[3GScottishUser]

From The Sunday Times (30/07/2006):

VODAFONE appears to have finally accepted what its critics have long told it: the revenue uplift from putting fancy 3G phones in its customers’ hands does not justify the cost.
Along with the rest of the mobile industry, Vodafone had hoped that 3G mobile networks would encourage customers to spend more money on services such as browsing the internet, downloading music and watching video clips.

However, less than two years since launching these services, Vodafone has discovered the incremental revenue they generate does not justify the hefty subsidies it has to offer on expensive 3G handsets. It has recently cut the level of subsidies it offers retailers, causing a sharp fall in the proportion of 3G phones it is selling.

After last week’s trading figures, James Barford of Enders Analysis estimated that sales of 3G phones have “plummeted ... from 20% of all handset sales in the prior quarter to just 12%”.

Vodafone would not confirm the size of the fall but said the Enders assessment was “reasonably accurate”. A spokesman said: “3G is being de-emphasised. You’re seeing a commercial evaluation.”
Vodafone said it had seen some revenue uplift from early adopters, and it is still promoting services such as mobile television and music downloads. But for the mass market, 3G networks will increasingly be used to offer cheaper voice calls to win market share from landline companies such as BT.

Claire Enders, who heads the analysis firm that bears her name, said Vodafone’s rethink on 3G was “the first good news we’ve had in a long time”. It showed Arun Sarin, the group’s chief executive, was prepared to listen to his critics, she said.

There was more bad news for 3G in a market-research report commissioned by Enders. This found that 63% of adults were not at all interested in 3G services, and a further 18% were not very interested.

Even those with a 3G phone showed little interest in the possibilities. Seven out of ten had either never made a video call, or had done so only once. More than half of 3G phone owners had never watched a video clip or downloaded music after an initial test. Three-quarters of consumers said they were unwilling to pay £5 a month to watch mobile TV.

The telephone study, conducted by BMRB, also makes grim reading for 3, the newest of the mobile networks and the only one dedicated to 3G. Only one third of 3’s existing customers plan to resubscribe with the network — less than half the loyalty displayed by its principal competitors.

O2 has the most loyal customers, with 81% planning to stay with it. Virgin Mobile also scored well, its 76% loyalty score putting it ahead of Orange, Vodafone and T-Mobile. 3 said it did not consider the findings statistically significant because only a “very small” number of its customers were interviewed. It said the level of its customer “churn” was in line with its rivals.

http://www.timesonline.co.uk/newspaper/0,,2769-2291142,00.html

[Ben]

Operator realises that consumers choose what will be successful, not them. Woah!

I think this moment of enlightenment is important for Vodafone. 3G is an important part of their strategy, but it's entirely possible that they have been pushing it too hard at their own expense. Handsets and services that are 3G-specific will sell the concept themselves over the years to come, it's more important to get the network infrastructure in place so the end user can choose how they wish to use the technology available to them.

[3GScottishUser]

Its noticeable that manufacturers have recently been bringing out new 3G handsets without a 2nd camera for videocalling. Nokia 6233/4 has none nor does any of the new BenQ-Siemens offerings.

Even 3 have added the Nokia 6233 to their line-up!! This is the 1st consumer phone they have ever offrered directly without the videocalling facility. I think the penny has not only dropped at Vodafone but also elsewhere!

I suspect there will always be a very substantial number of customers who want simplistic devices to chat and send SMS, maybe take the odd snap. When you look at the complexity of the newer 3G models one has to wonder how many of the fabulous range of facilities will actually be used by 'Mr or Mrs Average'. Time will tell but it looks like 3G will eventually become a platform for cheaper voice calls to compete with landlines and may offer data users more flexibility when pricing becomes lower.

All things considered - not quite what any of the networks thought when they paid billions for licences back in the late 90's. Its amazing how some things pan out..... tortoise and hare stuff...... thinking about 02!! They have quietly kept building GSM numbers and have also introduced 3G products by stealth, some with added benefits like i-mode. No major dash to market video, videocalling or content..... just highlighting voice and SMS at specific price points (ie SE K800i on £35/month 750 X/Net + 750 SMS). A very considered bit of market positioning. Not introducing handsets before they were truly comparable to GSM and choosing to ignore 3G benefits and migrate customers by stealth on better value price plans. Have 02 got is sussed? Judging by their increasing customer numbers and their retention stats it would appear so.