Sector to feel price pressure

Analysis: The entry of the ambitious and aggressive mobile operator 3 into the Irish market is potentially great news for the public.

The firm is the global leader in 3G technology, which offers consumers a range of video and multimedia services to their mobiles.

And 3's decision to offer many of its 3G services - including premiership soccer, film and news clips - for free should boost the uptake of the new technology in the Republic.

It will also increase the pressure on the existing mobile operators to vastly improve their own services and tariffs in order to compete with 3. So far only Vodafone has launched a 3G service in the Republic, with O2 and Meteor preferring to compete on voice and less advanced data services.

Both O2 and Meteor, which is being taken over by Eircom, will now have to re-evaluate their own 3G strategies in light of 3's launch.

But perhaps the best news for consumers is 3's focus on cheap voice calls for people who use their phones relatively often. Mirroring its strategy in Britain, where it has recruited three million consumers in just two years, the firm is targeting bill-pay users who spend more than €25 per month on their mobile phone.

Mobile prices for this segment of the market are well above the EU average in Ireland, according to consecutive surveys published by the communications regulator, ComReg. A price comparison between Vodafone and 3 (see table) shows that the new entrant could hugely increase competition in this market sector.

"The entry of Hutchison and Eircom's takeover of Meteor will make the market much more competitive," says John Gunnigan, an associate with the telecoms consultancy DotEcon. "It will certainly affect the dominant mobile players Vodafone and O2."

3's launch should not suffer the same debilitating problems with network coverage that Meteor encountered in 2001. It has signed a roaming deal with Vodafone that offers it 99 per cent population coverage for voice and data services. Its 3G services will be available to 60 per cent of the population at launch, with further 3G network roll-out planned over the next few years. However, it is unlikely that rural areas will ever be fully served by 3G.

As with any technology launch consumers will face early snags as 3 gets to grips with the market and its network. For example, it will be at least a few weeks before consumers can take their existing mobile number with them when they shift to 3 from another mobile operator.

There are also continuing difficulties with dropped calls when a user travels on a car and train between two base stations using different 3G and 2G technologies.

However, 3's entry to the market is a landmark for a mobile industry which for too long has enjoyed bumper profits at the expense of Irish consumers.