When the going gets tough, the tough
get together?
In a recent advertising campaign in France for
a shampoo to curl your hair, the bottle in the poster took the
form of a modern mobile phone. That the concentrated technology
a mobile phone represents should be associated with such a banal
product as shampoo may well make the hair of some constructors
and operators curl! But perhaps the metaphor is closer to the
truth than it would first appear, considering that in many European
countries mobile phone penetration has indeed reached saturation
point. So is the mobile phone business an industry with a great
future behind it? For operators fewer new customers means that
more emphasis needs to be placed on keeping those that they have,
while for manufacturers, a contracting market has pushed many
into hasty alliances with former rivals, the best examples being
Sony with Ericsson and Seimens with Nec.
As the dust settled at the end of 2000 operators
particularly were hit hard. Although in Asia growth has been sustained,
particularly in Japan and China, now the world’s largest mobile
phone market, in Europe on the other hand, the debt burden caused
by the purchase of expensive third generation licences meant that
even the fittest companies had to pause to catch their breath.
To add to their woes, the poor uptake of data services using WAP
severely reduced expected revenues.
Pushing against open doors?
To counteract these financial pressures, operators
adopted different strategies. A number decided on protest and
litigation, hoping to make governments renegotiate on what they
thought to be exorbitant auction prices or licence fees. The Spanish
government vacillated interestingly as taxes, introduced because
the government were accused of selling off the licences too
cheaply, had then to be sharply reduced when the Spanish 3G
licence holders vigorously protested. In France even more dramatically
one licence holder Vivendi Universal, threatened (albeit briefly),
to withhold the first half of the licence downpayment. Then in
October, rather surprisingly, the French government, in an awkward
about turn, caved in and reduced the costs from €4.95bn to only
€619m in return for a percentage on eventual 3G revenues. Suggesting
that other European governments should do the same, France hopes
that its two unsold 3G licences will now become more attractive
propositions especially as for the first time the number of mobile
phones has overtaken that of their fixed cousins. The United Kingdom
did not follow French advice, announcing quite early in the year
that it had no intention of undoing anything and that the 'caveat
emptor' principle applied. This was of little comfort to BT
and hastened the demerger of its mobile wing, which has now become
the somewhat bizarrely named mm02, only the 6th
largest European operator but with a distinct advantage of having
little or no debt. Another result was the ending of BT’s joint
venture with AT&T through their joint-venture Concert, which
was officially dissolved in October. This came as no surprise
to anyone with knowledge of the transatlantic misadventures of
BT over the last decade or so which, despite the rhetoric, have
always been disastrous.
The question is, will other companies be more
successful in their overseas alliances? DoCoMo the Japanese operator
made great show of its collaboration with Dutch operator KPN at
the beginning of the year but it was only in December that a timid
launch of Europe’s first i-mode service was announced. The way
forward perhaps lies with co-operation and cost sharing rather
than combination. Certainly splitting 3G development costs is
what France Telecom and Deutsche Telecom (DT) have agreed to do
in Holland, while BT / mm02 and DT will do the same
both in Germany and the UK with their respective subsidiaries,
Viag Telecom and One2One. Continue..
