. The company will also be renamed TA Orange to stress the link with TelecomAsia, CP's fixed-line phone company.

The newcomer enters a market that has swollen in size to nearly seven million users from about three million a year earlier. CP Orange expects to grab a significant share of a market that it believes will have 15 million to 20 million users by 2005.

But the company is being coy about whether it intends to offer rock-bottom bargains to tempt people away from its rivals, Advanced Info service and Total Access Communication.

It has ruled out the possibility of free handsets as a marketing tool, arguing that a strategy of price-cuts and subsidies would destroy the cellular industry. The emphasis instead, executives said, would be on the quality of the Orange brand.

A woman observes a display at one of the innumerable marketing events staged by the industry.

Among the Orange services that would be new to the local market would be a short message service in the Thai language.

Richard Moat, co-chief executive of CP Orange, said at the launch that it was the policy of Orange worldwide to ensure that its systems met high expectations before they were marketed to consumers.

Because the company's network included GPRS (general packet radio switching) technology, new services such as data would be introduced when market response warranted it, he said. For now, the main focus would be on voice.

Adhiruth Thothaveesansuk, the commercial officer of CP Orange, said the company was considering what benefits it could offer to users of TelecomAsia's fixed lines and PCT services.

But he dismissed speculation that PCT handsets could be traded for CP Orange mobile phones, because PCT had been clearly positioned as a value-added service on fixed lines.

Rivals AIS and DTAC, meanwhile, are watching the newcomer closely so that they can counter any new incentives.

Both AIS and DTAC were caught off-guard earlier in the year by a TelecomAsia campaign that gave away 160,000 PCT handsets in three days. While they said that PCT had a different target market and was not a direct competitor to cellular service, they admitted that the promotion had eaten into their market share in Bangkok.

TA operates 2.6 million fixed lines in Bangkok, of which 1.7 million have been sold. It also has 600,000 PCT users.

Apart from giving out free handsets, the TA campaign cut PCT call rates to a flat three baht per call to fixed-line numbers in the same area. The previous rate was three baht for the first two minutes, and 1.5 baht per minute after that. Long distance calls from PCT handsets remain unchanged at three baht to 18 baht a minute depending on the destination.

In response, Digital Phone Company, the small sister mobile-phone company of Shin Corp's AIS, was forced to introduce packages that cut monthly fees from 500 baht to 300 baht, with a three-baht a minute flat rate for nationwide calls.

DPC has about 250,000 subscribers, while AIS has 4.1 million subscribers and DTAC 2.6 million.

But some analysts still predict the debut of CP Orange will spur a price war in 2002.

Advertising spending by the two dominant players was between 1.1 billion baht and 1.5 billion baht each in 2001. With CP Orange entering the market, ad spending by cellular companies is expected to rise steeply in the race to maintain leadership and build brand awareness.

Everyone agrees that the market still has room to grow. The local cellular penetration rate is about 11% nationwide and 34% in Bangkok. In Hong Kong and Taiwan, by comparison, 80% of he people have mobile phones.

AIS and DTAC plan to spend between US$300 million and $600 million on network expansion in 2002, and a commitment by TA Orange to spend $600 million is set to make competition even tougher in terms of new technology, quality of service and new services.

Competition and price wars are good news for subscribers, but an industry source said the latest developments could be a prelude to a much fiercer life-or-death struggle for operators, prior to the industry opening up to free competition in 2006.

The source argues that the current battle for market share is happening at the same time that a revolution in mobile phone services is underway.

BEYOND WAP

The introduction of WAP (wireless application protocol) phones by AIS and DTAC is good example of the race for technology leadership, although WAP has had a poor response so far from the market.

The technology allows users of WAP-enabled phones access to the Internet. But the limited content, applications and slow speed of data transmission have made the service costly and unpopular among users.

Both AIS and DTAC are now promoting the more advanced GPRS (general packet radio service) technology which can connect mobile phones more easily to the Internet.

GPRS is considered a two-and-a-half generation or 2.5G technology. It is a half step toward the widely anticipated 3G technology now being pioneered in Japan by NTT DoCoMo.

The 2.5G technology enables high-speed transmission, at 115 kilobits per second, to the Internet and other data communications. It offers a more than a tenfold increase in data throughput rates from 9.6 kbps to 115 kbps.

By using GPRS services, subscribers are always connected and always online so access to services is easy and quick.

DTAC has spent US$15 million and AIS $10 million on GPRS. Analysts said both operators planned to expand GPRS, each tapping a $60-million budget for the technology.

The introduction of GPRS by operators in the fourth quarter of 2001 was expected to spark a more intense battle to win subscribers in 2002.

But an industry source cast doubt on whether the battle for technology leadership would be part of a larger-scale price war, as CP Orange has made it clear it would not emphasise price but only quality in its marketing strategy.

But with an attractive 25% growth rate for the entire industry in 2001 and explosive growth in pre-paid services, lively skirmishes to grab a share of pre-paid services seem inevitable.