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Last Updated: Sunday, 17 October, 2004, 16:29 GMT 17:29 UK
UK gearing up for 3G Christmas
By Jon Cronin
BBC News Online business reporter

3G phone users watching football clips
3G phones promise more fun - but will they sell this Christmas?

A new addition to the Christmas present list could be making an appearance this year - the third generation (3G) mobile phone.

Vodafone's announcement last month that it plans to launch 3G phone services in November - giving customers access to video calling, faster download speeds and more advanced games - sent a wave of interest through the UK industry.

Not to be outdone, rivals Orange and T-Mobile said they too would be launching 3G mobile services in time for Christmas.

After several setbacks and delays - and more than 22.5bn ($40.6bn) of investment - is the wider mobile market on the verge of plunging into the world of 3G phones?

It would seem so - but, for the time being at least, that plunge looks set to be a cautious dipping of toes.

Only '3', the UK's pioneering 3G phone operator, is sounding bullish about its prospects this Christmas, although developing its network has been a huge drain on the resources of its Hong Kong-based parent company, Hutchison Whampoa.

Encouraging start

Vodafone describes the launch of 3G phone services in the UK as a "milestone" for the company.

The world's biggest mobile phone firm, which spent 6bn acquiring its 20-year UK 3G licence, says it plans to have up to 10 new 3G handsets available in November.

3G mobile phones: a guide to some key features

Vodafone says it has been encouraged by the performance of its 3G PC laptop datacard for business users, launched in April this year, which sold 50,000 units alone in June.

"It has reinforced our belief that there is a market for 3G here," says a Vodafone spokesman.

However, despite the interest caused by the company's announcement in September, Vodafone is playing down the prospects of big sales this Christmas.

"3G means a lot of things to a lot of people. It's important to us, we've got to make sure that it's good. We've got to deliver for our customers."

'No mass market'

Vodafone's line is shared by Orange and T-Mobile - although T-Mobile's parent firm, Deutsche Telekom, has already launched 3G phone services in Germany.

Britain's other major mobile operator, MMO2, has so far been dismissive about the short-term prospects for 3G.

"We don't believe that 3G will be a mass market for Christmas," Grahame Riddell, the company's head of mobile data marketing, told BBC News Online recently.

The big players are getting the ball rolling for Christmas 2005. We expect offers this year, but in terms of volumes of sales, it's unlikely to be huge for them
Jason Chapman, telecoms analyst, Gartner.

"We've got to make sure the customer experience is right, there is no benefit if you don't have a proper customer proposition."

However, in a sign that the mood at MMO2 may be shifting, a spokeswoman for the firm said: "If we feel there is something we can offer that is attractive to our customers ahead of Christmas, we will launch it. It's unlikely, but we are not closing any doors."

"We won't be forced into it just because our competitors are doing it. It's not about being first, it's about being best," the company says.

'Laid back Christmas'

Essentially, the big mobile players are positioning themselves in the 3G market ahead of Christmas - rather than making a dash to claim a bigger slice of sales, says Jason Chapman, a telecoms analyst with research group Gartner.

"We've seen the launch of 3G datacards by the big players in the UK. That got them ready to move into the consumer space. However, I don't think there's going to be a big marketing push this Christmas, I think it's going to be quite laid back," he says.

The new Vodafone 3G range - picture from Vodafone
Vodafone plans to launch its 3G mobile range before Christmas

"The big players are getting the ball rolling for Christmas 2005. We expect offers this year, but in terms of volumes of sales, it's unlikely to be huge for them."

His view is mirrored by Charles Dunstone, the boss of mobile retailer Carphone Warehouse, who has warned that sales of 3G phones by the likes of Vodafone in the run-up to Christmas are unlikely to be breathtaking

But for the market incumbent, 3, success this year is vital, says Mr Chapman.

"3 will be very aggressive at Christmas. They are competing against big, established players. It's going to be hard for them."

Mobile momentum

Not surprisingly, 3 says it is confident its sales will continue to grow over the holiday period. It adds that it alone has the volumes of 3G handsets available in the shops to make a difference this Christmas.

"This is going to be our Christmas. I want us to be the latest subject at dinner parties," says Gareth Jones, 3's chief operating officer. "I want our customer base to be our sales team. It will be 3, as opposed to 3G, this Christmas."

However, he is keen to see competitors enter the 3G market.

"As soon as those guys are in the market the better. Once everyone is in, the momentum will build and that will reduce costs and drive improvements in handsets."

"We are confident. We've had 18 months to learn about 3G. The other operators are going to have to go through that."

The company, which originally encountered problems with bulky handsets and patchy network coverage, now boasts more than 1.2 million customers in the UK.

"People are aware of what 3G phones can do now. There is a higher level of market awareness than there was 12 months ago. I think that by 2007 the bulk of the market will be on 3G technology."

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