GPRS price war unlikely, say analysts

Vodafone is undercutting BT Cellnet by £100 with its Motorola T260 GPRS phone, but industry experts say BT is unlikely to follow
Written by Graeme Wearden, Contributor

Analysts believe that Vodafone's decision to offer a cut-price GPRS service is unlikely to force BT Cellnet into cutting the price of its own service.

Vodafone launched its consumer GPRS offering earlier today, and is taking on rival BT Cellnet with an aggressive pricing policy. It is charging £100 for a Motorola Timeport260 -- compared to a Cellnet price of £199 -- while still offering two pricing packages that are very similar to Cellnet's.

The move is being seen as the start of a price war in the mobile data market, but Simon Buckingham of analyst firm Mobile Lifestreams doesn't agree. He believes that Vodafone could have got away with charging much more for a GPRS handset -- and doesn't expect BT Cellnet to respond with any price cuts in the near future.

"Vodafone have made a mistake. They could definitely have charged more for their handset," said Buckingham. "The people who will be rushing to get a GPRS handset are the real gadget freaks -- the early adopters. To those people, whether they pay £99 or £199 makes virtually no difference as long as they own the very latest thing," he explained.

BT Cellnet launched its own consumer GPRS network two weeks ago. The Motorola Timeport 260 is currently the only GPRS handset available, but up to a dozen more are expected to arrive by the end of the summer.

Buckingham thinks that a lack of public understanding makes it unlikely that consumers will shop around for the best deal. "There may be some people, perhaps 15 percent of GPRS subscribers, who come into the market as virgins without an existing network -- but will they know enough to make an informed choice? The Vodafone deal is only available from Vodafone retail stores, but most people buy their phones from Carphone Warehouse anyway," he said.

According to Buckingham, most early subscribers to GPRS will either be corporate users, who won't pay for the phone themselves, or heavy users who will be upgraded to GPRS for free because it makes good business sense for the networks.

GPRS, also known as 2.5G, handsets will allow faster download speeds than is possible with GSM phones, which should make it easier for users to surf the Internet using their phone. Networks are promising download speeds of up to 30 kbit/sec -- although there are suggestions that networks are actually slower than this in practice.

GPRS is seen as a stepping-stone to third-generation (3G) networks which will support faster data-transfer speeds than GPRS, thus allowing video-streaming and colour Web surfing. Buckingham believes that Vodafone is trying to play catch-up in this market.

"The battle now is for the non-voice calls. Vodafone won the voice war, and Cellnet have been desperately trying to win the non-voice battle. Delays with GPRS handsets have given Vodafone the chance to catch up, but today's prices are at most only a minor skirmish," he said.

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