O2 moves on mobile data

9 Jul 2003

Following its much publicised launch of a trial 3G network in the Isle of Man, O2 revealed last week that it has moved on and now has its latest trial network in Ireland. However, this news was dampened somewhat by the assertion of the group’s chief executive, Peter Erskine, that 3G was still a long way from going mainstream.

“We remain certain that 3G will happen since a lot’s been invested in it. The question is not if, but when. The issue is handsets. Handsets delayed the launch of 2.5G and they’ll delay the launch of 3G. The 3G handsets we have at the moment are big, they eat batteries and they’re expensive. We expect 3G to begin take off in summer to Autumn of next year,” said Erskine.

Despite the delay in 3G, Erskine and other executives pinned their colours to the mast by stating that mobile data was the next big area for growth. The company said it had the numbers, the services and the hardware to drive development.

On paper, the company’s data revenue figures are impressive. Data amounted for 17.3pc of the companies service revenue last year and it grew to 19.4pc in the last quarter. Erskine was predicting it to rise to 25pc of revenue by the end of 2004. It had 643,000 active GPRS customers by the end of May and was getting 2,000 new users of O2 Active a day. O2 Active is the company’s revamped mobile portal, launched last month, which competes directly with the Vodafone Live! service. The O2 offering has a colour, icon-driven interface which, in addition to the usual news and information services, also offers email, multimedia messaging and gaming. On the devices front, the company was also claiming success. It had sold 64,000 xdas and 27,000 BlackBerry devices by the end of May.

However, the breakdown of the figures reveals that the data market still relies heavily on SMS. The company recorded a 60pc growth in SMS usage over the past year, with 8.5 billion messages sent of the company’s network. Non-SMS data revenue stands at 5pc, which is up from 3pc in 2001/2002. Only 12pc of O3 customers now have a GPRS-enabled handset, a key enabler of non-SMS data usage.

O2 is still somewhat unusual in its strategy of bringing its own branded devices to market, and last week’s event saw further developments in this arena. The company’s xda is a market leader when it comes to PDA/handset hybrids and enjoys an 80pc market share in this segment in Ireland. What pleases the company more is the fact that average data use on the device is more than three times that used by customers with other devices. O2 took the opportunity last week to announce the xda II, which will be available across the group before Christmas. The new device incorporates many of the features that were absent from the original such as an integrated camera, Bluetooth and tri-band capability. The device will also feature a removable battery, an internal antenna and will run the 2003 version of Microsoft’s Pocket PC OS. Although no final specifications were on offer, the sample device we looked at was also significantly lighter than the original model.

Also in the pipeline is an extension to the range of BlackBerry devices, which will rise to three models, including a colour version by the third quarter of this year. The BlackBerry platform is also being enabled on third party devices such as the forthcoming Nokia 6800 and xda II.

Music is another arena in which the company has identified potential data revenues. The company announced a new music strategy whereby it will launch O2-branded personal music players which can be connected to a mobile phone and which can download music directly from the net. This is following on from a trial which the company worked in partnership with MTV, BMG, Universal, Sony, Warner Music International, AIM and publisher MCPS-PRS. All provided track listings for new chart releases.

The final new development mentioned is a rather ambitious Bluetooth initiative. O2 confirmed that it is intending to trial a Bluetooth access point for the home that allow a mobile phone to automatically switch over once it is in range. The access point can be connected to a DSL line that allows the mobile user to avail of cheaper costs associated with a land line. The proposed initiative allows for separate billing between calls made via this type of connection and calls made over the conventional mobile network. O2 said it would be trialling the technology later this year and it may become a product by the end of 2004.

Despite its caution on 3G, O2 clearly believes that mobile data is the way forward and the company isn’t waiting around for 3G to happen before it starts pushing services.

By Dick O’Brien