Vodafone's careful approach to 3G launches

August 1, 2004

In early May this year, telecom giant Vodafone Group launched 3G mobile phone services that allows video calls and high-speed data content services in Germany and Portugal.

Vodafone was taking a very cautious approach to introducing 3G services around the world in terms of market segments, geographic coverage, handset offerings and service bundles. The company started with a simple offering in February for business users in the UK with a 3G datacard that allows users of portable computers to read email and surf the Internet six times faster than over the regular mobile phone network.

The companies moved on to test the consumer markets in two countries with very different cultures. The launches in Germany and Portugal were very limited with only one handset - Samsung Z105 - being on offer. 3G coverage is still far from 100% in the two counties. Like its main rival in the UK, Hutchison, Vodafone customers also experience drop calls during call handovers between 2G and 3G base stations. The company has since offered handset services in other countries, with Sweden as its latest addition

Vodafone is aiming to expand its marketing and rollout campaign in time for Christmas with wider coverage and a wide section of handsets and content for consumers. It already started selling the highly anticipated SonyEricsson Z1010 in Germany for 299 euros.

The early content services are positioned as an enhancement to Vodafone live!. They include video calls with another Vodafone user in a 3G coverage area, video streaming and short video clips of major sports events. Futures service on Vodafone includes location-based service, GPS and gaming between many 3G handsets.

Vodafone has sold over 50,000 mobile 3G datacards for computers across ten countries. However, there are signs that 3G high-speed data services might not be what the consumers really want. Vodafone slashed its 3G datacard that allows laptop computer users to access the Internet through its high-speed mobile network to one euro from 300. In February, the company had been selling the card for at least 299 euros.

One source said, "they (Vodafone) overestimated demand and are now trying to sell down their inventories…"

A week after Vodafone's announcement, T-Mobile launched a new three-month 3G trial plan that includes free download and also cut its rate for picture messages sent over 3G phones by as much as 75% to 0.39 euros to rival Vodafone.

Vodafone's measured 3G launch was in contrast with its rival Hutchison Whampoa's all out assault launch. Because 3G is an incremental upgrade for Vodafone customers, Vodafone can afford to take a low-key approach.

Hutchison's early launch left customers disappointed and led it to sustain volume with extreme discounting. Rushing out services before quality and customer satisfaction can be assured damaged the prospects for the market.

Vodafone is now confident that the 3G network infrastructure is working and can support smooth handover from 2G to 3G mode. A couple of weeks ago, Vodafone launch a major campaign in Germany to encourage current users to upgrade to 3G. Rivals in Germany are already "shaking their heads as this is clearly going to drive down price", one analyst said.