Hong Kong app firm Mobile Telecom Network Holdings Ltd. (MTel) (08266.HK) is jumping on the mainland bandwagon to get a share of the potential profits in the country’s huge growing pool of smartphone users.
“Hong Kong outperforms neighboring markets in producing apps, because we develop fast … the quality of Hong Kong’s app stores is way better than in other markets,” chief executive Willy Wong told EJ Insight.
“But the IT sector must not just think about the Hong Kong market, because it is too small.”
Established in 1999 and listed in 2003, MTel employs about 150 people and has developed more than 100 apps for Hong Kong-based companies, including MTR Corp Ltd. (00066.HK), Shangri-La Hotels and Resorts and UA Cinemas.
It has also collaborated with several prominent banks based in the city, including Bank of China (Hong Kong) Ltd. (02388.HK), Bank of Communications Co. Ltd. (03328.HK, 601328.CN), China Construction Bank (00939.HK) and Standard Chartered Plc (02888.HK).
“Our next step is the mainland market. We started a team with about 40 staff in Guangzhou last year. Shanghai and Beijing are the next two cities. Our development team must be ready in mainland China,” Wong said.
At the end of August, the country had more than 350 million 3G users, according to data released by the Ministry of Industry and Information Technology.
MTel’s first move is to build on its ties with the banking sector in Hong Kong to reach out to lenders on the mainland.
“We are preparing to extend our collaboration with the banking industry into the mainland,” he said. “We are serving Bank of China, Bank of Communications and China Construction Bank in Hong Kong and Macau, but not in mainland China yet. This is our goal.”
In the game
But, while these collaborations can build the company’s brand and extend its network in the mainland market, Wong said MTel’s ultimate goal was to develop its own mobile games because of the higher returns.
He said the company had to spend more than HK$1 million (US$128,960) to develop an initial version of an app for Standard Chartered, employing up to eight engineers on the project for about five months, resulting in a 20 percent profit margin.
In contrast, a signature mobile game can be developed by about four staff in five months and costs MTel less than HK$1 million, with triple the return on investment.
MTel has developed about a dozen mobile games in the last three years and Wong says the company plans to market them on the mainland next year. It hopes to work with companies such as Samsung, Sony and HTC to preload some of the games onto mobile phones.
He said that when MTel started, business collaborations contributed about 90 percent of its profit while mobile games only accounted for 10 percent. Last year, the ratio became 7:3, and Wong said he aimed to make their contributions equal next year.
The MTel chief said that finding skilled staff is one of the biggest challenges for the industry.
“It is very difficult to find talent in the industry. It is competitive in Hong Kong as wages are high and most of the time, brilliant minds do not want to work for others,” he said.
He said the app market is saturated in Hong Kong and more consolidation is needed to firm up the industry.
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