With such high stakes it is not surprising that the last 2 years has been
plagued with arguments, counter arguments, disputes and even legal suites:
OFTEL promises sweeping reforms (January
Next month OFTEL with commence its next bi-annual review and has promised
'sweeping changes' to telecoms regulations which it says will help users
get a better deal. The review includes mobile and internet services. It intends
to benchmark against overseas services.
UK government accuses German government of blocking Vodafone's
bid for Mannesmann (November 1999)
Vodafone's hostile £77bn (Ecu 120bn) bid for Mannesmann quickly became
embroiled in European politics when Tony Blair, the UK's prime minister,
accused Gerhard Schroder, the German chancellor, of blocking the bid. Hr
Schrõder had expressed alarm about the impact on German corporate
culture and there not being hostile takeovers. In Germany workers occupy
nearly 50% of the seats on Supervisory Boards and are concerned that mergers
lead to job losses. Blair thought this a bit rich given that two German companies
had recently acquired UK telecommunication companies: Mannesmann had acquired
Orange and Deutsche Telekom had acquired One2One. Vodafone would almost certainly
sell off Mannesmann's engineering operations for which Bosch has already
expressed an interest. However, Mannesmann's German customers like BMW are
known to prefer ownership to remain in Germany. Vodafone could also spin
of Mannesmann's fixed line networks and would have to spin of the Orange
operation because of UK licensing regulations.
Brussels then moved in to put its views when Erkki Liikanen, the European
Commissioner for Enterprise, warned that the EC would only approve the takeover
if the wider benefits to the consumer could be demonstrated. This statement
went far beyond any made by the EC's Competition Commissioner. On the other
hand, the EC is trying to encourage mergers where the companies concerned
would be a stronger force in those world makers where size is important.
Under German takeover rules, statements made by either party can be much
more flexible than in the UK which opens the bidding to all sorts of
mis-information and economically truthful statements. For example, in the
UK a "final bid" really has to be final and if rejected the bidder must wait
a specific time before making a new bid. Neither of these conditions apply
in Germany. To make matters worse, German companies can restrict, to quite
limited amounts, the information they need to give to a bidder. This may
make it difficult for Vodafone to convince its own and
Mannesmann's shareholders of the financial case.
Since the bid Mannesmann has been taking full page ads in the UK broadsheets
to highlight what it sees as the negative aspects of the bid and the real
cost should the takeover proceed. Both parties have been waging war through
the media with statements and counter statements by the day.
Mobile number changes confuse
Like the fixed line numbering system, the popularity of mobile phones means
the UK would eventually run out of spare numbers. According to Oftel, there
were only 30m numbers on the old scheme yet the UK had already reached 24m
mobile phones. However, the conversion to the new numbering scheme is not
straight forward. In many cases customers will simply insert an additional
digit 7 - for example, an 0956 prefix will become 07956 - but in many other
cases the prefix will be completely different. However, all mobile phones
will in future begin with the digits 07 and this system should keep us going
until there are over 300m mobiles - enough for 5 devices each. Old and new
number can both be used until April 2001. For details see the
Are pre-pay customers being fleeced? (October
Hans Snook, Chief Executive of Orange, was reported as accusing the rest
of the industry of "knowingly fleecing customers" with net-work service charges
unrelated to usage and in selling vouchers with expiry dates. He put the
total charging at over £500m per year.
Mobile operators are increasingly addressing the mass market and first time
users who are buying off the page and through non-specialist retail outlets
such as supermarkets. Low cost headline figures are used to attract customers
and so there is temptation to recoup costs by other means. The result is
that many people stop using their phones after some months. Operators will
need to take a longer term view if they wish to instill new users with new
habits and should look to added value services for additional revenue.
Do mobile phones cause
This is an issue that just rumbles on and on. The assertion is that the
microwaves emitted by mobile phones can lead to memory loss and cancers but
the various studies have produced conflicting results. The amount of radiation
does vary between makes of phones. Meanwhile, for those that are concerned,
the recommendation is to use an external headset and microphone.
In May 1999, the National Radiological Protection Board (NRPB) rejected
suggestions that there was a link and in doing so refuted the Swedish study.
The NRPB said: "It lacks statistical precision to draw conclusions on
specific aspects of phone use and tumor location." Neither has the US
Food and Drug Administration found any evidence of inducing cancer though
it did find that reaction times were improved slightly, especially with the
older analogue phones which emit more powerful microwaves than digital phones.
For example, a Nokia 2110 user absorbed 22 times more radiation than a Motorola
Star TAC 70 user, though the Nokia was well below the considered safe limits
In January 2000 the National Radiological Protection Board was asked by the
Health Minister to set up an advisory group to look at the issue from the
How to allocate the UMTS
The next generation of Universal Mobile Telephone Service (UMTS) phones is
due to begin in 2002 but before then the government has to first decide how
to allocate the bandwidth. The current proposal is to auction the bandwidth
in varying amounts but Vodafone, the largest of the UK operators, believes
the bandwidth should be split equally amongst the UK's 4 operators. Bids
for the UMTS licenses were due in by mid January 2000 with the auction set
for March. The auction could raise over £1.5bn, a figure which concerns
the Mobile Data Association (MDA), the industry body. It believes this to
be excessive and to undermine the viability of UMTS achieving a break-even
figure of 8m subscribers.
Just to make things worse, the government told existing operators that they
had to open their expensive network to new entrants if they wanted to be
able to bid for the new licenses. The government argued that if new entrants
didn't have the opportunity to build up a customer base then they would not
bid for the new licenses and this would mean less competition. However, One2One
the smallest operator took the DTI to the High Court which ruled that the
government's action was illegal. Nether-the-less, the Vodafone and BT Cellnet
have backed down and will allow the new entrants access to their network.
Presumably, as the 2 largest operators, they felt they would not be able
to argue, like One2One, that they were a special case. The situation with
Orange is unknown, but also being small it may be treated the same as One2One.
What are the practical coverage
The 4 major operators all say their coverage rates are very close to 100%
of the population (which invariably means some remote rural areas have poor
or non existent reception). However, in practice users find the signal strength
to be variable and for pockets of non reception to exist. Train journeys
are particularly prone to dropping calls.
A study by Oftel, the telecommunications regulator, in February 1999 showed
city coverage in the 3 major capitals of the UK (London, Cardiff and Edinburgh)
was a 94% to 97% for successful calls, depending on the operator, whilst
calls on rail journeys between these places were only 73% to 89%. Oftel wants
the industry itself to provide independent comparative information.
What UMTS standard to
Ideally the next generation should all conform to a single standard,
thus avoiding the situation with the current GSM phones where there are 3
standards in the world. There were 2 contenders for the next standard: W-CDMA
from Ericsson which has been adopted by the European Telecommunications Standards
Institute (ETSI) and CDMA2000 from Qualcomm, the USA preferred choice. However,
the issue was more than a technical decision, and had the making of a Trade
War between the US and Europe. The US had threaten to invoke the World Trade
Organisation if Europe adopted a different standard, on the basis that this
was protectionism. There was also an issue as to whether Ericsson had infringe
Qualcomm's patents. UMTS is due for roll-out in 2002.
In March 1999 the Ericsson - Qualcomm dispute was resolved, much to the relief
of the mobile network operators. Under the deal, Ericsson acquired the wireless
infrastructure business of Qualcomm, each will license the others technology
and both were to abandon their lawsuits. They also agreed to develop
a new common standard based on CDMA but with 3 slight variations that mobile
phone manufacturers should find easy to adopt within one phone.
Former industry regulator joins potential bidder for UMTS
license (November 1998)
Vodaphone's Chief Executive Chris Gent said he thought it inappropriate that
Don Cruickshank, the former director of OFTEL, the telecommunications regulator,
was advising United News on making a bid for a license to run one of the
third generation mobile networks.
Blitz, James, Atkins, Ralph, & Cane, Alan, 1999, Blair enters telecoms
battle, Financial Times, 22 November 1999.
Connor, Steve, 1999, Cellphones cancer scare 'not proven', The
Independent, 25 May 1999.
Fried, Ian, 1998, A new era will dawn on mobile communications, The
Independent, 23 November 1998.
Garner, Clare, 1999, Mobile phone number changes leave users at sixes
and sevens, The Independent, 2 October 1999.
Harrison, Michael, 1999, Hostile bid leads Gent into uncharted waters,
The Independent, 25 November 1999.
Larsen, Peter Thal, 1999, Mobile phones set to go global, The Independent,
26 March 1999.
McIntosh, Bill, 1999, Orange to spend £20m on raising market share,
The Independent, 28 October 1999.
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