HUTCHISON Whompoa is being forced to consider closing its British 3G mobile operation to shift resources to faster growing markets such as Israel, Eastern Europe, India and Hong Kong. The company is worried that it is spending billions of pounds developing a British network with little chance of recouping its investment. Hutchison is having to offer free handsets worth £405 and cheap tariffs in the UK to attract customers. Key investors NTT DoCoMo and KPN have already pulled out of the UK venture. [via the Scotsman]
This could spell disaster for the 3G market place in the UK. Surely, Orange and Vodafone are watching what’s going on and making their own business decisions based around this news. It was obvious the 3G had a lot to do to win customers over and as I’ve said before video isn’t the USP that’s going to bring in the customers in their droves.
The reason for the impending failure is that most UK mobile users are with one of the main five providers, and as 3 has come late to the party, it has had to spend big to try and win market share, a battle it isn’t winning based on the USP being video and handsets the size of bricks (sorry had to add the last part, but have you seen how big they are!)
The other providers may be ok, as they already have millions of subscribers and it should be easier for them to migrate users to 3G as they did when they migrated people from analogue to digital mobiles a few years back. But we’ll wait and see what impact this has on the market place. My question would be if 3 pulls out who’ll pick up the pieces?…my bet is they’ll sell the subscriber base and network to the highest bidder vodafone?) and cut their loses. Or the outside chance could be that they’ll sell to Virgin. Let’s wait and see.