3 gears up for Christmas assault as Vodafone readies counter attack

1 Nov 2004

The UK’s fledgling next-generation mobile operator 3 has sent out a strong message to its 2G rivals ahead of the traditional pre-Christmas run-up, by announcing the launch of no fewer than six new mobile handsets. The new models, supplied by LG, Motorola and NEC, raise the total number of handsets 3 has on offer to twelve, with the Hutchison Whampoa-backed unit seeking to capitalise on its recent gains in the sector. Following a slow start, 3 has now signed up more than 1.2 million subscribers, up from 210,000 at the start of the year and 850,000 by June, with 230,000 sales coming in August alone. 3 had hoped to secure its niche before its more established operators could introduce their own 3G services, but Vodafone has scuppered its plan by announcing its own aggressive pre-Christmas 3G marketing plan.

Vodafone is preparing for a global launch of UMTS on 10 November with ten handsets, nine of which will be made available to the UK market. After a string of delay and setbacks – and GBP6 billion investment in acquiring the 20-year licence – the operator is finally ready to take the plunge, buoyed by the success of its 3G PC laptop datacard launch in April, which sold in excess of 50,000 units in June alone. Vodafone describes the launch of 3G in the UK as a ‘milestone’ for the company, but is playing down the launch, instead warning that the success of the venture depends upon its ability to ‘deliver’ to its customers. The cellco has seemingly learnt a valuable lesson from the failures of its Japanese operation Vodafone KK, where its inferior range of 3G handsets enabled it to sign up just a few hundred thousand users while rivals DoCoMo and KDDI won more than 20 million between them.

The aggressive moves adopted by both 3 and Vodafone are in stark contrast to the UK’s other mobile operators which are adopting a more cautious approach. mmO2 is looking toward the first quarter of 2005 for its full-blown 3G launch but is dismissive about the short-term prospects for 3G. Orange too has backtracked from earlier promises to launch by the end of this year, as it continues to wrestle with ongoing technical problems. Meanwhile, T-Mobile has said it plans to roll out a limited 3G service, but still expects the vast bulk of its sales in the final quarter of 2004 will be derived from 2G.

Undaunted, the UK’s 3G pioneer 3 remains bullish about the prospects for the technology, despite the huge drain its rollout has placed on Hong Kong-based parent Hutchison Whampoa. Critics of the operator point out that it is spending huge sums to underpin the global rollout of services and may ultimately struggle to realise a return if it fails to achieve critical mass in each market. Moreover, with traditional voice calling providing a huge portion of 3’s revenues – subscribers are reported to be spending up to six times more on voice as on mobile data – the future prospects for the thus far hyped data services is unclear.

In a related story, BT Group says it is ready to launch a mobile service next year that will allow users to make low-cost calls over the internet in airports, stations, hotels and cafés. The operator, which offloaded its BT Cellnet wireless arm in November 2001, hopes to market mobile handsets incorporating Wi-Fi technology, representing the first signs of the real threat posed by Wi-Fi to traditional mobile operators. If successful, the uptake of Wi-Fi-enabled handsets could precipitate a reversal in the recent trend of fixed-to-mobile substitution: under BT’s plan, when mobile users are at home or in the office, their calls will be routed over the fixed line network using wireless technology. However, when they enter a hotspot, the call will be carried over the internet allowing the incumbent to undercut the international roaming rates charged by mobile operators.

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