2004: The year of mobile data?

30 Oct 2003

From January there will be four mobile players in the Irish market targeting a customer base of four million people. Digital Ireland assesses the business services that the firms plan to offer in the year ahead as 3G finally becomes a reality

Vodafone: Ready for global delivery

As the largest player in the Irish mobile market Vodafone came into being following its parent company’s acquisition of Eircell from Eircom for €4.5bn in 2001. The company, with more than 60pc of the marketplace, is in the interesting position of having both the most to gain and the most to lose in next year’s hyper-competitive marketplace. The company already has a good portion of its 3G network in Ireland fully live and intends to begin offering services to the Irish public from December. In interviews with siliconrepublic.com the company has indicated that most of its efforts in the 3G space will move in the direction of offering value added services to business customers in the form of data services rather than trying to sell flashy handsets to the Irish market.

Vodafone Ireland’s CEO, Paul Donovan, points out that Ireland is one of the “most mobile” markets in Europe today, with low fixed-line penetration and a population where the average age is 16pc below the equivalent European figure. He adds that Irish mobile users were also amongst the highest spenders on mobile services in Europe, trailing only behind Luxembourg.

He pointed out that mobile prices in Ireland have fallen by 10pc on average for the past four years.

With Hutchison’s 3 service about to enter the Irish market on a full network infrastructure and the obligation to host a mobile virtual network operator, as well as Eircom clearly stating its strategy to enter the mobile market next year, Donovan points out that Ireland will become one of the world’s most hyper-competitive mobile markets with four infrastructure-based players targeting a population of only four million people.

Medium usage prepaid users in the Irish market, Donovan says, enjoy the best value service, while peak usage contract customers get full value from their mobiles. Prepaid customers represented 70pc of Vodafone’s customer base, with contract representing the remaining 30pc. “Minimum usage prepaid customers can have telecom services for less than the price of Eircom’s monthly fixed-line rental,” he adds.

“There is no question that Ireland is one of the most developed mobile markets in the world, with one of the lowest fixed-line penetrations per head of population in Europe. Our research shows us that Irish consumers are willing to spend on technology if the price and value are right. Text messaging in Ireland is amongst the highest in the world.”

For the first time, Donovan reveals that average minutes per user (AMPU) amongst Irish customers were the highest in Europe at 183 minutes per customer, which is 71pc higher than the British on the O2 network, 68pc more than the Germans on O2, 45pc more than the Dutch using KPN’s network, 65pc more than the Spanish on the Telefonica network and 18pc more than the Norwegians on the Telenor network. The figures were based on internal Vodafone data and independent data from Teligen, prepared for the OECD.

Donovan indicates that Vodafone has invested over €600m in its Irish network since acquiring Eircell from Eircom for €4.5bn in 2001 and that the company anticipates spending a further €1bn in the coming year on its 3G network, after giving €114m to the Government for a 3G licence.

“Mobile phone costs are below the European average for seven out of 10 people in Ireland,” Donovan says.

Vodafone Ireland’s chief technology officer Fergal Kelly says that the company has completely 3G-enabled its networks in Ireland’s major cities and has commenced work on towns with populations of around 5,000 people or more. He said that some 1,500 base stations around the country would be 3G-enabled by Christmas.

He explains: “Our first foray into 3G will be with services and that will be the rule throughout the world. The only exception will be Japan because it needs to be able to compete head to head with DoCoMo.”

Kelly explains that the only 3G handsets available to the Irish market at present are Nokia handsets that are currently on trial and these would retail for between €600 and €1,000. “We want to introduce services that drive usage. While we will aim to bring a number of 3G handsets on to the market in the new year, we haven’t a big agenda around smart phones to go in tandem with the launch,” he admits.

He adds: “The focus of our 3G launch will be around data, not voice, so for that reason we will be pinning our earliest launch on the 3G Connect Card, the next generation of the current GPRS Connect Card for business. We will be playing down the 3G aspect of it all and focusing on higher speed and more resilient data services. While the first 3G handsets will only be capable of speeds of around 64Kbps, the Connect Card will be capable of data speeds of 384Kbps, which we believe will be attractive to businesses with mobile workforces, whom we believe will be the earliest adopters of 3G.”

Kelly also reveals that Vodafone is currently transitioning 2G voice services on to the future 3G-based service. “We are currently spending €6m a week between upgrades and maintenance of our network,” he says.

In terms of the consumer market in the run-up to Christmas, Kelly reveals that MMS video messaging and streaming on 2.5G phones as well as the N-gage games platform would feature strongly in Vodafone’s seasonal push.

O2: Striving for excellence

As the No 2 player in the Irish market, O2 is constantly aiming to close the gap on Vodafone. Racing neck and neck, the companies have broadly the same kind of customer base — a heavy mix of prepaid on top of a solid business base. Presented with challenges ranging from number portability to new entrants in the marketplace, O2 often gives off a veneer of unflappable nonchalance, reckoning that a good quality network and the right product mix will sustain the company no matter what happens.

Like its competitor Vodafone, O2 plans to have 3G services available from December, but does not intend to push handsets in a big way. “For one thing, 3G handsets are not available in sufficient quantities to warrant a big push,” explains Chris Hayman, who heads up O2’s business products division.

“On a business front, from the perspective of the big corporate down to the single sole trader, we are focusing on a technology roadmap that evolves heavily around data services going into 2004,” he says.

Activities inside and outside O2 over the recent months illustrate a company striving for technical excellence and at the same time struggling to understand exactly what business people and consumers require right now in terms of mobile services.

In recent months the company revealed plans to scrap roaming services with Northern Ireland, opting for a single all-Ireland call rate. In addition, the company has signed a media messaging interoperability agreement with arch-rival Vodafone that will enable users of both networks to send multimedia messages with pictures and sound to one another.

In addition the company has invested heavily in the potential of Wi-Fi, installing base stations and services in a number of prominent Irish hotels and railway stations as well as signing deals with virtual Wi-Fi network provider Bitbuzz to host Wi-Fi networks in up to 150 locations around the country. The head of business solutions at O2, Orlagh Nevin says: “We want our customers to be able to use the service in as many venues as possible and our partnership with Bitbuzz offers us a cost-effective way of providing our customers with a great deal of choice in key locations.”

As well as establishing a satellite tracking system for Aircoach as part of a €100k contract as well as a similar tracking deal with Midlands waste firm Mr Binman, the company has also introduced a service that allows subscribers to create and run their own personal website directly from their mobile phone. FoneBlog, the technology behind the service, was supplied by NewBay Software, whose CEO is former Baltimore marketing head Paddy Holahan. Using FoneBlog, mobile network operators can provide unique web addresses for their customers who can then update their personal websites by simply sending images, audio and text from their mobile phones using MMS or SMS messaging. The website can be viewed from any internet browser, personal digital assistant or Wap browser.

In terms of data services to the business community, over the past year and for the year ahead the company plans to maximise data services on the xda and BlackBerry devices as well as introduce more services aimed at doing business whilst on the move.

Hayman explains: “A lot of our focus on the business market is on growing the data market. We expected voice to start falling in tandem with the growth of data services such as email on the move, but ironically we are seeing an uplift in voice usage.

“In Ireland, where 80pc of the population are using mobiles and only 50pc have fixed-line services, we are seeing an interesting growth in demand for data services such as mobile broadband and that will be a major factor in our market in 2004. In the corporate space extended office data applications such as mobile CRM (customer relationship management) and sales force management will be big in Ireland. We will also be unveiling a new range of data cards from a mixture of manufacturers in the new year. In the consumer space, multimedia messaging and games will be a big factor in the Irish mobile market in 2004.

“At present data services are being snapped up by the early adopters, but by next year they will be entering the mainstream,” Hayman says. “In the business arena, a lot of people are already using mobile data services and we will be following this up with next generation versions of the popular xda and BlackBerry devices.”

In terms of 3G, Hayman confirms that the company will be offering services from December, but like Vodafone is playing down the handset angle in favour of more sophisticated and resilient data services for discerning business users. “Our focus right now is on conjuring up the most appropriate applications that will win us business. Among these would be solutions that would synchronise email, calendar and address book applications from Outlook with what you can do on your mobile phone.

“In keeping with our 3G licence obligations, we will be ready for launch in December,” Hayman says.

The advent of more sophisticated data services will force the introduction of better services that extend existing ones such as Wi-Fi. “One of the most challenging things we will be looking at next year will be the creation of special in-home networks that complement existing 2G and 3G services as well as Wi-Fi. To make this happen in a way that consumers and businesses would appreciate would mean the introduction of a range of new payment mechanisms.

“In terms of the corporate market, the emphasis will be to give the best experience to the business user and improve all of the services that we’ve launched so far,” Hayman concludes.

Meteor: Winning the smaller wars

As the third entrant into the Irish mobile market, Meteor Communications has less than 4pc of the existing market, a position it believes it can only improve on. Meteor, which finally began operating in Ireland two years ago after a two-year delay caused by Orange’s decision to sue the regulator over the awarding of Ireland’s third GSM licence to Meteor, missed out on the watershed years of mobile penetration in Ireland, which currently stands at more than 81pc of the population. As a result, the company has been struggling to break out of its 4pc share of a market dominated by O2 and Vodafone.

Despite having fewer than 200,000 subscribers, the company has already begun to claim the first victory after the introduction of number portability, claiming that it has moved up a percentage point from 3pc to 4pc of the Irish mobile market, gaining customers that have left Vodafone and O2. “We are the only provider that can claim a net gain, the other two have seen net losses,” says CEO Stewart Sheriff. A spokesman for Meteor said that the company believes it will have boosted its shareholding of the Irish market to 6pc by the end of this year, and to 10pc by the end of 2004.

The company will not be entering the 3G market, having opted not to pursue a licence. Instead it intends to make the most of its sophisticated, high-capacity GPRS network.

In recent weeks it has been revealed that Meteor will get the lion’s share of its parent Western Wireless International’s annual US$40m investment in infrastructure because the company believes that Ireland represents its best opportunity for growth in 2004.

Brad Horowitz, president and chairman of Western Wireless International (WWI), and John Stanton, chairman of Western Wireless, one of the major players in the US telecoms market, were in Ireland recently to review the operations and progress of their investment in Meteor Communications. WWI, which has an 80pc stake in the mobile operator, is the overseas arm of Western Wireless, which provides telecommunications services to much of rural America.

Horowitz said: “In terms of the rationale as to why we would continue to invest in Meteor, it is part of our process to review them every year. We have a lot of hungry children in terms of subsidiaries around the world. In terms of our decisions to allocate capital, Ireland represents the best opportunity for growth.”

The decision to increase investment in the Irish subsidiary follows a year of speculation about Meteor’s future. Rumours ranged from it being sold to one of the two other mobile operators in the Irish market to it being the ideal springboard for Eircom to return to the mobile market following a moratorium that ends next May.

Western Wireless chairman John Stanton said: “We expect to invest US$40m throughout the course of 2003 and that goes to propositions that are generating cash and dividends for our shareholders. The lion’s share of that is being invested in Ireland.”

Looking at the direction of the operations going forward, Sheriff said that the company is developing GPRS-based packages aimed at various layers of the Irish small to medium-sized enterprise market as well as a major marketing push for the Christmas consumer market.

Sheriff also says that in terms of expanding Meteor’s coverage beyond the present 85pc of population, “we have attempted commercial negotiations with both operators and examined opportunities for reciprocal agreements, and we have examined all commercial opportunities. However, the two operators don’t believe in co-operating with us and we believe that it is time for Commission for Communications Regulation (ComReg) to step in”.

In terms of the potential to host mobile virtual network operators Sheriff says that he had not yet seen a proposal that would convince him that such a scheme would work. He also denies that Meteor has been in discussions with Eircom about offering the former state telco a conduit for returning to the mobile business.

3: Playing by the rules

Hutchison 3G, or 3 as it will be known at the time of launch, represents something of a conundrum when trying to assess its future in the Irish mobile market. After spending £4.4bn sterling on a UK 3G licence, the less than warm reception it received in the UK and Italy during the launch of services this year indicates the hard slog ahead for driving 3G services. The fact that the Irish mobile market is almost entirely saturated between the three existing network operators and rumours that it will be almost late next year before Irish consumers can avail of 3’s services makes one marvel at the capital outlay the company will require to penetrate an almost impenetrable market.

Hutchison and its partners NTT DoCoMo and KPN are spending US$16.7bn on 3G rollouts in nine countries, including Ireland, the UK, Italy and Australia. Hutchison owns 65pc of the UK-based 3, with DoCoMo owning one fifth and KPN owning the remainder.

3’s strategic position will seem all the more peculiar as its obligation to host one or more mobile virtual network operators (MVNOs) under the rules of its Irish 3G licence. Speculation by the other mobile operators hints that Eircom’s threatened return to the Irish mobile market after May 2004 may be enabled by becoming an MVNO makes the situation even more peculiar. That will mean five mobile operators targeting a population of a mere four million people. It will make Ireland one of the most hyper-competitive mobile markets in the world and — with four million people in a sparsely populated land (one eighteenth that of the UK on an island one third of the UK’s landmass) — one where more masts will be needed for less people.

3 has contracted Esat BT to roll out its 3G network in Ireland as part of a €100m deal that will involve Esat BT building and operating all elements of the radio access network, including carrying out the radio planning, site acquisition, construction and setting up of the transmission network.

However, a shortage of handsets and limited network coverage mean that it will be late next year before Irish consumers can access services from 3. This is despite the fact that the company says its network is currently live in Dublin, offering services including video mobile calling and content services to key corporate partners.

With an office on Dublin’s Baggot Street, local Hutchison 3G staff members on the ground in Ireland are virtually impossible to contact. Hutchison 3G’s director of communications in London, Ray Bashford, says that despite the delays the company is sticking rigidly to the timetables set out in the licence it has received from the ComReg. “The fact that we are currently operating in Dublin is wholly consistent with our agreement with the regulator,” Bashford adds.

In terms of a retail strategy, Bashford indicated that the company would be following a strategy similar to that in the UK, whereby the company has a number of flagship stores in key cities as well as acquiring 100 stores from Super Drug to host its retail strategy. “We are still ironing out our retail strategy for Ireland. We have retail agreements in the UK with Carphone Warehouse and so we would anticipate leveraging this arrangement with the company in Ireland,” Bashford reveals.

Hutchison’s launch in Europe has been fraught with difficulties, exasperated by poor consumer adoption, mounting cash burn and legal difficulties with partner KPN. Four months ago KPN refused to grant a loan worth £150m sterling to the ailing 3G operator’s UK operations, resulting in a High Court action in London over KPN’s failure to stick to its shareholder agreement.

KPN’s efforts to extricate itself from the venture without any further material loss was applauded by telecoms analysts across Europe, who have described 3G ventures as being unwieldy and unlikely to deliver a swift return on investment. Whether this assessment is true will be borne out for real on Irish soil over the coming year.

By John Kennedy