3GScottishUser
23rd November 2005, 08:14 AM
From Dow Jones (23/11/2005):
STOCKHOLM (Dow Jones)--Third-generation mobile phone services are gathering steam in Europe - but analysts don't expect a 3G phone to be the must-have Christmas gift this year.
That isn't good news for mobile phone operators, which estimate customers increase spending by 10% to 15% a month once they get a 3G handset, as they play with features such as video and music downloads.
Sales volumes will be higher than last year, but a real pickup in demand for the handsets isn't expected until 2006. That's largely because the phones are still clunkier and more expensive than standard 2G handsets.
"Until we see selling prices for 3G handsets below $150, it will not really take off in really big volumes," said Karl-Henrik Sundstroem, chief financial officer at Swedish telecoms equipment maker Telefon AB Ericsson (ERICY).
"I don't see that coming until next year," he told analysts in September.
Neil Mawston, an analyst at industry research firm Strategy Analytics, estimates that only 14% of around 55 million mobile phones sold in Western Europe in the fourth quarter will be 3G-enabled.
That's up from around 8% of the total at the beginning of the year, but European 3G growth is still slower than many in the industry had expected.
Mobile operators are keen to promote 3G services to recoup the costs of setting up their networks.
Companies spent around EUR120 billion on 3G licenses around 2000, and in the last three years have spent another $17 billion (EUR14.4 billion at current exchange rates) on building networks, according to consultants Gartner Group.
But the market has been slow to grow since the first services were launched in early 2003. At the end of September, about 15.8 million subscribers in Western Europe were using 3G, according to data from Informa Telecoms & Media. That's less than 4% of the 428 million mobile subscriptions Informa estimates exist in the region.
Development in Europe has been driven by Hutchison Whampoa Co. Ltd. (0013.HK) and Vodafone Group PLC (VOD), which are set to remain the 3G leaders in the coming months.
Strategy Analytics estimates the two operators had around 87% of total 3G subscribers at the end of June in Western Europe. By far the largest 3G operator then was Hutchison in Italy, with an estimated 4.5 million subscribers.
"It will be mainly Hutchison and Vodafone for the rest of this year," said Strategy Analytics' Mawston.
Hutchison has been pushing the services as it has no other network. It bought its licenses convinced that today's mobile phone networks, known as second generation or 2G, would be rendered obsolete and has refused to buy any existing players.
Vodafone has been pushing 3G services because it believes there's a strong case for moving customers from its existing networks. Not only do revenues rise, but the biggest part of that rise is on data services, where customers spend 85% more than on old-style phones.
Other operators are less enthusiastic, saying the new phones aren't quite good or cheap enough yet to compete with 2G handsets.
"In about one year we expect 3G phones to cost around EUR100 and then we will see a natural migration," said Fredrik Berglund, president of Nordic operations at telecom operator Tele2 AB (TEL2-B.SK).
Berglund said Tele2 isn't prepared to pay much extra to get 3G customers by subsidizing the handsets.
As an example, the cheapest 3G handset currently available from Vodafone Sweden is Motorola Inc.'s (MOT) V1050 at SEK2,500 (EUR260). The cheapest 2G phone available is Sony Ericsson's T290i, at SEK695 (EUR73).
A comparison between two broadly similar phones from Nokia Corp. (NOK), the world's largest handset maker, illustrates how 2G and 3G phones stack up this Christmas.
Nokia's best-selling 6680 3G phone is in most aspects the same as its 6681, which uses the 2G network. Both phones both have bright color screens, 1.3 megapixel cameras and MP3 players for music with 64 megabytes of memory.
The key differences are talk time and price. The 6680 has less talk time, at 2.2-3.2 hours compared with 3-6 hours for the 6681, and in Stockholm costs around SEK5,400 (EUR563), compared with SEK4,600 for the 6681.
Size is also an issue with 3G handsets. Samsung Electronics Co. Ltd's. (005930.SE) Z500 phone, touted as the world's smallest 3G phone, still weighs above 100 grams but is one of few phones approaching its 2G siblings.
However, things have moved on from two Christmases ago, when 3G phones were much bigger and heavier, and had poorer performance on all measures.
As the 3G phones' drawbacks are reduced, operators are sharpening up their strategies for getting them out of the door in large volumes.
Rene Obermann, chief executive of T-Mobile, a unit of Deutsche Telekom AG (DT), said the key is to market services such as music and video for specific target audiences.
"The handsets are increasingly better and offer more value," he said.
Obermann said at the company's recent capital markets day that 3G services aren't likely to generate much revenue for Deutsche Telekom in the next one to two years, but would help improve customer retention rates.
Dario Talmesio, an analyst at Informa, said he believes there will be substantial pickup of 3G in some countries in the fourth quarter, with progress on a wider scale next year.
"In 3G-oriented countries such as Italy and the U.K., around 30% of mobile phone sales in the fourth quarter could be 3G," Talmesio said.
But Nokia is cautious about 3G phones' share of total global sales volumes this Christmas, putting it at about 6.4%, though the company points out that absolute numbers will be substantial.
Nokia predicts around 50 million 3G phones using the European Wideband Code Division Multiple Access, or WCDMA, standard will be sold globally in 2005. However, that projection has been kept unchanged, even as Nokia has raised its forecasts for overall mobile phone sales during 2005 to 780 million from around 690 million.
Most subscribers on WCDMA networks are either in Europe or Japan, but networks are increasingly being built elsewhere in the world.
Gartner Group Tuesday also increased its forecast for global sales of mobile phones to consumers, to 810 million from 780 million for all of 2005.
At the same time, Gartner's analysts warned there will be a buildup of inventory of 3G phones as consumers fail to pick them up.
"Operators will fail to have their bright 3G Christmas," said Carolina Milanesi, an analyst at Gartner.
http://sg.biz.yahoo.com/051122/15/3wql8.html
STOCKHOLM (Dow Jones)--Third-generation mobile phone services are gathering steam in Europe - but analysts don't expect a 3G phone to be the must-have Christmas gift this year.
That isn't good news for mobile phone operators, which estimate customers increase spending by 10% to 15% a month once they get a 3G handset, as they play with features such as video and music downloads.
Sales volumes will be higher than last year, but a real pickup in demand for the handsets isn't expected until 2006. That's largely because the phones are still clunkier and more expensive than standard 2G handsets.
"Until we see selling prices for 3G handsets below $150, it will not really take off in really big volumes," said Karl-Henrik Sundstroem, chief financial officer at Swedish telecoms equipment maker Telefon AB Ericsson (ERICY).
"I don't see that coming until next year," he told analysts in September.
Neil Mawston, an analyst at industry research firm Strategy Analytics, estimates that only 14% of around 55 million mobile phones sold in Western Europe in the fourth quarter will be 3G-enabled.
That's up from around 8% of the total at the beginning of the year, but European 3G growth is still slower than many in the industry had expected.
Mobile operators are keen to promote 3G services to recoup the costs of setting up their networks.
Companies spent around EUR120 billion on 3G licenses around 2000, and in the last three years have spent another $17 billion (EUR14.4 billion at current exchange rates) on building networks, according to consultants Gartner Group.
But the market has been slow to grow since the first services were launched in early 2003. At the end of September, about 15.8 million subscribers in Western Europe were using 3G, according to data from Informa Telecoms & Media. That's less than 4% of the 428 million mobile subscriptions Informa estimates exist in the region.
Development in Europe has been driven by Hutchison Whampoa Co. Ltd. (0013.HK) and Vodafone Group PLC (VOD), which are set to remain the 3G leaders in the coming months.
Strategy Analytics estimates the two operators had around 87% of total 3G subscribers at the end of June in Western Europe. By far the largest 3G operator then was Hutchison in Italy, with an estimated 4.5 million subscribers.
"It will be mainly Hutchison and Vodafone for the rest of this year," said Strategy Analytics' Mawston.
Hutchison has been pushing the services as it has no other network. It bought its licenses convinced that today's mobile phone networks, known as second generation or 2G, would be rendered obsolete and has refused to buy any existing players.
Vodafone has been pushing 3G services because it believes there's a strong case for moving customers from its existing networks. Not only do revenues rise, but the biggest part of that rise is on data services, where customers spend 85% more than on old-style phones.
Other operators are less enthusiastic, saying the new phones aren't quite good or cheap enough yet to compete with 2G handsets.
"In about one year we expect 3G phones to cost around EUR100 and then we will see a natural migration," said Fredrik Berglund, president of Nordic operations at telecom operator Tele2 AB (TEL2-B.SK).
Berglund said Tele2 isn't prepared to pay much extra to get 3G customers by subsidizing the handsets.
As an example, the cheapest 3G handset currently available from Vodafone Sweden is Motorola Inc.'s (MOT) V1050 at SEK2,500 (EUR260). The cheapest 2G phone available is Sony Ericsson's T290i, at SEK695 (EUR73).
A comparison between two broadly similar phones from Nokia Corp. (NOK), the world's largest handset maker, illustrates how 2G and 3G phones stack up this Christmas.
Nokia's best-selling 6680 3G phone is in most aspects the same as its 6681, which uses the 2G network. Both phones both have bright color screens, 1.3 megapixel cameras and MP3 players for music with 64 megabytes of memory.
The key differences are talk time and price. The 6680 has less talk time, at 2.2-3.2 hours compared with 3-6 hours for the 6681, and in Stockholm costs around SEK5,400 (EUR563), compared with SEK4,600 for the 6681.
Size is also an issue with 3G handsets. Samsung Electronics Co. Ltd's. (005930.SE) Z500 phone, touted as the world's smallest 3G phone, still weighs above 100 grams but is one of few phones approaching its 2G siblings.
However, things have moved on from two Christmases ago, when 3G phones were much bigger and heavier, and had poorer performance on all measures.
As the 3G phones' drawbacks are reduced, operators are sharpening up their strategies for getting them out of the door in large volumes.
Rene Obermann, chief executive of T-Mobile, a unit of Deutsche Telekom AG (DT), said the key is to market services such as music and video for specific target audiences.
"The handsets are increasingly better and offer more value," he said.
Obermann said at the company's recent capital markets day that 3G services aren't likely to generate much revenue for Deutsche Telekom in the next one to two years, but would help improve customer retention rates.
Dario Talmesio, an analyst at Informa, said he believes there will be substantial pickup of 3G in some countries in the fourth quarter, with progress on a wider scale next year.
"In 3G-oriented countries such as Italy and the U.K., around 30% of mobile phone sales in the fourth quarter could be 3G," Talmesio said.
But Nokia is cautious about 3G phones' share of total global sales volumes this Christmas, putting it at about 6.4%, though the company points out that absolute numbers will be substantial.
Nokia predicts around 50 million 3G phones using the European Wideband Code Division Multiple Access, or WCDMA, standard will be sold globally in 2005. However, that projection has been kept unchanged, even as Nokia has raised its forecasts for overall mobile phone sales during 2005 to 780 million from around 690 million.
Most subscribers on WCDMA networks are either in Europe or Japan, but networks are increasingly being built elsewhere in the world.
Gartner Group Tuesday also increased its forecast for global sales of mobile phones to consumers, to 810 million from 780 million for all of 2005.
At the same time, Gartner's analysts warned there will be a buildup of inventory of 3G phones as consumers fail to pick them up.
"Operators will fail to have their bright 3G Christmas," said Carolina Milanesi, an analyst at Gartner.
http://sg.biz.yahoo.com/051122/15/3wql8.html