Mobile penetration reaching saturation levels: how will newcomer Hutchison fare?

18 Jun 2003

According to official figures released by Ireland’s telecoms watchdog the Commission for Communications Regulation (ComReg), by the start of April 2003 around 3.1 million people in the country owned a mobile phone, representing a mobile penetration of close to 80%. However, the document went on to show that the two longest-established operators – Vodafone (formerly Eircell) and O2 Ireland (formerly Digifone) – commanded a massive 96.6% share of the sector despite the third and newest player, Meteor Mobile, having been in operation since February 2001. Meteor’s strategy has been to focus on signing up lower revenue users by offering cheap call charges and eliminating peak and off-peak rates. But its plan has by and large failed to dent its larger rivals’ hold on the sector, a fact which could prove an ominous warning for market newcomer Hutchison 3G which is hoping to launch UMTS services at the end of this year or early in 2004.

Hutch was awarded its class A licence by ComReg (then known as ODTR) in August 2002, having agreed to pay EUR50.7 million for the concession over the 20-year term of the licence. Under the licence stipulations, Hutch is required to provide service coverage of 80% of the population by 2007, however, it has already scaled back plans for a full national network and in the first phase is concentrating on urban areas only; it now plans to initially install just 450 of the 1,000 base stations originally scheduled. Hutch’s predicament is symptomatic of a wider problem in the telecoms sector. In May 2003 the Association of Licensed Telecoms Operators (ALTO) maintained that Irish consumers were suffering because of the lack of competition and claimed data from the regulator showed that they were paying the highest mobile phone bills in the EU. ALTO attributed this to Vodafone and O2’s domination of the market, but said it was also a reflection of the fact that full mobile number portability had not yet been implemented and that no MVNOs were in operation. Moreover, ALTO pointed to an imbalance between the relatively heavy regulation of fixed line telecoms and light regulation governing the mobile segment, implying that it would prefer to see more intervention from ComReg in the wireless sector.

Although full mobile number portability is due to be introduced from 25 July this year – a move that ComReg hopes will improve competition despite protests from the incumbents that it will simply increase churn and therefore costs – the question remains how will Hutchison manage to break into the Irish market? Hutchison could attempt to buy Meteor from its US parent Western Wireless, eliminating a competitor and giving it an immediate foothold in a single move. However, both Hutchison and Meteor have repeatedly denied that a buyout has been discussed. Meteor is undoubtedly in an unenviable position, with its most recent accounts (for 2001) showing pre-tax losses of GBP56.4 million on turnover of just GBP10.6 million; even with the help of its parent, Meteor is unlikely to survive unless it can dramatically improve its position.

Ireland,
CIT’s Datafile of European Telecommunications

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