No end in sight to Britain's mobile revolution

The boom is nowhere near over. 80 per cent of the population could be using cellular telephones by 2005
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The Independent Online

IF YOU haven't got a mobile phone yet, don't worry, you soon will.That confident assessment of growth trends in the UK mobile market is being borne out by the scorching pace with which consumers are climbing aboard the mobile bandwagon. Whether for convenience, business, personal security or just plain style, the mobile revolution is arriving faster than many of the industry's prophets thought possible less than a year ago.

IF YOU haven't got a mobile phone yet, don't worry, you soon will.That confident assessment of growth trends in the UK mobile market is being borne out by the scorching pace with which consumers are climbing aboard the mobile bandwagon. Whether for convenience, business, personal security or just plain style, the mobile revolution is arriving faster than many of the industry's prophets thought possible less than a year ago.

Indeed, figures released yesterday show that a record 2.7 million Britons bought mobile phones during the third quarter ending 30 September, turning the industry's traditionally quiet summer period into its busiest ever. But that's just the beginning. Chris Godsmark, analyst with Investec Henderson Crosthwaite believes that over 4.5 million Britons - or nearly one in 12 of the population - will succumb to the mobile bug between now and Christmas.

"You've suddenly got a situation where cellular has become the 'must- have' product for consumers," Mr Godsmark says. "It covers a number of bases: being cheap, useful and enjoyable, it's a great product for Christmas." He adds: "Above all it's become the type of product that if you don't have one, especially if you are young, you're in a minority."

Already, the four network operators - BT Cellnet, Vodafone Airtouch, One2One and Orange - are being forced to add support staff and network capacity at faster rates than envisaged a few months ago. Although the explosion in mobile growth has led to some teething problems in getting new users connected, it has done nothing to dent the tidal wave of demand ignited by plunging handset prices and increasingly aggressive discounting of airtime prices for both overseas and national calls.

For the moment, strong customer demand is helping all four operators grow quickly. Indeed, the mobile market is no longer technology, but instead, marketing driven. Just as Walkers produces dozens of flavours of crisps, so mobile companies target different consumer groups with a plethora of product and service options.

Orange, for example, has successfully targeted higher value customers who are billed each month and has recently become profitable. One2One, the smallest operator, and BT Cellnet, the perennial number two operator to Vodafone, have targeted the pre-pay market, invented just a year ago, to gain valuable percentage points of market share. Vodafone, meanwhile, being the earliest established operator, has used the resulting economies of scale to make hefty profits to reinvest in new markets overseas.

For Britain, the path the mobile revolution will take isbroadly familiar to anyone who has recently travelled in Nordic countries like Finland and Sweden. There, mobiles are used by six in every 10 people, while the use of mobile networks for voice communications has recently surpassed the use of traditional fixed line telephones. Not long ago, industry experts predicted that the expansion of mobile services would begin to slow once half the population had a mobile phone. Twelve months ago, it was expected to take until around 2003 for this level to be achieved in Britain. Now that level of usage is expected to be obtained sometime towards the end of next year.

But that won't mark the end of the mobile boom. Rather, it is expected that mobile telephone use will spread to around 80 per cent of the population by 2005, so creating the critical mass for the next phase of growth: the development of interactive services.

Hans Snook, chief executive of Orange, for one, sees mobile networks handling 90 per cent of all voice traffic, forcing the likes of British Telecom to become distributors of video-rich entertainment or perish. Chris Gent, his counterpart at Vodafone Airtouch, the world's biggest mobile company, is equally convinced that traditional phone companies face a highly uncertain future.

The rapid growth of mobile market share, now adding almost one million new net users per month in Britain alone, will soon provide the customer base to stimulate a whole range of new services. This will allow users to access bank accounts, check train times or locate themselves on interactive electronic maps.

Many of these services will start to become available next year using existing digital networks. However, over the next few years, new higher capacity, so-called third generation networks, designed to operate with Internet protocol technology will be built.

Though Britain has recovered some ground lost to the Nordic countries and Italy, the next challenge is to lead the way in developing new networks and be at the forefront of developing new services and products. UK licences to build the networks were to have been awarded this autumn, but a challenge on roaming rights for a new market entrant has delayed the auction until early next year.

"If (third generation licences) are going to be delayed any further it would be a late start for the UK, and that's not good," says Nils Grimsmo, managing director of Ericsson UK. In the mobile phone market of tomorrow, it seems, being quick is the only option.

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