Mobile phone firms expect five-year wait for 3G profits

date: 29th January 2001, source: independent.co.uk

The five British wireless phone operators that bid £22bn for universal mobile telecoms service licences in last year's government auction won't see a return on their investment for more than five years, according to a majority of participants in a survey of industry executives and equipment suppliers.

The survey, conducted last month by Quotient Communications, also shows that operators are not sure what applications will prove successful in stimulating demand for third generation services. Indeed, more than one in five respondents, 21 per cent, believe that the so-called killer application that will drive demand has not been invented yet.

Rodney Stewart, managing director of Quotient, said: "It's important to think about what services customers will want to use and what they will be prepared to pay for them. But just having a marketable set of applications is not going to be enough." He added: "The emphasis must be on how to plan networks that are flexible and robust enough to support unpredictable demand."

Among the 350 industry executives surveyed, more than one in four, or 27 per cent, believe that the most popular application will be internet access. A further 21 per cent said some form of mobile location application will be the most important service.

Even when the application is identified, more than a third of survey respondents said operators will not make a return on their investment in licences for 10 years or more. More than half, or 57 per cent, said it will take five years, while just 8 per cent believe that operators will recoup their investment in less than five years.

Concerns about inadequate network coverage also emerged with 80 per cent of respondents stating that a digital divided could be created if users in some parts of Britain are not able to access 3G networks. "Our survey shows that there is still a great deal of uncertainty about the way in which 3G services will be delivered, whether the majority of the UK population will have access to the applications they need and whether operators will be able to guarantee quality of service to customers," Mr Stewart said.

Notwithstanding the bear market conditions, respondents to the survey believed that the UK mobile market will remain relatively stable over the medium-term. More than two thirds, some 68 per cent, believe that there will still be five operators or more in the UK providing 3G services in 2005.

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