Business Watch: EE bah gum, the UK 4G spat is getting heated

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The decision to grant EE permission to roll out its 4G network in the UK is only likely intensify the heat between it and its rivals even further

So Everything Everywhere has finally dumped its silly name and come up with something slightly less all-encompassing.

EE, pronounced as two separate letters as opposed to “ee” (as in the Yorkshire refrain “ee bah gum”), will be the brand used by the company to launch its 4G services.

Expect to see advertisements very soon promoting the ultra-high “spEEds” available on the company’s new 4G network. However, you won’t see them this month.

EE has said it will make 4G available to 20 million people in 16 cities by the end of the year, increasing its population coverage to 70 per cent and 98 per cent over the following two years.

But it has agreed to delay any 4G launch until October at the earliest after the government secured a standstill agreement to avoid a flurry of litigation over Ofcom’s 4G release plans.

4G ding-dong
EE, which owns the Orange and T-Mobile networks, has – you might remember – been given the go-ahead by Ofcom to reuse its 1,800MHz radio frequency spectrum for 4G services.

But the other networks, in particular O2, are livid that they will have to wait until 4G auctions are held during the first quarter of next year (at the earliest) before they can offer 4G. That’s because they don’t have the spectrum in the right frequency band to take advantage of Ofcom’s spectrum refarming rules.

Unsurprisingly, they have threatened to sue if EE is allowed to cash in and hoover up a whole bunch of eager 4G customers during the crucial Christmas selling period.

On the flip side EE might be tempted to sue back if it is forced to wait until the auction completes, having already made significant plans around Ofcom’s new rules.

So the Coalition government has stepped in in a bid to avoid a lengthy legal spat that would not look for good for UK plc – we are already trailing behind several Western economies, including the US and Germany, with our 4G release schedule.

There will be a month-long delay while all sides try to hammer out an agreement. What they will agree – if they can agree – is anyone’s guess, but it seems likely Ofcom will be pressured to expedite the much-delayed auction process to ensure it happens soon enough to mollify O2 and Vodafone.

Meanwhile, EE will get on with testing its network in London, Bristol, Cardiff and Birmingham.

First-mover advantage can sometimes backfire when it comes to new mobile technology, and in many ways the delay is a blessing in disguise for EE – provided it is allowed to launch in time for Christmas.

EE rebrand
Just look at the example of Three, which had a mountain of bad publicity back in 2003 when it launched the UK’s first 3G network. The phones got too hot and their battery life was risible. In the end Three had to slash prices and offer dirt-cheap voice calls to lure customers.

Nine years on and things are very different of course. The capabilities of the first 4G phones, including the new iPhone, and also Nokia’s forthcoming flagship Windows Phone 8 handsets and new devices from Samsung, Huawei and HTC would look like works of science fiction to a mobile user from 2003.

But networks are notoriously fickle and network launches are laden with risk.

EE is preparing to rebrand its 700 Orange and T-Mobile stores as EE – a bold move given that it has yet to sell a single phone under the new brand.

And the rebranding to EE for 4G purposes does not solve the continuing problem the company has had since Orange UK and T-Mobile UK were merged into a joint venture by their respective parents, France Telecom and Deutsche Telekom.

Instead of two consumer brands it will now have three – could it be any more confusing for the poor punter?

Some commentators have suggested EE should simply have ditched T-Mobile and used the Orange brand, but I suspect that would have damaged the pride of 50 per cent shareholder Deutsche Telekom and upset many employees who joined EE from T-Mobile.

So instead, it seems, there is a new brand that could eventually replace both Orange and T-Mobile entirely.

The question is, will the cachet of the Orange and T-Mobile brands be diminished? It seems entirely plausible, especially if the other networks launch their own 4G services under their existing brands soon.

But if EE can build up its new brand to something successful, it could transition customers over time and reinvent itself as an integrated mobile and fixed player competing with the likes of Virgin Media and BT Retail.

Not an easy task though, especially with two powerful shareholders whose interests will not always be aligned.

iPhone 5 fever
Meanwhile, EE chief executive Olaf Swantee will be encouraged by early sales of the iPhone 5, which has enjoyed double the level of pre-orders as those for the iPhone 4S, the previous iteration of the handset supplied by the operator.

According to Apple this week, More than two million of the devices were ordered in the first 24 hours that the handset was on sale.

Jan Dawson, analyst at Ovum, said the new device highlights “the inherent risks involved in Apple’s strategy of only releasing one device at a time, in that it always has to strike a compromise that is most likely to appeal to a wide base of users”.

Under pressure from Android phone makers – Samsung in particular – Apple has gone for a bigger screen, although same analysts think it may not be big enough for some consumers.

Nevertheless with its LTE capability, better battery life, performance and camera, Ovum reckons Apple will sell “tens of millions of iPhone 5 devices in the next few months and well over 100 million in total over the next year”.

That includes phones sold to iPhone 4 and 4S users who upgrade – plus sales of those earlier devices will get a boost due to price reductions.

Nevertheless, Ovum reckons Android’s lead in total shipments and installed base will continue to grow. “Apple’s devices continue to target just a subset of the addressable market, and Android devices meet a much wider range of customer preferences and price points,” said Dawson.

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