New mobile phone era dawns

29th July 2003, Comments 0 comments

After spending millions to win new generation mobile phone licences, operators are starting to roll out the handsets this month. But as Andrew McCathie reports, plugging into the mobile phone revolution could come at a considerable cost.


Having splurged more than EUR 100 billion three years ago on third-generation licences, Europe’s mobile phone operators are gearing up for the long-awaited launch this month of the new era wireless technology.

Hong Kong-owned Hutchison Whampoa Ltd is leading the way with its European offshoot Hutchison 3G becoming the first operator to offer third generation mobile phones.

In the coming weeks, Hutchison 3G consumers in Italy and Britain will able to buy handsets and to plug into a Universal Mobile Telecommunications System network, which is designed to link wireless technology to high-speed Internet services.

Users in Germany will get their chance to try out the new system during the second half of the year.

By 2010, the London-based UMTS Forum, an industry representative group, expects one in every three mobile phone to use 3G technology or about 700 million UMTS users worldwide.

But before then, analysts are expecting a major shake-out in the 3G market as operators rush to try to recoup their enormous investments in UMTS systems by speeding up the rollouts of the new generation phones with the Hutchison European business emerging as a major test of whether the new technology can find a commercial footing.

Following up behind the introduction of UMTS phones in Japan and South Korea, Hutchison Whampoa plans to extend the launch of its 3G services to other parts of Europe including Austria, Sweden and Denmark as the year progresses. The Hutchison 3G launch in Britain and Italy was delayed from October last year.

But Hutchison Whampoa, which spent about USD 16 billion on developing its European 3G network, won’t have the European 3G market to itself for long with rivals such as Vodafone, T-Mobile and Telecom Italia planning to join the UMTS revolution by offering new generation wireless services later this year.

Indeed, with the operators badly shaken by the high-cost of the licences, initial hopes about the prospects for the new generation mobile phones have been fading. Several European licences have not been allocated and some have been returned to the regulatory authorities.

Price war predications

With 3G handsets expected to cost between EUR 600 and EUR 750, analysts are predicting an intense price war in the new industry.


Already Germany, which is home to Europe’s largest number of Internet users, has been a through a period of market consolidation with the number of UMTS operators reduced from six to just four.

But then, even before the auction process was completed there were signs that the German 3G market would undergo a shakeout with Hutchison Whampoa withdrawing from the E-Plus mobile phone venture with Dutch-owned KPN Mobile NV saying that the price for the new licence was too high.

Moreover, the rollout of the 3G services in Europe comes at a time of deep economic gloom in Europe as growth shrinks, unemployment charges ahead, and both business and consumer confidence drops to a low ebb.

“From the point of view of profit expectations we have to think of a time period of between seven and ten years, “said UMTS Forum president Bernd Eylert.

“UMTS is a long-term business,” said Mr Eylert, who sees the World Championship football in 2006 as likely to be the major factor in forging a new mass market for 3G phones.

Even in South Korea and Japan, which are in the forefront of wireless technology, revenue from the new high-speed mobile phone services has been far from inspiring with data traffic representing only about 25 percent of total revenues.

The added problem is that many technology analysts are concerned about whether consumers will take to more complicated mobile phone services with signs already emerging of reluctance on the part of many phone users to access operations involving too many clicks on their handsets.

In the picture

This is especially worrying for an industry which sees next key stage of its development driven by offering services based on access to sophisticated data and video services.

“The data service has to come in two or three clicks, or the user will get off the service and not use it any more," said KPN Mobile’s Peter van Delft at this month’s 3GSM World Congress in Cannes, the world’s largest wireless trade show.

Many in the industry hoped that last year’s launch of picture messaging would help to lay the foundations for a successful pick-up of 3G services with video telephony one of the major selling points for UMTS handsets, especially among younger people.

But despite extensive advertising, sales of picture messages handsets appear to have been somewhat less than encouraging.

In the meantime, because of the advanced data services provided by the new generation phones and the cost of the handsets, analysts believe that the first to seek out the new UMTS services will be corporate customers. This is especially the case as prices for handsets are not expected to start to fall until next year.

The reality, however, for the mobile phone operators is in terms of building up a robust commercial market base for their new 3G services is that there are many more private consumers than corporate customers.

March 2003

Subject: Mobile phones

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