3G won't hurt profits - Vodafone

May 12, 2004

The chief executive of Vodafone says he does not expect the introduction of 3G mobile phones to hurt earnings because it will take many years for customers to signup to the service.

Arun Sarin said takeup will span "many years" and therefore spreading the costs of network investment and handset subsidies.

"Is it a natural consequence in the 3G world that operating profits and revenues will be flat or neutral? No," he said during the FT World Mobile Communications Conference in London.

"For us, 3G is no big bang. For us, it is an evolution."

Vodafone has launched 3G data cards for laptops earlier this year in several European countries. It has started selling 3G handsets in Germany and Portugal last week, which has prompted T-Mobile to push forward the launch of their 3G service in Germany.

Japan's NTT DoCoMo issued a profit warning for the coming fiscal year admit fierce competition. The company is introducing a monthly flat rate mobile internet tariff to encourage consumers to subscribe to its 3G FOMA service and catch up with its rival KDDI which has over 13 million subscribers to its 3G service while DoCoMo has over 3 million customers.

Sarin also believes the mobile phone industry should work together to develop a standard that will supersede 2G and 3G technologies. He said telecommunications operators and manufacturers needed to co-operate to avoid the introduction of competing wireless technologies that could increase network rollout costs and cause compatibility problems.

"We need to map the direction for the next five to 10 years to avoid industry fragmentation."

Vodafone and other operators has faced problems during rollout of their 3G networks such as compatibility issues between handsets and networks, drop calls and short handset battery life.