Research Notes

The first 3G sales experiences – from “3”

After all the hype around 3G and “3” and all the services that will be available at high speed over the network – what is the main selling point for a new “3” mobile phone? Unbelievably it is the price of the voice traffic!

Just a few weeks after “3” launched their mobile phones to the public, the first indications of what the consumers first buying experience are have been collected and analysed by Strand Consult. We have visited a number of “3” outlets – both some of their own and some independent retailers. Everywhere the sales pitch from the salespersons has been the same almost word for word: “3” offers the lowest price on voice minutes.

The three main factors with this strategy that could be unfortunate are the following:

– “3” are not focusing on the mobile services that should be generating 20 – 40% of 3G revenues
– “3” are buying customers by offering the lowest minute prices in the UK
-The two above factors can influence the customers perception of “3” – to the effect that “3” is just a new discount brand – rather than the first 3G mobile operator in Europe.

During the last few years there has been a lot of discussion about 3G – and of course a lot of delay in launching. One of the biggest issues has simply been the huge price of the 3G licenses. This makes it enormously disappointing that “3” are not focusing more on their mobile services – as the mobile services seems like the most likely way to get a return on investment on the 3G licenses.

Already in 2002, some UK mobile operators were making cautious statements that they would like to making around 50% of their revenue from mobile services by the end of the decade – simply because the price of voice minutes are still declining and simply not enough to finance the 3G licenses – let alone investments in 3G technology and services.

Many countries in Europe are right now seeing voice minutes dropping as 2G and 2.5G battle on price to steal customers from each other. From a business point of view, this has to be the most brutal way of committing collectively suicide for the mobile operators. The only way forward is to focus on new revenue streams and the most obvious is data traffic revenue from mobile services.

The huge explosion in data traffic from mobile services will not come before customers understand what they can use mobile services for – and have a handset that can handle these new services. Right now, Vodafone Live are showing mobile users in many countries some of the many new possibilities that have emerged with the newest colour, MMS and Java enabled mobile phones and in only five months acquired over 1 million subscribers to the Vodafone Live service.

Even though it must have been a blow to “3” that Vodafone Live launched their service before “3” was ready – and many of the Vodafone services are similar to those of “3”, I am certain that most in the business thought that “3” would follow a similar strategy to Vodafone Live – focusing on services, branded content and of course video calls – something that Vodafone on their 2.5G network cannot offer.

It is greatly disappointing that “3” have decided basically join in the voice minute price war rather than focus on all the mobile services – especially video calls – that “3” offers – services – even though they are similar to Vodafone Live – that ought to be the backbone of a healthy 3G mobile market. Now one has to worry that “3” are setting the stage for a somewhat less healthy 3G market where once again the focus in on price and price alone.

Perhaps this is not what “3” had in mind when creating their price policy strategy. One can hope that they had more in mind that when customers purchase the “Kit” price plane for £59,95 the average ARPU (average revenue pr. customer) would be much higher than the current ARPU for mobile customers in the UK. Maybe they also hoped that their sales force would present “3”‘s offering with much more focus on the mobile services than seems to be the case. In some of the shops some of the salesmen did try to demo some services for us, but had difficulty with them, maybe because it is still very new for them as well. Just telling us that “3” has the cheapest voice minutes is from an uncertain salesman’s point of view, by far the easiest way of selling a “3” phone with subscription for now, but from a long term strategy point of view, the most unfortunate sales pitch possible.

Everyone knew that “3” had to start from scratch and go out and convince customers to switch to 3G, but it does seem a great pity that customers will have absolutely no idea why they should choose a 3G phone – other than cheap voice minutes.

According to Strand Consults latest reports “How to make money on mobile services” and “How to make money on mobile services” Facts & Figures, there will be over 6.8 million 3G subscribers in the UK by the end of 2005. Each of those users will on average in 2005 spend a little over 16 Euro pr. month on mobile services, generating a total revenue in 2005 for 3G mobile services in the UK of 1.320 billion Euro.

“How to make money on mobile services” is a comprehensive report about the development and value of all types of mobile services in 16 mobile markets in Europe from 2002 to 2005. The mobile services are split into type of service, network technology, service technology, country and each figure is also split up into the operators perspective and content providers perspective – not only giving a very clear picture country by country as to which types of services will have the most success on the different platforms and when it will happen – but also how big a share of the revenues from any given service in any country the content providers can expect.

There is no doubt that the 3G market will take off and that mobile consumers will start using mobile applications – but “3”‘s strategy could have an effect on exactly how lucrative the 3G market could become from the mobile operators’ point of view.

More information “Facts & Figures”
More information “How to make Money”

Contact us to get a copy of the report

Request the report