[3GScottishUser]

From Mobile Today (27/09/2006):

Manufacturers are claiming that Vodafone's retreat from 3G in the first half of the year is responsible for thousands of unsold 3G handsets.

Sources at top manufacturers have indicated that they were badly stung with 3G handsets launched earlier this year on the back of big orders. The shift in emphasis to keener-priced, better-looking 2.5G handsets appears to have caught out several manufacturers that had built up 3G stock in expectation of backing from a range of operators.

Sony Ericsson's VP for the global Vodafone account, Peter Marsden, said: 'The subsidies definitely went down earlier this year on 3G.' The manufacturer's Vodafone-exclusive W900i phone proved a disappointment with slow sales. Marsden said operators had started to acknowledge that aesthetic appeal of handsets was a bigger factor for consumers.

Samsung struggled in the first half of the year after its flagship device, the 3G Z400, was ignored by operators. UK chief Mark Mitchinson said: 'The operators showed more appetite for 2.5G. Maybe they didn't see the ARPU from 3G [that they expected]. That's where we've been impacted more because it cascades down.'

He added that operators are buying Samsung's new Ultra range of handsets in large quantities, despite the lack of 3G.

Meanwhile, Motorola's global mobile chief, Ron Garriques, has explained Motorola's focus away from 3G, stating that the company was making better margins selling 2G handsets.

Motorola made big plans for its V3x handset for the first half of this year. However, it was not taken up in large numbers by Vodafone. A source at Motorola said: 'Consumers really switched towards looks, and there wasn't a killer 3G application.'

The prominence of Vodafone's solus manufacturers, Toshiba and Sharp, on the operator's handset portfolio has also been severely scaled down.

Vodafone has moved away from advertising 3G or its Live! services, focusing instead on its tariff deals. There are only two references to 3G in Vodafone's latest catalogue, despite a growing range of 3G handsets.

Vodafone was not available for comment.

http://www.mobiletoday.co.uk/content/14751.asp?men=&sub=1

[Hands0n]

The answer would appear to be blindingly simple - make 3G handsets that look like 2.5G handsets, if aesthetics are really the strong selling point.

In fact, why not do what makes emminent sense and only manufacture 3G handsets (they are all backwards compatible with 2G/2.5G) and thereby have a single production line. Cease all development and designof 2G handsets immediately. Get the aesthetics right and it really wont matter how the MNOs sell the product [as 2G or 3G], the manufacturers will gain from simplified and streamlined production facilities (one single production line per handset) and there will be no lack of sales.

[Ben]

Vodafone were write to snub the manufacturers in this instance. Blimey, Vodafone tried harder than anyone to get 3G off the ground but when the handsets just wern't up to scratch they made no secrets about pulling back to give the customer what they actually wanted.

3G will rebound, but it'll take widespread HSDPA availability, better handsets and more compelling services if the networks want that ARPU bump they were promised (promised themselves).

[Hands0n]

I agree quite a bit :) Voda did indeed do their part very early on, and were the first of the main four to get stuck in. It is a crying shame that they now find themselves needing to back-peddle and subsume 3G into all else that they do. I do rather fancy that in 2007 they'll make something of HSDPA - but they've really got to get the data tariffs right for public consumption, not the premium [price] that they are at the moment.

I truly believe that the Manufacturers got as greedy as the networks did [when they bought their 3G licences]. But the Manufacturers do have an opportunity to get themselves out of this quagmire by creating a standard production line rather than making discrete 2G and 3G devices. The inherent backwards compatibility of 3G devices should be exploited to the full and all production shifted to that technology. Other industries managed to standardise and create single production lines to great financial benefit. It does appear that all things Mobile Telephone still reside in the Dark Ages!

[Ben]

With regard to manufacturer greed - just as the level of investment wasn't there on the part of the network operators, though their licence fees did lend some credibility to that, handset manufacturer investment was also poor. I guess in a market where it's still the camera on a phone that is the most competitive selling point there's not a lot of room for investment in an enabling technology like 3G that the customer doesn't even [need to] care about.