Consumers give thumbs down to 3G phones

There is growing concern among the UK's mobile phone operators over the prospects for third-generation (3G) phone services as anecdotal evidence suggests it is not finding favour with consumers.

There is growing concern among the UK's mobile phone operators over the prospects for third-generation (3G) phone services as anecdotal evidence suggests it is not finding favour with consumers.

Recent consumer surveys have found the 3G service too expensive with consumers also reluctant to sign on since there are so few users of the new technology.

One industry source said that 3's third-generation phone service was not selling as well as hoped at independent mobile phone retailers such as The Link, Phones 4U and Carphone Warehouse.

3 is the only mobile phone operator to have launched a 3G service in the UK so far. It allows users to make video calls and watch short video clips.

The source said: "In the first couple of weeks, we heard that one retailer had sold just one 3 handset in one of its busiest shops which, given the size of their [3's] advertising campaign, is a real worry."

3, which is controlled by Hong Kong's Hutchison Whampoa, said recently it had sold about 10,000 handsets in the first couple of weeks since its 3/3/3 launch. The operator is spending tens of millions of pounds advertising the service this year alone.

"If 3 doesn't take off ­ and we're all hoping it will ­ it'll be bad for the industry as a whole," the source said. "They could end up ruining it for everyone."

A report released yesterday by the Work Foundation found that the cost of running third-generation mobile phones was putting many people off buying the new technology.

A separate survey, carried out by the phone supplier Dial-a-Phone, also found that the cost of the 3 handsets, were too expensive. Sixty-three per cent of the respondents said they would consider buying a 3G handset if the price was more attractive.

"Not surprisingly, the second barrier cited was friends and family not having 3G phones," Richard O'Quinn, of Dial-a-Phone, said. Mr O'Quinn added that he expected 3G handset prices to drop "with new models priced highly and then reducing in price as more phones become available on the market."

3's handsets cost between £399 and £449, although they are currently being offered at a discount, while its contract tariffs start at £59.99 a month.

Analysts at Merrill Lynch said they thought 3's current offering would interest only a "relatively limited" segment of the market, given the high handset price and the high tariffs. They noted, however, that shop staff had indicated that 3's handset sales might now be closer to 20,000 in the UK.