Vodafone tackles iPhone

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Vodafone’s new mobile music service, MusicStation, will give UK customers unlimited access to more than a million tracks for £1.99 a week. The service was revealed alongside a range of 3G heavy handsets, offering faster web browsing than the 2.5G iPhone.

The advantage of MusicStation, which was dreamed up by a clutch of British dotcom millionaires, is that you can download tracks over the air. But there is a snag – when you stop shelling out for your subscription, the songs you have downloaded become unplayable.

It is a big gamble by Vodafone, which had earlier been tipped to win the iPhone across Europe, but baulked at the idea of ceding a large slug of ongoing voice, text and data revenue to Apple.

Apple chief executive Steve Jobs is a firm believer that people want to own, rather than simply rent their music. On the other hand, MusicStation could be a great way to cut churn. After all, if you have downloaded a lot of tracks, why would you want to switch networks and lose them all?

The tough bit, of course, will be persuading people to sign up in the first place when there is the ultra-cool iPhone on offer. But even though the iPhone is innovative and desirable, it is more expensive than Vodafone’s new handsets.

Industry watcher Gartner reckons that well over a billion handsets will be shifted worldwide this year. In contrast, just 110 million iPods have been sold since the iconic music player was launched in 2001.

Vodafone UK head of mobile internet and content services Al Russell rejected talk that the exclusive deal with MusicStation was second prize for not winning the iPhone contract. “This is completely new in mobile music,” he said. “The iPhone is not our driver.”
Of course, MusicStation is not just designed to shift more handsets. Many of Vodafone’s existing 17.4 million UK customers will have handsets that are already compatible with the service, which goes lives in November.

Rob Lewis, chief executive of Omnifone, which developed MusicStation, said: “We hope to do for mobile music what BlackBerry did for email.” That’s a big hope, especially when there are so many competing services launching at once.

ast month, Nokia said it was starting its own music service, selling tracks at 79p each – the same price as Apple’s iTunes. But the Finnish giant has already encountered problems. Orange has expressed doubts about the service and no network has signed up to it.

Virgin broadband at CPW

Meanwhile, Carphone Warehouse has struck a deal to resell Virgin Media’s broadband, digital TV, home phone and mobile offering in its stores.

It is the first time Carphone has offered a broadband fixed-line package from a rival supplier to its own TalkTalk service.

It is a move that most analysts in the City have applauded. Thanks to the acquisition of AOL’s UK business, TalkTalk now has serious critical mass, and analysts say it can therefore afford to branch out into offering a competitor’s services in return for a handy commission.

It is little surprise that Virgin Media was the first to sign up. Not only does the company have a deep relationship with Carphone, but it is under tremendous pressure to boost its subscriber numbers having seen its relaunch earlier this year hamstrung by the removal of BSkyB’s basic channels from its cable TV service.

Virgin Media acting chief executive Neil Berkett said: “By extending our product portfolio in-store and making it simple and easy for customers to sign up, we are hoping Virgin Media will be at the top of shopping lists.”

Carphone chief executive Charles Dunstone hopes to strike more broadband deals. He didn’t even rule out offering to resell the services of fierce rival BT, although what BT Retail chief executive Ian Livingston might have to say about that is another matter.

The move is part of a push by Carphone to sell ever-more non-mobile devices and services in its 791 UK stores. Carphone is setting aside room in its stores for The Broadband Shop, a dedicated area giving a choice of mobile broadband services from T-Mobile, Orange, 3, and fixed line from Virgin Media, TalkTalk and AOL Broadband. It is even giving away a free laptop to the first 160,000 who sign up to a two-year contract with AOL. As Dunstone pointed out, people love receiving shiny bits of new kit for free, and they can do far more stuff on a free laptop than they can on a free set-top box or a wireless router.

Whether such an approach is sustainable in the long term remains to be seen. In the short term, however, Carphone is set to reach another major milestone this month.
Its shares are about to enter the prestigious FTSE 100, making it one of the 100 largest listed companies in Britain.

Today Carphone is worth more than £3 billion. Not bad going, given that Dunstone founded the company just 18 years ago in a Marylebone flat with his life savings of £6,000.

 

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