Connected Research

Union policy research in the 21st century

T-Mobile and Orange comment

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Just briefly, given that it’s a Friday night and I really ought to be somewhere else right now,’s Friday Review (registration required; available for a limited time only) this week gave an interesting summary of some analysts’ comments on the prospective UK joint venture between T-Mobile and Orange.

Two things leaped out of the summary for me:

– Orange and T-Mobile, while having a hugely significant market share of the 2G (USM) market – in fact, they have half of it – have a much lower share of the 3G (what we might call mobile broadband) market (some 27%)

– analysts have been talking of a tie-up between Vodafone and BT.

The former is the most interesting of these since it casts a fresh perspective on the competition aspects of the venture of which I have been highly critical previously (see my earlier post this week). 3G is, of course, the future of mobile communications (until 4G comes along, anyway); we cannot so easily dismiss the past, where T-Mobile and Orange are particularly strong – but, as subscribers increasingly switch to 3G, this does change the balance of the market share since where T-Mobile and Orange are currently very strong is, in this context, a declining market (unless and until T-Mobile and Orange do manage to get it together on 3G – which the joint venture may well facilitate). I do hear the sounds of company spin here, but it is an intriguing argument nonetheless.

The second item I think we can surely discount, for all manner of reasons not least including the deficit in the BT Pension Scheme. But it does go to show the need to beware of analysts who (at last!) have some news to speculate about – speculation extending to other companies on the fringe can sometimes be rather wild.

Another aspect of the news this week is that Ericsson has, by the way (via a series of outsourcing deals), built a position for itself where it manages a large proportion of the total mobile network on behalf of the individual players. Some comment has been raised that, if this sort of monopoly operation was allowed then so should a joint venture operator with a market share of 37% (or 43%, including wholesale operations). But I think this is a different situation entirely: the arrangements with Ericsson are contractually based (and can thus be ended) and, while it does give Ericsson a fair amount of power over the operators themselves, the impact of such a position on the key question of competition between operators as regards consumers is harder to spot – though, it must be said, it’s not impossible to conceive of a situation in which Ericsson was able to use its dominant position to ratchet up the costs of network management, with an evident impact on prices to end users. Other network management companies, however, are available should the price rise too high…


Written by Calvin

11/09/2009 at 7:35 pm

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