T-Mobile to challenge Vodafone over 3G

Deutsche Telekom is planning to attack Vodafone's market dominance with a strategy of aggressive price-cutting and acquisitions.

A senior executive within T-Mobile, Deutsche Telekom's mobile arm, said that his company was planning to expand its European operations. He added that T-Mobile might try to undercut its rivals with cheaper third-generation (3G) handsets.

Vodafone, the UK's largest mobile network operator, refused to respond to this challenge on Monday. But company sources did tell ZDNet that it was more interested in getting the most profitable mobile users onto its 3G service, rather than signing up large swathes of the population.

According to Monday's Financial Times, Rene Obermann -- the head of T-Mobile's European operations -- has declared that his company is keen to eat into Vodafone's global domination. A key battleground for mobile operators is the 3G networks due to rollout across Europe in the next few years. Obermann said that T-Mobile was considering generous subsidies for 3G handsets -- even if this could result in a damaging price war.

T-Mobile owns UK mobile operator One2One. While Vodafone is Britain's largest mobile operator with 12.5 million subscribers, One2One has only around eight million. Analysts have predicted that some 3G operators -- especially the smaller ones -- may be forced to cut the price of their handsets in order to tempt customers onto their services.

While Vodafone agrees that handset subsidies are one way of attracting users, the company isn't planning to bring in blanket price cuts. Instead, you're only likely to be offered a subsidised video phone if you've already been spending money on downloading WAP pages , ideally to a GPRS phone.

"We're looking to attract early adopters and business users. The subsidies on offer from Vodafone will depend on the kind of customer you are," sources close to the company said on Monday.

As well as spending £6bn on a 3G UK licence, Vodafone will also have to spend considerable sums of money constructing a 3G network. By targeting the users who are already using mobile data services, the company believes it will be more successful than rival 3G operators who try to win large market share.

Find out more about what's coming up in the wireless world with ZDNet UK's Special Report: The Road to 3G.

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