U.K.'s Four Mobile Phone Companies Gear Up for Record Christmas Season
By Kate Norton
U.K. Wireless Companies Gear Up for Record Christmas (Update1)
(Adds prepaid phone details in 3rd, 6th paragraphs.)
London, Oct. 31 (Bloomberg) -- The U.K.'s four mobile phone
companies are expected to add 60 percent more customers in the
fourth quarter than a year earlier as Britons clamor for pay-as-
you-go packages during the Christmas shopping season.
Vodafone AirTouch Plc, BT Cellnet Ltd., Orange Plc and One 2
One Ltd. will likely sign up more than 4 million subscribers in
the run up to Christmas, beating last year's record of 2.54
million for the period, analysts and industry executives said.
Pay-as-you-go phones have become one of the hottest gift
items in the U.K. in recent years because unlike normal packages,
they don't require a contract or monthly rental fees. Talk time
is bought on an as-needed basis, letting a user monitor spending
on calls more closely.
``Revenues will go through the roof,' said Steve Jobber, an
analyst at Paribas Capital Markets. Demand this year will set
records as operators offer cheaper calls and other incentives to
lure prepaid customers, steps that could add 1 billion pounds
($1.64 billion) to sales for the four companies over the next
year, according to some forecasts.
The country's four operators are betting the measures will
also encourage pay-as-you-go customers to use their phones more,
increasing revenue per subscriber. Prepaid customers, which now
account for 40 percent of the U.K. market, typically spend less
than contract subscribers.
The country's four mobile operators say they've taken steps
to ensure there's no repeat of problems that arose last
Christmas, when unexpectedly strong demand for prepaid packages
led to handset shortages and problems connecting to the network
during the holiday period.
Customer Services
Vodafone AirTouch, the country's largest wireless company,
said it ``struggled' to keep up with demand last Christmas, but
it's invested 20 million pounds on customer services this year to
ready itself for the holiday season. Orange and One 2 One have
also opened new call centers to handle customer requests for
connection and additional talk time. BT Cellnet said it's also
prepared.
At the same time, all four are scrambling to stimulate
demand and grab a larger share of the country's booming mobile
market. Half the U.K. population will own a mobile phone within
two years, compared with 22 percent at the end of 1998, analysts
predict.
Vodafone AirTouch, for example, Thursday announced new call
discounts for contract customers, aimed at seasonal shoppers. The
company's distribution network also is better than those of its
rivals and it has more sales agreements with supermarkets,
putting Vodafone in a good position to exploit prepaid demand,
analysts said.
Higher Spending
Even No. 3 mobile operator Orange, which has traditionally
focused on higher-spending contract customers, has cut its
prepaid call prices by more than 50 percent, in acknowledgement
of prepaid's role as the force behind the industry's growth. It's
spending between 15 million and 20 million pounds to advertise
the campaign, which it expects to boost its share of the pay-as-
you-go market to 20 percent in the fourth quarter from 11 percent
in the third.
U.K. phone regulator Dave Edmonds is concerned the mobile
operators may be overwhelmed by the estimated 3.5 million new
prepaid customers this quarter he's demanded to see their plans
to handle the Christmas rush.
Analysts, however, say there's little cause for concern.
After being caught off guard last year, the mobile operators are
eager to ensure they don't lose out on potential sales again,
especially after a string of record quarters.
``The operators saw the third quarter was stunning and
should be drawing conclusions from that,' said John Tysoe, an
analyst at WestLB Panmure in London.
The measures they're taking won't all translate into profit,
though, since price declines and costs to sign up new subscribers
will drag down margins, Paribas' Jobber said.
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