Vodafone: Suppliers Better be Ready for 3G

CEO Arun Sarin warns: We'll bring our formidable size to bear on vendors to ensure that there is interoperability

Arun Sarin, CEO of the Vodafone Group, has given a timely warning to terminal and infrastructure vendors that they need to get their acts together on interoperability if they are to grow the overall mobile market. Speaking at an ITU plenary session yesterday, 'Satisfying the customer', Sarin said: "In terms of 3G handsets being available in high volumes, we'll be in a fantastic position to launch services by September or October 2004, but we need to make sure that the services are going to be a lot better than 2G or 2.5G. That being the case, if need be, we'll bring our formidable size to bear on vendors to ensure that there is interoperability."

Vodafone's 'formidable size' is beyond question: 120 million subscribers spread across 26 countries and its purchasing power is considerable. The mobile operator will hope to use that weight to "encourage" greater cooperation among vendors and ensure that future services are sufficiently attractive to allow profitable revenue growth. The key challenge for 3G is, of course, to persuade 2G/2.5G customers that it's worth the upgrade.

However, there are a few interoperability hurdles still to overcome. "As the Hutchison 3G network in the UK has demonstrated, there's still a problem of dropped calls between 2G and 3G networks," says Nigel Deighton, an analyst with the Gartner Group. "The vendors need to get this problem sorted out as soon as possible."

Chris Lewis, vice president of research and consulting at the Yankee Group, adds that there are also interoperability issues to resolve within the network core. "A lot of the 3G networks will sit on MPLS platforms, but MPLS interoperability [between different networks] is still not there yet. And it's not just hardware interoperability that's a problem, there's the challenge of integrating with the software players as well."

According to Sarin, Vodafone is "aggressively" deploying 3G. "We're spending a couple of billion [US] dollars a year on it," he said. With the stakes so high, Yankee Group's Lewis says the industry can't afford to "screw up" again on making promises on service and not delivering. "Every player in the value chain needs to work together to make sure that the 'pie' gets bigger and not everybody is looking out for themselves."

For the future, Sarin is optimistic and believes the mobile industry is about to deliver on service promises made in 2000. "The wireless industry is on the verge of sweeping change and innovation, and that bodes well for [mobile] customers," he said. He also added that future mobile growth was "inevitable". "In 1991, telecom revenue was US$350 bn, with 95 per cent of that accounted for by fixed traffic and mobile the remainder. Ten years later, the market size was US$850 bn and the mobile revenue share was 40 per cent – that still leaves plenty of room for growth."

As evidence of growing market acceptance of mobile data services, Sarin pointed out that since the launch of Vodafone Live! -- its mobile internet and services platform – in October 2002, it has attracted 2 million subscribers. But Sarin did not reveal its ARPU performance other than to say it was "incremental". "If the Vodafone Live! ARPU figures were any good, I'm sure they would have released them," says Michelle Lussanet, senior analyst with Forrester Research.

By Ken Wieland, ITU Telecom World 2003 On-Line News Service

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