Cheap broadband in Hong Kong
City Telecom is hugely successful and building on this, the company aims to be the largest ISP service provider in Hong Kong by 2016. Three years into their strategy and while still relatively small, its 400,000 customers pay US$13 a month for 100 Mb/s synchronous broadband. They also get a money-back guarantee: If they don’t clock 80% of the promised speed, the company pays them twice their monthly fee. Hong Kong residents have been switching to them in droves.
While Hong Kong has 7 million inhabitants, only a small fraction of the island’s mountainous terrain is developed, which means a staggering population density of 42,400 people per square kilometre – versus 1660 in Japan and 205 in the US. That makes every customer far cheaper to serve. City Telecom’s network was built at US$200 per home. Typical network deployments cost 5 times that.
The largest IP service provider in Hong Kong, PCCW, has about 1 million customers but is growing at a fraction of the pace. It added only 3,000 in the last six months, compared to 41,000 for City Telecom. PCCW recently slashed its prices to match City Telecom, but still can’t come near the speeds.
In addition, the company reports to have been cash flow positive since 2007. It is debt free with 10% revenue growth and 30% EBITDA growth. The stock has risen 200% in 12 months. City Telecom has reached the one million subscriber milestone for its fixed network services, including direct fibre broadband internet access, local telephony and IPTV.
In an industry that tends to commoditise people, City Telecom’s strategy is to commoditise bandwidth – to make 100Mb/s the industry norm in Hong Kong. Their plan is to win by offering the best service at the lowest possible cost structure. If City Telecom can achieve a US$13 service, and do it profitably, there is surely hope for the rest of the industry even if the population densities are lower.
See: Hong Kong – Major Telecom Players
Tagged in: Asia, Hong Kong
