Telefonica and Sonera have axed their German joint venture Group 3G, which traded as Quam. But although it shows how hostile the German mobile market is to new entrants, the closure shouldn’t be taken to mean that 3G is dead in Europe. For firms with large enough resources and customer bases, data services should still offer the chance to make money.
German 3G mobile operator Group 3G has been closed down.
German mobile operator Group 3G, jointly owned by Spain’s Telefonica and Finland’s Sonera, has halted operations.
The closure was not a surprise. Telefonica and Sonera have been under pressure to return to their core businesses – Spain and South America for Telefonica, and Scandinavia for Sonera, which is in the course of merging with Sweden’s Telia.
Group 3G, which traded as Quam, was also one of Europe’s weakest mobile prospects. As a new entrant, it had to build its customer base from scratch. This has proved particularly hard in Germany, where the two operators that first launched mobile services – T-Mobile and Mannesmann (now Vodafone) – still have 80% of the market.
Quam has been operating as a 2G mobile virtual network operator, but has attracted less than 200,000 people – a drop in the ocean, given Germany’s 63 million mobile subscribers. The launch of 3G should encourage some people to switch, but its five rivals – the incumbents plus Orange’s Mobilcom, KPN’s e-Plus and mmO2 – would all have fought fiercely for new custom.
So what happens now? For Telefonica and Sonera, life gets a bit easier. The write-off, mostly of the E8.4 billion they paid for the 3G license, was already factored into their market valuations, and the capital savings will be welcome. And they aren’t handing the license back yet; it’s possible (if unlikely) that a change in German law will let them sell it.
It would be wrong to conclude that other operators should follow suit, however. Mobile data services should still be a moneymaking opportunity for groups that have the resources to create and market them, and existing customers they can up-sell to. Unlike Quam, the major pan-European telecoms groups have these factors in their favor.
Related research: Datamonitor, Global Mobile Devices (DMTC0777)
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