Australia's 3G Party and Why Hutchison 3 is Attractive to Telstra's i-mode Strategy
After all the dating of the past 12 months the Australian operators have now come out and introduced their partners for the commencement of 3G services in the second half of June 2005. While Optus was always spurned by Telstra all other combinations were explored in the smoke-free dens of Australian business backrooms.
According to Optus, who partnered with Vodafone, Telstra has paid about 50% too much for their deal to share Hutchison 3G Australia (H3GA)’s radio network. This is in addition to the 20% premium Telstra initially paid for its 3G spectrum back in 2001 (although Telstra did acquire additional spectrum compared to all the other carriers).
One of the distinct differences between the Optus & Vodafone sharing agreement and the Telstra & H3GA one is that the latter allows the partners to share spectrum. Yet this would seem to diminish the value of the extra spectrum which Telstra acquired at the 3G auction?
Allen Lew, Managing Director for Optus Mobile Optus, made it very clear that their deal with Vodafone was purely one of shared services cost saving in their non-core assets – in this case the radio network. It had no effect on competitive positioning or service offers.
On the other hand when Telstra signed its AU$450m heads of agreement to share the H3GA network commentators were wooed by the self-styled "strategic" value of the move – yet in their commentaries no-one mentioned i-mode.
In a report a couple of weeks after the announcement the strategic importance was confirmed in a press article where Holly Kramer, Telstra Managing Director Wireless and Mobility Products, confirmed that Telstra’s strategy calls for an increase in usage and demand for i-mode mobile services, which will then be migrated across to 3G.
Telstra's now defunct Mobile Loop content strategy launched in April 2003 for its CDMA network had provided a "learning curve" for the i-mode and 3G projects, Ms Kramer said. She said of the i-mode business ecosystem model "It has been highly successful and because we have bought into that, we think we are 'getting it' now."
Of course i-mode doesn't provide any guarantee of success for Telstra in 3G services.
Telstra, Optus and Vodafone are all playing catch up to Hutchison which has been operating its 3G service for about a year and earlier this month reported very strong growth in its customer base in the first half of 2004.
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Telstra, with a 46% market share, saw post-paid ARPU decline from AU$59.91 a month for the six months to December 31, 2002 to $58.24 a month for the six months to December 31, 2003. No.2 player Optus, whose mobile business has outperformed Telstra's in recent years, managed to increase post-paid customers' ARPU from AU$68 a month to $73 a month for the three months to December 31, 2003.
Telstra could comfortably target 16% of revenue from 3G non-voice services, but by the time it gets there Hutchison may have moved beyond. For instance the average figure at 3's country units across the globe is about 13.8% and this is lower than the current global figure from Vodafone. (Although Strategy Analytics still expects text messaging via SMS to remain the dominant global application and to account for 26% of all data service revenues even in 2009.)
Despite the constant doubters among the analysts H3GA is experiencing a tremendously high rate of active users of their 3G portal – taking one visit per month per user as an “active user”. It is believed that in HK the figure for 3 is 80% to 90% and it is not inconceivable that 3 Australia could get up into that range.
Interestingly Hutchison's 3G success might be exactly what the other carriers need to accelerate their 3G services growth. The Hutchison 3 portal user experience is bringing new customers to the site and retaining their attention – thus educating the market. This is a little like Telstra's competitors did with broadband – enabling Telstra to launch a full-scale economic attack which rapidly built its market share.
Globally, 3 has decided upon a 'open content but walled garden' approach to mobile content - as opposed to the moderated content semi-walled garden of i-mode. This allows easy integration to the billing systems for any sites compliant with the 3 "industry best practice" content standard.
Gareth Jones, chief operating officer of 3 UK, recently insisted consumers don't want access to the mobile Internet and ruled out offering open mobile Internet services. However most of i-mode’s growth in Japan is from the unofficial sites, from which DoCoMo does not get a direct clip.
If 3's model is proven right in the Australian market then the whole i-mode ecosystem will have to worked harder to successfully compete. On the other hand if subscribers start to appreciate the open access of the Japanese market then i-mode inherently gives Telstra an initial advantage - especially if they have figured out how to profit from the unofficial sites.
At this time the main point is that Hutchison 3 are doing a good job of educating consumers and giving them an enjoyable mobile content experience.
Without i-mode Telstra could have been in more serious trouble in its mobile business. With good competitors such as Hutchison and using i-mode Telstra has the basis for a hook from its more than 7million subscribers to its 3G services.
To understand better the i-mode business model see my related blogs on imodestrategy.com and DIblog.com:
Ca va? DoCoMo's i-Mode Clone Grows Quietly in France - here
Telstra's 3G Decision - Where the Analysts Missed the i-mode Play - here
Aussie Commentators Scatter as Telstra Endorses 3G - here
Who's who in the Zoo of Hutchison 3G in Australia? - here
How to Build Your Linkedin Business Network - here
Why the Open Mobile Terminal Platform Alliance is a Win for the i-mode Business Model - here
Why the Analysts Have It Wrong About Telstra's new i-mode Alliance - here
How to Redesign the i-mode Sales Process for Success - here
Sourcing Strategies for Telco IP Core Network - here
What do you think is the single most critical factor for Telstra to get right if it is to take a leadership position in 3G? Post your Comments.
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