mmO2 CEO Peter Erskine has said that plans to cut UK mobile operators’ profits on cross-network voice calls could hurt 3G roll-out. This is unlikely to be true: any sensible operator will base their 3G plans on expected 3G ROI. The comments look more like an attempt to shift the perceived blame for future delays in mmO2’s 3G plans onto the regulators.
UK mobile operator mmO2 has claimed that tougher regulation will delay 3G roll-out.
Peter Erskine, CEO of mobile operator mmO2, has said that a regulatory review into UK mobile termination charges could force the company to halve its 3G spending.
Oftel commissioned the Competition Commission review after concerns that the UK’s mobile operators – mmO2, Vodafone, Orange and T-Mobile – were overcharging for calls made to their networks, driving up the cost of calling mobile phones from landlines and other networks.
The CC has already made a preliminary ruling that operators should cut charges. It wants profit on termination charges to halve initially, and then fall further over time. Final conclusions are scheduled for January.
In an industry where around 85% of revenues still come from voice calls (and voice call prices are falling), termination revenues do give debt-laden operators a breather at the expense of consumers. However, reducing or abolishing them is unlikely to impact 3G roll-out.
Companies will make their 3G decisions based on return on investment, however the CC rules. If mmO2 and its competitors think a nationwide, heavily subsidized 3G launch will justify investment, they will launch on time, across the country, with cheap handset deals. If not, they will roll out 3G gradually and with expensive handsets.
So the inquiry will not have a significant effect on 3G roll-out – and given the preliminary ruling, price cuts are highly likely despite Mr Erskine’s lobbying. However, his comments are still interesting: mmO2 may be creating a convenient escape route for itself.
Given its financial situation and the cost of a full-scale launch, it’s quite possible that mmO2 will need to announce more 3G cutbacks in future, delaying roll-out and restricting geographical coverage. If the company does have to make a further 3G climb-down, an ‘external cause’ would save face among shareholders and customers.
Related research: Datamonitor, Industry Review: Telecoms – October 2002 (BFTC0781)
You can download a FREE telecoms report from www.dmfreereports.com