Could 3G Be A Carrier Killer?
By Richard Baum, Reuters
Mar 22, 2001 (6:57 AM)
URL: techweb.com
TOKYO—Some European mobile-phone operators may go bust because of the billions of dollars spent on new licenses, Japan's second-largest wireless company has warned. Toshio Okihashi, head of strategy for DDI Corp.'s mobile business, said third-generation (3G) services would not provide the increase in revenues European operators need to recoup their license fees.
Asked if that meant there was a risk some would go out of business, he said: “I think there is... If they go ahead and invest in 3G services, that business may fail.”
His comments are significant because Japan leads the world in mobile Internet usage and is set in May to launch the world's first 3G services, providing high-speed Internet access, data, video, and CD-quality music over mobile phones.
Okihashi, whose company is popularly known as KDDI, said European operators needed customers to double their spending on mobile calls to claw back their investments in 3G licenses.
But he did not believe 3G services would trigger any increase in the industry's key measure of average revenue per user (ARPU).
Asked how European carriers could make money on 3G, he said: “I don't think they can. I really wonder how they would do it.”
KDDI and Japan's two other mobile operators received their 3G licenses free.
Okihashi's views were shared by a leading Japanese investor in European equities.
“It is likely some smaller players will go bust,” said Yasuaki Kinoshita, who helps manage $3 billion of European equity investments for Nippon Life. “There are too many players in Europe.”
European operators are expecting the launch of faster mobile Internet services this year, using the General Packet Radio Service (GPRS) technology dubbed 2.5G, to boost average revenue per user, with a further lift coming when 3G allows people to download videos and music on their handsets.
But KDDI expects average revenue per user from 3G to only match the $65 per month its customers are spending on its latest 2.5G services.
An increase in phone usage, which he expected to double under 3G, would be offset by falling prices. KDDI plans to launch 3G in October, after industry leader NTT DoCoMo debuts its services in May.
Kinoshita said he expected the impact of lower prices to be greater in Europe, where there is more competition than Japan, and he said average revenue per user could even fall.
He said that European operators needed to consolidate, and companies such as France Telecom SA, Deutsche Telekom AG, and British Telecommunications PLC should look at merging their mobile companies with other operators. |
