3 Group Aims to Disrupt Market with X-Series

| November 17, 2006 | Wireless Services - Europe | Competitive Intelligence Report | Client Access

Analyst: Emma Mohr-McClune

Current Perspective: Positive
Vendor Importance: Very High
Market Impact: High

Event Summary

On November 16th 3 Group announced the global launch of the X-Series from 3, in partnership with Skype, Sling Media, Yahoo!, Nokia, Google, eBay, Microsoft, Orb and Sony Ericsson. 3 Group will launch X-Series through all its 3 markets in the coming months, starting with 3 UK on December 1. X-Series allows users to make unlimited calls from an X-Series handset (Nokia N73 or Sony Ericsson W950i), access home TV via the mobile phone using Sling, access home PC-based digital media files using Orb, as well as browse, search and chat from a mobile using Yahoo!, Windows Live Messenger and Google services.

Analytical Summary

• Current Perspective: Positive on 3 Group’s X-Series initiative, which represents the most price aggressive, comprehensive and progressive mobile data strategy in Europe since T-Mobile’s Web ‘n’ Walk. To be sure, X-Series represents a daring, high-risk attempt to address some of the last remaining taboos in the mobile market, and the initial offering will certainly exhibit teething problems, but 3 Group appears to be working harder than most to drag the mobile market into the Internet age.

• Vendor Importance: Very high to 3 Group, as X-Series is undoubtedly a major milestone in the operator’s journey from mobile operator to ‘mobile media and entertainment provider,’ but also a high-risk strategy. Struggling with debt and sinking confidence in its business model, X-Series is arguably 3 Group’s last ‘do or die’ attempt to inspire traction in the flailing 3G market. With X-Series, 3 Group is putting all its chips on the table at once, and the stakes are very high.

• Market Impact: High on the European mobile media and mobile data markets, as X-Series puts forward so many new challenges, it will be difficult for competitors to know which to address first. 3 Group’s X-Series promises to send mobile data pricing benchmarks crashing, sets up a major challenge to core voice revenues, and could change the way mobile operators charge for mobile application usage, forever.

Recommended Competitor Actions

• Although 3 Group has yet to unveil the X-Series pricing flat-rate, competitors should steel themselves for an especially low-price mobile data challenge.

• Competitors should not disrupt their own Mobile TV strategies on account of 3 Group’s Sling service. SlingBox uses a bandwidth intensive TV streaming technology (especially on the upstream) which will make for unsatisfactory viewing over a 3G network, on a 3G device. However, in the mid-term, this capability will become more challenging as 3 Group rolls out its HSDPA network, with HSDPA-enabled handsets.

• T-Mobile International should recognize X-Series as the most compelling and complete competitive response to its own T-Mobile Web ‘n’ Walk strategy to date. T-Mobile International should respond with a renewed marketing campaign for Web ‘n’ Walk, re-outlining its browsing, search and messaging usage benefits with key Internet application brands.

• Competitors have been given early warning of X-Series’ arrival (the initiative isn’t expected to appear in non-UK 3 markets until 2007), and should prepare a competitive response accordingly. For mobile operators such as The Vodafone Group and Orange, the best competitive response would be the launch of an initiative similar to Web ‘n’ Walk, with a heavy emphasis on messaging.

• Competitors should be ready to point out the weaknesses in this X-Series initiative, namely its inability to address the mobile data international roaming cost challenge, and the lack of announced messaging client interoperability.

• The one, immediately addressable challenge within 3’s X-Series is its ‘unlimited IM’ proposition. Until now, mobile operators have held off on going into this service arena aggressively, choosing instead to get the client interoperability, roaming, billing and operator interconnect fee issues ironed out ahead of a major marketing push. 3 Group’s new aggression in this space, however, may force some operators to market quicker than anticipated.

Recommended End User / Customer Actions

• Consumers attracted by the prospect of free Skype-to-Skype calls on a mobile phone should be aware that this is one of the first (if not, ‘the’ first) mobile operator initiatives on a Symbian handset, and should expect other mobile operators to follow suit shortly. Consumers are strongly advised to avoid Skype Mobile calling from within a foreign market, as the mobile data roaming charges are highly unpredictable.

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