The CEOs of Ireland’s two big mobile networks have expressed doubts not only over Hutchison’s ability to deliver an effective 3G (third generation) service but with its fundamental business model.
That Hutchison’s successful bid for a 3G licence has been met with cynicism from Vodafone and O2 will come as no surprise as the two operators face their first serious challenge to their duopoly. Meteor, the third mobile operator, opted against bidding for a 3G licence and is still struggling to build its existing GSM (2G) business.
“Hutchison’s network has to be a new beginning. It has to produce an improved performance for customers over and above what we can currently achieve,” says Vodafone CEO, Paul Donovan, about the rival operator’s 3G network in the UK. “But Hutchison has said customers will experience drop out because it is patching 3G with national roaming on 2G. There are very significant numbers of interworking issues between 2G, 2.5G [GPRS] and 3G that all the operators are grappling with.”
Hutchison Whampoa plans to launch its network in the UK, branded 3, before Christmas. Ed Brewster, head of external relations, acknowledges there are some difficulties with the technology, but says they are steadily being ironed out.
“Handing over from 3G to 2G is an industry-wide issue. Holding a voice call [as you move from a 2G transmitter to a 3G transmitter] is the problem. It’s not a problem the other way around,” he says. “The work we’ve done on this to date is positive and we’re happy with the progression. By the time we roll out our full service it will be a solved problem,” he explains.
The moot question concerns when the full service will be in place. “The launch of 3 is not a full big bang marketing launch this year,” explains Brewster. “It’s a step-by-step incremental process, rolling out the services in phases. That said, we are hoping to have paying customers by the end of the year. When we begin offering services we will have 3G coverage in the main urban area of Britain: London, Newcastle, Belfast and Birmingham, for example.”
Outside of these areas, 3 customers will roam on to 2G networks courtesy of an agreement with O2 to use its infrastructure. Brewster couldn’t confirm that a similar deal would be put in place in Ireland.
Irish operators have also been vocal about the logic in Hutchison launching as a 3G-only business. “I would question the business model,” says Donovan. “Nowhere in the world has Vodafone chosen to invest in a stand-alone 3G business because we regard migration [moving over from 2.5G] as very important.”
Danuta Gray, CEO of O2 Ireland, agrees: “I’m sure Hutchison will say its business plan is very strong but I would question launching a 3G network without a strong 2G and 2.5G business in place.”
Brewster refutes suggestions that Hutchison’s strategy is founded on anything but a strong plan — at least as far as the British network is concerned. “In the UK it’s a plan based on consumer research, on a business model that raised £3.2bn sterling financing. There has been a very thorough independent valuation of our business strategy,” he says.
All three networks are expected to launch 3G services in Ireland by the end of next year.
By Ian Campbell