British mobile operator, Orange's, proposal to charge the same amount per call, whether it is made within Ireland, or Britain, could help the company win substantial customers if it succeeds in its bid for the third mobile phone licence here, industry sources have predicted.
The Orange proposal would result in substantial savings for customers. At present, Eircell or Esat Digifone customers bringing their phones abroad can face two charges. When making a call to Ireland, a fee known as a roaming charge is payable. This can be quite expensive. A person making a call to someone abroad pays a local charge, while the person receiving the call pays the international leg. About 50 per cent of Telecom Eireann's international traffic is to Britain and the Orange proposal would be very attractive to British people doing business here.
Mobile operators say roaming charges are expensive because they have to pay the corresponding companies with whom they have the roaming agreements. However, those in the industry admit privately that local operators sometimes Eircell and Digifone in this case load their own "percentage" onto roaming charges.
The Orange proposal could help win customers from the existing operators, but the company first has to win the licence. It is competing against the Meteor consortium, comprising US group Western Wireless, The Walter Group and RF Communications, a small Irish company.
Both bidders will make formal presentations to the Regulator's Office next week, outlining details of their bids. Meteor is expected to announce further details of its plans, following its presentation on Tuesday.
One of the key problems for the two bidders will be obtaining planning permission to erect masts. Environmentalists are very aware and well-organised and the existing operators, notably Digifone, have encountered some serious problems when trying to get permission.
Unlike Digifone, Orange will not apply for planning permission before it wins the licence, due to be awarded in June. It is unclear at this stage what approach Meteor will take, but like Orange it hopes to share masts and has been scouring the country for suitable sites in recent weeks. Digifone was considered a bit presumptuous in adopting that tactic, but it proved to be to the company's advantage in the end as it helped it roll out its services somewhat quicker.
As it turned out, despite proceeding with the planning process early, Digifone was fined £1 million for missing its launch date a problem caused chiefly by planning difficulties.
Orange said last weekend that it hoped to share existing infrastructure. Its senior executives have a good relationship with Eircell chief executive, Mr Stephen Brewer. Eircell is thought the more likely of the two operators to share infrastructure.
The Orange view is that such co-operation makes sense both will benefit because the existing operator will get rental and will also be able to share the masts which the new operator builds. However, industry sources say the tactic adopted by the existing operators will be to refuse initially at least in order to delay the launch of Orange or Meteor. An extra six or eight months on their own in the market would help the existing operators greatly, they say.
"It is not as if Orange will be offering a few hundred sites themselves," points out one source. "They may be correct in saying it is in Esat or Digifone's interest to share, but I doubt if they will be in any hurry to do so."
The source asks what financial controller would advise taking a few hundred thousand pounds in rental to share infrastructure when it would just be helping another competitor to enter the market?
Others say the issue of sharing infrastructure is not at all straightforward. Eircell and Digifone have many tenancy agreements with local landowners. One source points out that most of the existing agreements are structured in a way that ensures the landowner must give his or her permission for further structures to be placed on the land.
Therefore, if Orange or the Meteor consortium want to use the infrastructure, they will face two costs through payments one to the landowner and one to the existing operator.
Orange appears unfazed. The company says it encountered resistance to infrastructure sharing in Britain where three operators already existed and still launched successfully.
Orange executives also said it was already looking at sites in Ireland. It is likely that it will try to strike some deal with people who have existing infrastructure such as banks or garage retail groups. The latter is seen as an attractive option because garages are usually well-located, both in urban and rural areas and would have the space for mast installation.
Another issue is whether Orange or Meteor can win a sufficient amount of the market, where two highly successful and well-regarded players are already in place. Many in the industry have expressed serious doubts about the feasibility of a third operator. These include NBC stockbrokers. Industry sources estimate that setting up the new operation will cost £200 million, while NCB estimates it at £150 million. Orange has pledged to invest £620 million over a period of years.
NCB estimates the third operator will need to gain 33 per cent or between 180,000 and 200,000 subscribers. By sharing infrastructure with somebody, then 130,000-150,000 would be a break-even level. NCB expects the mobile phone penetration to reach 31 per cent or 937,000 by the end of next year.
Orange expects to win 30 per cent of the market eventually, but has declined to specify the timeframe for this. It is expected that the two current operators will make strenuous efforts to improve their customer care standards and to introduce more services in advance of the new operator's arrival. This is because a percentage of customers will always switch to a new operator, because of dissatisfaction with their current one.
