Vodafone launches 3G handsets

With investment of nearly £20bn it's aiming for '10 million young, fun, active customers' before March 2006
Written by Jo Best, Contributor
Vodafone has confirmed it's the first of the big four mobile operators to launch a 3G service, with the wraps officially taken off the third-generation tech to 13 countries today.

The UK's biggest service provider is leading the 3G push with 10 new handsets, seven of which will be exclusive to Vodafone -- with the Sharp 902 debuting as Europe's first two-megapixel camera phone.

Handsets will cost up to £300 for contract phones, with entry-level models being free, and up to £200 for pay-as-you-go.

Coverage will be 60 percent by population at launch, rising to 80 percent by 2007. Vodafone doesn't really have much choice on the 2007 target -- the company had to agree to it when it won its 3G licence back in 2001.

Despite criticism by early adopters that 3G is not the brave new mobile world some had hoped, Vodafone is gunning for an aggressive target. Chief executive Arun Sarin, speaking at the launch in London, said that "10 million young, fun, active customers will sign up to 3G before March 2006."

It's the iTunes generation that Sarin is hoping to sign up - and Vodafone is making a big deal out of music downloads. Vodafone Live! will have a library of more than 3,000 tracks for a "CD quality, iPod-like experience", Sarin said.

The Vodafone Live! portal has also been overhauled and over 100 content providers - from Man Utd to Maxim - to tempt users into spending on downloads, as well as making browsing the web absolutely free.

Vodafone has even decided to take mobile towards real-time drama, inspired by the TV series 24. Ringtones and gaming have also been boosted for the launch.

Unlike Vodafone's 3G business data card offering, data won't be sold by size - users will pay per song, per game and so on, or for a download bundle.

But despite the array of data content on offer -- from Disney to porn -- voice minutes are still high on the agenda. "Because 3G gives us more capacity... we can give customers more voice minutes," Sarin said. "In the 2G world we didn't have enough minutes... we were capacity-constrained."

With nearly £6bn spent on a 3G licence and one-third of capital expenditure slated for 3G, Vodafone is hoping to see some return on investment now the service is finally live. Its 3G business data card is already doing well, with over 130,000 customers since its launch in April.

Sarin said the 3G launch would give the operator more opportunity to raise its all-important average revenue per user (ARPU) and described the move as "a very good investment". Although Vodafone declined to comment on how much it expects to make, Peter Bamford, chief marketing officer at Vodafone, said the operator traditionally makes a seven per cent increment on its ARPU when a user starts using 2.5G Vodafone Live! and the company is expecting a further increment on top of that.

Rob Bamford, principal analyst at research firm Quocirca, believes that Vodafone might yet have cracked an enticing proposition for young customers but the reaction from the rest of the market is still unclear.

"They're very clear who they're going after," he said. "Whether that translates to total market success across all segments remains to be seen."

To avoid getting saddled with customers just after a cheap deal on minutes, content is king, Bamford said. "A big part of that is right sort of content providers. They're going for music that's very much the thing of the moment... filling up micro-moments of boredom," he said.

While Vodafone may have got a youth-pleasing content portfolio, it could fall down when it comes to coverage.

John Delaney and Dario Betti, analysts at Ovum, said in a research note: "Vodafone believes that its coverage is adequate to satisfy most of the early adopters of Live! 3G. We believe Vodafone may be taking an overly sanguine view of what people will be satisfied with. If the services offered by Live! 3G are really compelling, then people will want to be able to use them wherever they are. If they can't, it will annoy them. At £40-60 per month minimum ARPU, on contract, these are the customers Vodafone can least afford to annoy."

Editorial standards