Mercury steps up mobile phone battle

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The Independent Online

Business Editor

Mercury One-2-One, the cellular phone company, yesterday stepped up the battle for market share by bringing forward its plans for full national coverage.

The move came as its rival, Orange, which like Mercury One-2-One is an entirely digital service, prepares for a pounds 2.4bn flotation later this month on the back of a rapid increase in market share.

Richard Goswell, managing director of Mercury One-2-One, said the company planned to double its coverage to 80 per cent of the population by the end of this year, 90 per cent by the middle of next year and 95 per cent by December 1997.

Mercury has been trailing in the national stakes because of the narrowness of its coverage and the announcement brings forward and expands its investment programme.

The changes are bound to increase the pressure on the three other companies in the highly competitive cellular phone market - Orange, Vodafone and Cellnet - to improve tariffs still further.

There has been a succession of new tariffs announced over the last few months as the industry has fought for new customers.

Mercury said nothing about further tariff changes but admitted these were bound to come in the mobile market as competition continued. It is spending pounds 30m on an advertising and marketing campaign.

Mercury originally set its investment programme at pounds 895m with a target of 65 per per cent coverage of the population by the end of this year and 90 per cent by the end of 1997.

This has now been rolled forward about six months, and increased to pounds 970m to pay for an increase in the ultimate target coverage from 90 to 95 per cent.

Mr Goswell said Mercury had "successfuly outsold Orange in our coverage areas since we and they launched." He claimed 27 per cent of gross sales and 19 per cent of the market in these areas, though national figures for Mercury are much smaller, reflecting its poor coverage. "Our challenge is to take these good figures to the rest of the country" he said.

Mr Goswell denied the timing of Mercury's expansion announcement was anything to do with the flotation of Orange, whose prospectus was published on Tuesday.

Last year, Mercury agreed turnkey construction contracts with Ericsson and NorTel which had been designed to be flexible so they could be accelerated if necessary. "We have now confirmed we can achieve the new targets," he said. Mercury plans to launch in Manchester in April and had made the announcement so customers in the North could feel more confident about the service.

Mercury expects to announce that its customer numbers passed 400,000 in March, compared with 340,000 last September.

Orange is likely to argue as its flotation approaches that Mercury One- 2-One expansion is unlikely to damage its own prospects and will help to encourage mobile phone usage.

Both Mercury and Organge have moved away from the philosophy of the original two entrants to the market, Vodafone and Cellnet, which have used their tariffs to encourage low usage customers.