Analysys Touts 2.5G Networks

CAMBRIDGE, U.K. -- As Vodafone and NTT DoCoMo now attempt to replicate, on a global basis, the considerable success of their live! and i-mode services in Japan, operators need to look beyond messaging to seize the non-voice revenue opportunities that can be delivered through their 2.5G networks, according to a new report, Vodafone live! versus i-mode - lessons and prospects for the rise of global wireless services, from Analysys Research, the global advisers on telecoms, IT and media (www.analysys.com).

For many operators, basic text messaging still represents the dominant non-voice revenue generator, but Japan demonstrates the short-term opportunity to generate substantial additional non-voice revenues.

"While SMS is typically used by half of European cellular subscribers, generating around USD60 in annual revenue per customer, i-mode and Vodafone live! in Japan are being used by over 85% of customers, generating well over USD150," says report co-author Alastair Brydon. "We believe that many operators outside of Japan will be able to replicate this success, as long as they pay careful attention to pricing, marketing and the availability of handsets."

The report also points out that economies of scale will represent a critical success factor for mobile operators. Both Vodafone live! and i-mode are poised for substantial growth outside Japan during 2004, as they both attempt to achieve a global scale unmatched by other operators. At the start of 2004, there were 1.6 million i-mode and 4.9 million Vodafone live! customers outside Japan. "While early i-mode GPRS services were dogged by inferior handsets compared to Japan, growth accelerated towards the end of 2003 with new handsets and targeting of prepaid customers," says report co-author Mark Heath. "Both services now have a potential base in excess of 100 million users, and we expect strong growth during 2004. Operators that are not tied to Vodafone or DoCoMo have to identify other routes to achieve scale, including the formation of formal alliances such as the Starmap Mobile Alliance established by mmO2, One, Wind, Amena, Telenor Mobile, Pannon GSM and sunrise."

Inside Japan, Analysys Research predicts that 3G services will finally see substantial customer growth. "Initially, the 3G i-mode service struggled due to poor coverage and handsets that were inferior to those of the 2.5G service," says Alastair Brydon. "These limiting factors have now been firmly addressed and, together with aggressive data pricing per Mbyte, will fuel demand." However, Brydon cautions that, "With such low pricing, there is a danger that ARPUs will dip below those of 2.5G services."

Analysys Research recommends that operators outside Japan should concentrate on 2.5G services, until 3G is ready. "Japan's 3G experience shows that many things need to be in place before 3G consumer services can be successful, and even then the jury is still out as to whether operators can use 3G networks to beat those already possible on 2.5G infrastructure. Operators outside of Japan would be well-advised to concentrate on developing and promoting compelling, higher ARPU 2.5G-based services over the next two years," says Mark Heath.

Analysys Research Ltd.