The success of Ireland’s mobile networks is well documented but with over 100pc penetration of mobile phones and more competition than there has ever been, things are about to get a lot tougher for operators that have known nothing but good times.
As well as competing against each other, Ireland’s four networks have the increasing threat of emerging technologies that challenge old assumptions about mobile communications. Coupled with growing regulatory pressures that are putting a squeeze on comfortable revenue streams, operators are having to look at new ways of ensuring growth.
That said, Robert Haulbrook, CEO of Meteor, points out that the levels of mobile penetration in Ireland do not necessarily preclude more growth. “We are still behind other countries even at 102pc penetration, so we will continue to see growth here as the cost of voice services continues to reduce and as data services are adopted for both business and personal use,” he says.
Teresa Elder, Vodafone’s CEO, also sees opportunities: “While there’s little room for growth in traditional areas such as customer numbers we believe there’s still potential for growth in both usage and the number and types of products and services used by our customers,” she says.
O2 CEO Danuta Gray (pictured) shares this view, albeit with one caveat: “We still see growth in usage but because of the competition, regulation and alternative technologies it is offset by price pressure. It will still be there but not at the rates we saw four to five years ago.”
One place where growth is coming from is number portability which allows customers to move to a different operator while retaining the same phone number. “It has given us the opportunity to go after customer segments where we felt we could be more successful, such as in the business sector,” says Gray.
3 Ireland’s managing director Robert Finnegan identifies the company’s May launch of a prepay service as its most obvious path to more subscribers. As a dedicated 3G operator the company is also keen to play up the multimedia possibilities. “People talk about penetration being over 100pc but I liken it to when everybody had a black and white TV and wondered where the future was going to be. It turned out to be colour.
“2G operators are like black and white TV manufacturers migrating towards colour which is 3G,” says Finnegan. “Who wants to do just voice and text? You can watch football, download music and use the web. That’s the way the industry is going to move.”
Despite efforts by the regulator to increase competition further through the introduction of MVNOs (mobile virtual network operators), Vodafone, O2 and Meteor think the market is crowded enough for the size of the country. In terms of hosting an MVNO — allowing a new operator to use their network infrastructure — Elder and Gray said they were yet to hear a proposition that made business sense but said they would always listen to proposals.
Haulbrook sums up the view: “When we look at the prospect of encouraging MVNOs into a small market like Ireland one has to consider the viability of new entrants entering at such a late date.”
Finnegan takes a different slant. He wouldn’t say 3 was actively prepared to offer an MVNO but welcomed more competition. “Historically Ireland had two operators who creamed the market in terms of what they charged the consumer. The more operators that come in, the more competition there will be.”
The biggest long-term threat to the networks, however, may come from other sources. Mobile phone manufacturers are working on new hybrid handsets that will enable users to wander off mobile networks and on to Wi-Fi, the wireless zones found in hotels, airports and coffee shops.
For some of the operators Wi-Fi is seen as complementary rather than a competing technology. Vodafone and O2 have both embraced it to a degree, offering their customers ‘hotspot’ access across the country. But this doesn’t mean they think the technology will win out.
“It’s worth looking at this from the customer’s perspective,” says Teresa Elder. “The convenience and ubiquity of the mobile phone make it the natural choice for meeting all communications needs.”
Gray accepts the inevitable rise of new technologies and says that O2 is looking at how best to work with it. “It’s competition from a different source which means we have to move with the times. Since we were bought by Telefonica, a fixed and mobile player, we have a different insight. A number of people from Telefonica are working with us looking at convergence.”
Finnegan is more cynical, questioning the appeal of alternative wireless technologies. “Wi-Fi hotspots are very limited and, in some places, don’t even work. What we offer is not about being located in a certain city radius, it’s about anytime, anywhere access and that’s what our customers want.”
The operators are also exploring new technologies that will enhance the performance of their existing infrastructure. HSDPA
(high-speed downlink packet access) will enable 3G networks to deliver near-broadband speeds. Vodafone has been the most bullish about a launch and Elder has little doubt about its significance. “It’s a new area of focus for us. Initially we’re focusing on attracting customers in areas where use of our current 3G/GPRS Mobile Connect datacard is highest. However,” she said, “we will continue to roll out our 3G broadband [HSDPA] network over the next 12 months. We’re confident that, in time, we will establish ourselves as an alternative provider of broadband to customers throughout the country.”
O2 is cooler about the technology. “We are accelerating our investment with prototype applications for entertainment on the move,” says Gray. “HSDPA will give a residential broadband-type experience up to a certain level but if you are a really intensive user you’ll still have to look at alternatives. As soon as you get more than a few users on HSDPA, the physics of the technology, regardless of what people will say, means that there will be contention issues.”
Finnegan would only say of HSDPA that the proof was in the delivery. “There’s room for many players and having the best and fastest network is more important than being first.”
Haulbrook is cautious about converging technologies in general and warns against over-hyping them. “Convergence is a buzz word in the industry that has attracted quite a lot of coverage in the past year even though the concept is well behind reality when it comes to applications and availability,” he warns. “We recall how the dotcom and 3G evolutions were over-hyped and how technological development and capability was too far in front of consumer demand.”
What everyone agrees is that the handset will remain a key component in mobile communications, an ever-changing multimedia device that is now able to do much more than make voice calls. Some have speculated that the rise of the multimedia phone will eventually mean the demise of standalone devices such as MP3 players. Gray doesn’t agree: “The boundaries are blurring between them but there will always be room for standalone devices. There is no way I’m going to watch a full-length video on a mobile device, for example.
Elder agrees: “There will always be room for standalone devices such as music players and portable games consoles; they serve a different consumer need.”
Finnegan is the most bullish about the prospects. “We come very close and in some case surpass standalone devices with the types of service and handset we provide,” he claims.
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