Juitor says 3G business model does not work

date: April 25, 2001 - source: thetimes.co.uk

THE total value of advertising, shopping and interactive services delivered over mobile phones across Western Europe in 2005 will barely cover the cost of a single third-generation (3G) mobile licence bought in the UK, according to an influential report to be published next week.

In the latest blow to the fragile European telecoms sector, and its faith in 3G services, Jupiter MMXI, the research firm, predicts that total mobile interactive revenues in Western Europe will climb from 116 million in 2001 to just 8.1 billion (£5 billion) in 2005.

The forecast, which includes 3.8 billion in goods bought over mobiles, is dwarfed by the estimated 64 billion that will be spent shopping via PCs in 2005. It is also only marginally higher than the average 7.2 billion paid last year by mobile phone operators to buy a single 3G mobile phone licence in the UK.

Vodafone, Orange, BT Cellnet, One 2 One and Hutchison 3G together spent £22.5 billion buying 3G licences in the UK.

Jupiter MMXI believes that the total revenue generated by mobile phone subscribers in 2005 will be more than 124 billion, but with the majority continuing to come from basic voice services.

The 3G ambitions of the European mobile phone operators have been hit this week by the UK Government’s move to rule out refunds of 3G licence fees to the mobile operators. Yesterday Mario Monti, the European Union Competition Commissioner, gave warning that network sharing between 3G operators, seen as a way of reducing 3G roll-out costs, could limit competition in some markets.

And overnight NTT DoCoMo, the Japanese telecoms leader, delayed the launch of its 3G service, which would have been the first in the world, by four months to October, citing technical problems.

European mobile operators and 3G equipment-makers said NTT’s decision would not affect the launch of 3G services in Europe, scheduled for mid to late-2002 in the UK. BT’s Manx Telecom division said it was on track to launch 3G services on the Isle of Man at the end of May, making it potentially the first in the world.

The Jupiter MMXI report says spending on advertising, shopping and other services on mobiles will take off from 2003, “when many technical problems will have been solved”.

“Only in 2003 will revenues exceed 1 billion but, divided among all players, this revenue is small,” it says.

Johan Montelius, senior analyst at Jupiter MMXI, said the report raised questions about the operators’ ability to recoup the estimated £80 billion to be spent on 3G licences in Europe. However, he said many observers had forgotten that operators need to build new networks in any event to cope with the constant increase in mobile users.

By the end of 2005 Jupiter MMXI says there will be 300 million interactive handsets in Europe, from six million last year, and 191 million “active” interactive subscribers.

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