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3G mobile war Essay

The one that we have all been waiting for – 3rd generation mobile phone. The capabilities of phones have been put into broad-spectrum classes that have features (both real and proposed). Digital phones with broadband capabilities.THE BATTLE: WINNERS AND LOSERS!The UK is the first European country to auction off its “3G spectrum”. The UK government auctioned off five licences to create the networks and to operate the enhanced mobile phone services. Billions of dollars more than expected for the UK and German governments, were raised, earlier this year. Thirteen bidders had driven up prices well beyond the original estimate of a total auction value of �5bn. The money may not all be forthcoming at once as the licence winners have the option of paying in instalments over the 20-year licence period, with half paid up front.Winning Bids after 150 rounds:Licence A: TIW �4.384bnLicence B: Vodaphone �5.964bnLicence C: BT �4.030bnLicence D: One2One �4.003bnLicence E: Orange �4.095bnCombined value of leading bids: �22.47bnThe PrizeThe next generation of mobile phones will make the wireless Internet a reality for the UK. Phones, watches and other handheld devices will be powerful enough to show video on demand.Experts say that within a couple of years, more people will be connecting to the Internet on the move than via a bulky personal computer.TELECOMS SECTOR STARVED OF CASHInvestors and banks are becoming increasingly aware about their exposure to telecoms firms. Their fears have been fuelled by a steady flow of bad news from the sector and a warning from the UK financial regulator. The Financial Services Authority (FSA) is writing to chief executives of banks, warning against lending money to the telecoms sector. The warning came amidst concern that the banks are over-exposed to the sector.Telecoms firms worldwide have long been borrowing money from anyone willing to lend. The money has been invested in expensive infrastructure; the development of ever-smaller mobiles or it has been used to pay massive fees for mobile phone licences.The FSA’s warning coincided with the many problems that many telecoms firms were revealing. Share prices are falling, difficulties finding finance to pay for the new 3G mobile phone project. Motorola issued a profit warning, but indicated that it was an industry wide problem.One senior banker blames the problems suffered by mobile phone companies on governments. They have pulled money out of the sector by forcing up the price of the 3G licences, and also may have weakened the firms by encouraging them to overbid. But shifting the blame does not remove the problem; many telecoms firms are running out of cash.The Bank of England has joined financial regulators in warning banks of the risk of heavy lending to telecoms companies. The warning, contained in the Bank’s latest six-monthly review, comes under light of the very high prices telecoms firms are paying for 3G mobile phone licences in the UK and Germany. The Bank noted the companies’ heavy financing needs and said returns were “some way in the future”.It said awareness of the risks involved in lending to the sector had risen and “some but not all” banks had started to monitor or limit their exposure to the sector. In an article on the review, the Bank said, “One risk is that income generated from the new 3G technology may be lower than expected, and insufficient to service the borrowing”.Major international banks have generally underwritten their borrowing. But, increasingly, the banks are becoming wary about underwriting such debts. They are concerned about being over-exposed to this cash hungry industry that is proving slow to deliver sufficient levels of profits.Even the big investors are now sharing this view with the banks. They are now cautious about technology stock in general and are now questioning whether the telecoms sector is still in vogue.There are also risks that the handset technology may take longer than expected to develop and that 3G technology may become obsolete more rapidly than anticipated.In all cases, the main reason for investor concern has been the huge level of debt the companies have built up acquiring 3G mobile phone licences and in investing in new mobile, data and internet services.Even when market conditions were favourable, some analysts questioned the wisdom of spending so much money on services where revenue and profitability were so uncertain.TELECOMS FIRMS CAUGHT IN COSTS SPIRALAnalysts said that companies would have a hard time generating a return on their investments. Some of the companies involved appear to have come to the same conclusion and may try to pass on the cost to the consumer.BT is one company that is reported to be considering sell-offs to help cut the rising debt burden. It is considering floating its mobile phone units in under to unlock value and is also talking about the possibility of merging with a US company.Vodafone with its �6bn bid – now needs to generate some �600 each from a subscriber base of 10 million just to cover the auction cost. That ignores the investment requires to install, operate and market the new network.Analysts said that it could take many years to recoup the cost of the licence and the networks investments. Telecoms companies’ credit ratings, which are generally high, could also be knocked by the big debts being built up.Forrester Research says mergers and takeovers will be needed because 3G mobile phone services will not move into profit before 2013. It also says that the current generation of mobile phones is nearing saturation point in major markets. With fewer new consumers around, there will be fierce price wars to come. As this happens, operating profits will slide – just at the time when huge sums are needed to build and market the next generation services.WHY IS 3G NECESSARY?All products on the market have a product lifecycle and 3G are aware of this fact.The new 3G mobile phones are necessary for the next stage in development and advancement of the mobile phone. The operators feel that it is wanted and needed in the market place to satisfy new market demands. Evidence for these demands can be seen in the results of the questionnaire incorporated into this report (see page 7).WHO IS 3G AIMED AT?Segmentation information is aimed at directing the product at the right market and aiming to get the maximum output. 3G is aiming for more than one segment of the market. It is aimed at businesses and individuals, then it it is segmented again for paramount potential, looking at much more defined areas such as demographic: sex, age, and income, geographic: country, state and region, and psychographics: social class, lifestyle and personality.ENVIRONMENTAL & POLITICAL ISSUESSensational headlines linking the use of mobile phones with brain tumours have failed to dent demand. Sales of protective radiation shields and hands-free sets, which reduce the amount of radio waves absorbed by the brain, have risen sharply. But research so far has not produced any hard evidence, and the mobile phone is just too useful to give up!The requirement to install a further 30,000 new masts to enable full coverage in the UK and provide a full service, is increasingly receiving public opposition. The public are concerned about the health and safety issues relating to these masts and feel that they do not want to have these ‘blots on the landscape’ littered all over the countryside. But the fact is that these 30,000 new masks will need to be installed throughout urban areas and the countryside for 3G to happen and complete it’s mission by enabling the transmission of these signals. The building and erection of more mobile phone masts, under all the public pressure is giving cause for grave concern for mobile phone companies, as sites are becoming increasingly difficult to find. Therefore this is affecting the companies that are waiting for the new service to be put into practice in the UK and allow the widespread usage of 3G.Local authorities are also facing protests on similar grounds. Global Mobile Association (GSA), which represents the cell phone industry, is warning of ‘rethought time limits’ and targets for 3G. GSA if fully aware that finding new sites is becoming more difficult and is hindering the implementation of the product. The government is also facing anger from the GSA as it is ha taken �6.5 billion in revenue for the 3G licences in Britain; whilst leaving the problems of finding mast sites for the licensees. The government seems unresponsive – now that it has its money from the auction.COMPARISONS OF TWO EXISTING BUT DIFFERENT MOBILE PHONESComparisons are shown for the following 2.5 G mobile phone companies:COMPARISONS FOR:T MOBILEO2Talk PlanFree time 750All callsMonthly Charge�13.99�40Standard minutes included(Per month)750 minutes off peak�35 ; x-network callsStandard call charges (peak and off peak time)40p/5p10p/5pOwn mobile network to same mobile network charges(Peak and off peak)40p/5p8pOwn mobile network to other mobile network call charges(Peak and off peak)50p/30p35pText message(SMS) free10p50 free text messages per month and then 12p per minute for extra text messagesCaller line identityYesYesCall forwardingYesYesCall waiting and call holdYesYes1471 Service (last caller)YesYesInternational roaming agreements on networksYes200As above and amount of countries serving104Connection costFreeSpecial offersYesYesPeak times700 am to 700 pm -Monday to Friday8.00 am to 7.00 pm -Monday to Friday ;Weekends – midnight Friday to midnight SundayOff peak timesAt all other times except Bank HolidaysAll other times including Bank HolidaysItemised billingFree�1.99 on all tariffsVoicemailFreeFreeTariff changeFreeRoll over minutesYesFax and dataYesFree phone 0800YesInformation servicesYesInternational optionYesAdditional handsets�15 line rental charge @THE NEW MARKETING MIX OF 3GIt is imperative that the 3G operators do their market research in order to be successful with their marketing mix. Therefore 3G also needs to go back to basics to promote consumer confidence and in doing so will have to incorporate the four ‘Ps’:Product: CharacteristicsBrand namePackagingServices offered on the productPositions on the product lineAdditions to the product linePrice: Price levelsConsidering consumer responseAffect of sales volumeCompetitorsPrice changesPromotion: Advertising – nature and content, frequency, reach of target audience and media selectionSales promotionPublicityPersonal sellingPlace: nature and type of wholesale and retail outletsGeographical coverageMark up policyTrade supportPhysical distributionSales force – size, territories, sales quotas and role of personal selling.WHAT IMPLICATIONS ARE THERE FOR THE NEW MARKETING MIX?By manipulating the ‘Marketing Mix’ precisely, 3G should be able to win over the consumer, thus promoting confidence in the market. Equally it is vital to find out whether the public wants a 3G phone (this will be revealed when the operators carry out their market research whilst they are conducting their new marketing mix). If they don’t work hard to promote their product and convince the consumer, it could prove to be a very difficult and expensive lesson for the 3G operators (for both the operators and the consumers).MARKET RESEARCHA survey was conducted for potential consumers in order to gain information on what the public has already got and what it expects from the new 3G mobile phone. Below is a table of the questionnaire conducted and concluded by the results that were answered by 100 random members of the public.At Appendix 1, examples of the 3 G mobile phone questionnaires that were completed by members of the public are shown.3G MOBILE PHONERESULTS FROM QUESTIONAIREQuestion 1Gender: Male FemaleResults46% 54%Question 2Age:16/25 26/35 36/45 46/55 56/65Results49% 25% 15% 10% 1%Question 3Which of the following applies to you?Employed/Unemployed/Self Employed/Fulltime Education/otherResults46% 13% 2% 34% 5%Question 4Do you own a mobile phone?Yes NoResults79% 21%Question 5Are you happy with your existing mobile phone?Yes NoResults49% 52%Question 6Are you pay as you go?Yes NoResults66% 34%Question 7Are you on a contract?Yes NoResults34% 66%Question 8Which mobile company are you with?Results30% = Vodapone 16%=one2one 43%=Orange 11%=BTQuestion 9How much do you pay per month for your existing package?ResultsRanges: �10 – �65Question 10Is cost a factor when purchasing a mobile phone?Yes NoResults89% 11%Question 11What would encourage you to change your existing phone to 3G?ResultsLow costs. More gadgets. Better deal. Free insurance/phone.Keep it simple/easy to operate.Question 12What are your expectations of 3G services?ResultsHigh technology. Too pricey. Too much – confusing.Question 13If 3G provided you with a package that was consistent with your expectations, then how much would you be prepared to pay?ResultsWhat ever I can afford at the time. A reasonable price. Not too much more than present mobile phone.Question 14What services would you like to have?Email * Internet * Speed dialling * Free phone * cheaper tariff * Worldwide usage of phone * More flexible packages * Video/camera facility * Navigating (travel) * Accessible information * Free directory/customer services * Personal warning alarm (for security purposes) * otherANAYLISIS OF THE MARKET RESEARCH RESULTSOwnership of mobile phones, amongst adults living in the UK is half the population, this included the 16 – 25 bracket which contains the majority of teenagers; who say that they buy more mobile phones now since the introduction of ‘Pay as you Go’ pre-paid packages into the market. This is largely due to the fact that minors cannot sign a contract necessary to have a monthly-billed phone and a pre paid package is the only viable option. It is also due to the introduction of mobile phones into teenage fashion. Certainly, in this bracket, 49% own a mobile phone. It was noticed that the56 – 65 bracket were not interested in advanced technology and the mobile phone, this could possibly be due to the generation difference.The majority of the population in the highest income bracket, own a mobile phone, this was expected due to the relative expense of mobile phones. The prices may have reduced over the years, but a relative number of the population still consider them too expensive to buy. www.forrester.com/research/list/lensCosts are also a major factor, consumers are more conscious of the price they pay and are unwilling to stand for large price hikes. Although teenagers are less conscious of price and are willing to tolerate price increases.Consumers were wary of the new 3G, concerned that it would be too technical to operate and too pricey. www.forrester.com/research/list/lensThe consumer would like to obtain most of the extras that the 3G would provide, such as navigator and Internet, but stressed that they didn’t want to pay more than what they pay at present.My conclusion is that I perceive that the 3G operators are going to have to come up with some extremely convincing marketing strategies in order to persuade the future mobile phone consumer.THE CONSUMER ; THE CONCLUSIONIt is predicted that the average revenue per user from mobile Internet services will be 106 euros a year in 2005. Some analysts agree, saying many mobile phones are now in the hands of people, such as children, who will not use the phones enough to justify the companies continuing to subsidise the price of the handsets.However, a survey conducted by Siemens Ireland suggests that Irish mobile phone users would be prepared to pay as much as 63% more for 3G services including high-speed internet connections. This might indicate a brighter future for the revenue streams of operators offering 3G services than has previously been widely assumed.There are also varying opinions on the implications for consumers. Consumer take-up may be slow, with the consumer market for replacement phones generally seen as a product of fashion, not technology. Although some argue that providing users with a wide mix of services creates a more desirable product. But the companies have some way to go convince potential users that there are enough attractive and accessible services available to make it worth buying.Some analysts said that fresh competition in the market would keep prices low and new ‘exotic’ services would soon emerge offering consumers more choice. But consumer groups sounded a note of warning, saying that the high cost of the licences would inevitably be passed on to the consumers.How much network operators charge for the services will determine demand. Also the argument goes that the mobile operators wouldn’t have paid hand over fist for the licences, if they hadn’t been sure of their future revenue.

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