UK likely to suffer cellco casualty this year says report

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UK likely to suffer cellco casualty this year says report

By CAROLINE GABRIEL

Published: 28 January, 2009

READ MORE: UK

Just as British Telecom mulls a return to the UK mobile market, a report predicts that at least one of the current cellcos will go out of business during the downturn.

Frost & Sullivan says the UK, one of the most competitive mobile markets in the world, is too crowded for all five 3G operators to survive, although it did not venture a guess at which player might exit or merge with a rival. "There may be one too many mobile providers in the UK market at the moment in my opinion," said principal analyst Sharifah Amirah during a webcast. "Several players are seeing their position in the market very much compromised."

She believes the success stories across Europe will be those operators that go beyond the current wave of adoption of netbooks and laptop dongles for mobile broadband, and tap into the consumer electronics distribution channels too, as well as delivering a high level of personalization to consumers along with attractive devices and low cost rates.

Perhaps over optimistically, she also said the downturn would be a good time for players to invest in R&D in the UK and differentiate themselves with real innovation.

The UK has five cellcos, all part of multinational groups - including world leader by revenues, Vodafone, Telefonica O2, T-Mobile, Orange and Hutchison 3. These have been reducing costs by forming network sharing deals, collaborating with international sister companies and partners on purchasing, and moving to next generation backhaul. Whether such cooperation extends into full merger for any of the operators remains to be seen, but the pressure does not bode well for the price UK regulator Ofcom will be able to charge for its 2.6GHz spectrum licenses later this year. However, there has been talk of European cellco consolidation ever since the telecoms crash of 2001, with many analysts predicting then that most countries would support only two or possibly three carriers, but the average remains four or five.