T-Mobile’s 3G promised land

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It might not have the premium brand power of certain of its rivals, and it is some way behind in terms of customer numbers and service revenues. But T-Mobile does claim a rare innovative streak in the mass-market contract segment, as well as the best 3G network coverage in the UK.

As such, its award of exclusivity in the UK on the G1 handset, the debut device for Google’s nascent Android platform, makes some sense.

T-Mobile UK could probably have done a job for the Apple iPhone too, except perhaps the device maker’s ultra brand kudos is, on current form, a better fit for O2 in this market.

Early reports suggest, predictably, the G1 has not sold as well in its first weeks as Apple iPhone models did on O2, nor indeed as well as very early reports suggest the BlackBerry Storm is selling on Vodafone.

But it is one of only three real ‘event’ handsets so far in the market place, and T-Mobile has an exclusive and a spike in consumer interest because of it.

T-Mobile UK chief executive Jim Hyde (pictured) says: “The take up has been great, it works really well. We didn’t do it; others did the road-test. It’s faster than the iPhone – and whether that’s the device or the network, I don’t know and I don’t care. All I know is it is better and faster, so we’re delighted we have exclusivity for now.”

Like O2 and Vodafone in the UK, then, T-Mobile has first run on a single hyped handset from a challenger manufacturer brand, pitched squarely at high-end mass-market users who will utilize it for more than just voice calls, text messages and football updates on Saturday afternoons.

“These devices attract the type of customer that uses the products and services we want them to, which drives revenue for us,” remarks Hyde.

T-Mobile UK’s figures for the year to-date suggest such customers, and such devices, have been sorely missing from its books. UK revenues for the three months to September 30 were £794 million, down 6.7 per cent on the same period last year.

“With special effects out, we are flat-to-down in terms of year-on-year revenue,” counters Hyde.

Profit (EBITDA) was £175 million for the quarter, down 29.4 per cent on 2007’s figure, which Hyde explains away in light of a year-on-year uplift in contract additions (96,000 in the quarter) and the hit on its bottom line in attendant acquisition costs.

Margin was 22 per cent of revenue, compared with 29 per cent last year.
Sequentially, it was up 30,000 for contract additions also, and watchers fairly attribute the decline in its prepay base in the period to Virgin Mobile’s migration of customers onto contract, as well as  some to its SIM-only ‘Solo’ tariff.

T-Mobile UK counts Virgin Mobile’s prepay numbers, which piggyback on its network, in its figures, although it does not incorporate Virgin Mobile’s contract base.

Hyde spins it: “From a future growth perspective, I think we’re in pretty good shape. On a sequential basis we’re in great shape. The third quarter was our best quarter this year in terms of revenue, profitability and subscriber growth. We are really firing on all cylinders right now in a very tough economic environment, and the team has to hunker down now to progress from here.”

He notes T-Mobile UK finished 2007 on a roll. “We led the market or were close second in every measurable operating stat last year – revenue growth, EBITDA growth, margin improvement.”

But he also acknowledges it was wrong-footed in the UK in the first half of the year by the rate of the market slowdown, shedding more than 500,000 customers. It has therefore not seen the kinds of returns it would have liked in the quarter just gone.

“It caught us and a number of people off guard a little bit. We had a bunch of stuff slotted in for mid-year with the introduction of ‘Combi’ and the refresh of our SIM-only programme, and a big marketing campaign around our get-more guarantee. For a number of reasons the impact and effectiveness of that campaign has done exactly what we needed it to do. What it couldn’t do is come earlier in the year,” says Hyde.

“Hindsight being what it is; if we could have slotted in that stuff in January instead of later in Q2, we would have, but we thought we could ride it out during the first half of the year. In the end, it took the wind out of our sails a little bit.”

Full article in Mobile News issue 428 (December 1, 2008).

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