3 UK set for pre-pay 3G offering

A pay-as-you-go plan could boost sales of 3G handsets, following a drought of devices in 2003

Third-generation (3G) mobile network operator 3 UK is putting the finishing touches on a pre-paid package, after a problem with handset shortages was resolved.

A pre-pay 3G service that will let users pay as they go rather than having to sign up for a contract could help boost 3's subscriber figures, which failed to meet a target of one million by the end of last year. That was partly due to delays in obtaining handsets from NEC, which makes most of 3's hardware. Three is understood to have hoped for a Christmas pre-pay promotion, which was also put off due to lack of handsets.

Now, with a delivery of 1.5 million phones due to be completed by March, 3 is gearing up its pre-pay plans. A spokeswoman confirmed on Wednesday that the company expects to have a pre-pay offering on the market before April. The launch could happen as early as this month, according to industry rumours.

The company is said to be looking at the NEC e313 handset as its main pre-pay handset, reserving models such as the e616 for subscribers. Both the e313 and the e616 still must be tested on 3's network. Other new models on the way are the Motorola A925 and LG 8100.

Hutchison Whampoa, 3's parent company, recently launched 3G services in Hong Kong, and also operates next-generation networks in the UK, Italy, Austria, Sweden and Australia. Before Christmas it had signed up around 750,000 users worldwide, and the lower-than-expected subscriptions led Hutchison financial director Frank Sixt to comment that 3G operations could need up to 2bn euros extra funding.

Pre-paid services are popular with many users because they eliminate the need to pay a set monthly fee, but are riskier for operators.

Three has had the UK's 3G market to itself for nearly a year, but will soon face competition from T-Mobile, Vodafone, O2 and Orange, which have all either switched their networks on or are planning to do so later this year.

The new entrants are likely to shift the focus of 3G from consumer-oriented video downloads and video calling to business-oriented wireless data services. Such services are currently catered for by Wi-Fi access points and GPRS offerings, which offer lower speeds than 3G.

Some new handsets do not support video calling, a further blow to 3's strategy of distributing as many as possible video-call-enabled phones as possible to help push two-way video into the mainstream. Nokia, the largest handset maker, has said it does not see video calling as a popular service in the near term, and its first 3G handset for the UK supports only video downloads.

Currently, only a small range of mobile phone handsets are available for 3G services, but major manufacturers are finally beginning to add to the selection. Sony Ericsson's Z1010 is to launch sometime this quarter, as the company's first 3G entry. Nokia launched its 3G-capable 7600 handset last month.