CANNES, France-Despite the less-than-ideal weather conditions at this year’s 3GSM World Congress in Cannes, France, the event was highlighted by the GSM industry’s announcement of signing up its 1 billionth customer worldwide and the European market’s bright expectations for full third-generation networks that have slowly begun to roll out across the continent.
However, that enthusiasm was tempered by some, as there was still concern from a number of operators that those networks will not begin to see significant uptake or generate revenue for at least another year.
GSM Association Chairman Craig Ehrlich noted that the customer milestone crept up on the association. It did not expect to pass the 1-billion mark until March. The forum’s next challenge is to add the next billion subscribers, Ehrlich said.
French operator Orange, along with infrastructure partner Nortel Networks Ltd., brought the promise of UMTS-based 3G services to life at the event by deploying the region’s first 3G network in what both companies claimed was less than six months. Nortel said that while it was limiting network speeds to around 130 kilobits per second for the initial commercial deployment, which included the entire Cote d’Azure region, testing had provided speeds in excess of 300 kbps.
The launch was seen by some as a strategic win for Nortel, which has had difficulty penetrating the UMTS market in Europe due to a majority of contracts being awarded to European-based infrastructure providers.
Beyond the somewhat limited speeds, a lack of devices capable of accessing UMTS networks (which today includes a single PC card and a rather large Motorola Inc. handset), devices were a hot topic at the show.
Vodafone Group plc chief executive officer Arun Sarin, fresh off the company’s failed attempt to purchase U.S.-based operator AT&T Wireless Services Inc., decried the lack of suitable devices as the reason for the continued slow deployment of 3G services.
“We are still waiting for handsets,” Sarin said during the show’s opening keynote address. “It’s similar to the initial GSM launch in early ’90s; some things never change. I would dispute that handsets are available today. They are bulky, they get hot, and they don’t have battery life. The experience today is unacceptable to our customers.”
Sarin added that even though the carrier has launched 3G services in some markets using a PC card, the current handsets were not as appealing as 2.5G models. Sarin noted that he expected broad consumer reception to 3G-capable handsets once a broader selection is available later this year, predicting there would be millions of 3G handsets in the market by the end of the year.
Sarin’s comments were echoed by T-Mobile’s chief executive Rene Olberman, who said that while T-Mobile is ready to launch 3G in a number of markets, it would wait until a sufficient supply of diverse devices were available.
“There are not enough devices,” said Olberman, who joined Sarin on stage during the keynote address. “It’s not good to launch with just data cards.”
While T-Mobile was still not ready to throw the switch on its wide area high-speed services, the company turned up the wireless data pressure by expanding its increasingly popular Wi-Fi HotSpot service internationally. The company noted that it would now allow HotSpot customers to roam between networks in the United States and Europe, and that it expected to increase total hot spots from the current 4,700 worldwide to nearly 10,000 by the end of the year.
Olberman also said T-Mobile would continue to stress the role of Wi-Fi on its network, saying the company planned to launch PC Cards this summer that were compatible with 2G, 3G and Wi-Fi networks and that he expected to provide handsets with the same capabilities by the end of 2004.
“We are not going 3G alone, we are going 3G with Wi-Fi,” Olberman said.
T-Mobile USA Inc.’s next-generation plans we more elusive as Olberman would not commit to a UMTS network upgrade for its U.S. operations, citing the lack of available spectrum. The carrier is installing EDGE upgrades to its network, but Olberman gave no timeframe as to when the service would be commercially available.
“For now it’s Wi-Fi complementing existing 2.5G network and EDGE,” Olberman sad.
While Olberman was able to talk about T-Mobile’s U.S. strategy, Sarin was forced to explain Vodafone’s unsuccessful attempt to gain its own foothold in the U.S. market. Published reports have indicated that Vodafone was within hours of announcing it had won the bidding for AWS at $39 billion before Cingular’s last-minute offer.
“We did not change our price according to the bidding,” Sarin explained. “We went up to the limit and were outbid. Cingular can have AT&T Wireless at $15 per share. Even the most attractive assets have a price.”
Sarin did acknowledge that AWS would have proven a strong complement to Vodafone’s worldwide holdings and that Vodafone would have been foolish to not attempt to acquire the U.S. carrier.
“AT&T Wireless is a strong GSM carrier with 35 megahertz of average spectrum, 22 million valuable business customers with some of the highest average revenue in the market and they put themselves up for sale,” Sarin said. “With AT&T Wireless, we could have put together a good package. We could have used them to further expand our portfolio.”
Vodafone did not walk away from the auction empty handed as it still has a 45-percent interest in Verizon Wireless, Sarin contended, adding that he did not feel the possibility of ending the relationship had Vodafone won the AWS bidding war would impact its future relationship with Verizon Wireless or its parent company.
“We could not look at AT&T Wireless without the full support of Verizon Wireless,” Sarin explained. “They were willing to release us at an attractive price and with attractive tax consequences. We are partners, and even in the post-merger environment, we are likely to be the No. 1 player. Our U.S. strategy is the same as the one we had 30 days ago.”
Reports from Cannes also indicated that the current network technology issues that separate Verizon Wireless and Vodafone’s international operations could be solved as soon as next month as Samsung Corp. is expected to launch a handset capable of operating on both CDMA and GSM networks. Vodafone did not comment on the news but both carriers have previously hinted at the availability of dual-network handsets.
Vodafone also indicated that while it lost the war for AWS, it would not shy away from other potential deals, indicating it would likely turn its focus to acquiring the remaining interest in French operator SFR from current partner Vivendi.
“Whether it takes 12, 24 or 36 months, my view is that in time we will have SFR as part of the Vodafone family,” Sarin noted, adding it was just a matter of when partner Vivendi was ready to sell its stake in the venture.
