This week has seen some pretty big shifts in the UK. We’ve heard that Everything Everywhere has been allowed by Ofcom to use some of its existing spectrum to make 4G LTE services available to UK customers and businesses. This is great news for UK consumers as it means that we can finally catch up with the rest of the developed world when it comes to mobile connectivity.
However there are going to be a number of problems. First of all, compatibility may become an issue. Not all 4G enabled phones are able to work on the newly announced 1800Mhz spectrum. Australia already uses this wavelength and some American 4G enabled phones won’t work there. If Apple is already preparing a 4G enabled iPhone 5 it is perfectly plausible that it won’t operate on the 1800Mhz network that is coming to the UK from September. This means that we could be faced with a scenario where we have a 4G network available in the UK but only two carriers offering it and with very few handsets able to take advantage of the service.
This leads on to the second problem. When only two carriers (who are actually part of the same parent conglomerate, Everything Everywhere) are providing one service then there’s a risk that they’ll be able to sculpt prices and rip off consumers because they have monopoly power. At least until the auction takes place next year, when Ofcom will sell of the 800Mhz and 2.6Ghz spectrums. Even then, these companies will have seen what prices the market is willing to tolerate and they’ll enter at similarly high price points.
By having the jump on the other networks Everything Everywhere has the opportunity to mould the market. They’ve certainly upset the other networks, with Vodafone and O2 claiming that it is a shocking decision. By contrast, Three has stolen a march on the other networks by entering into a deal with Everything Everywhere to rent some of its new 4G bandwidth. If the new range of Nokia and HTC Windows Phones, and the new iPhone 5 are indeed 4G compatible then Everything Everywhere is incredibly well placed to become the leading force in the UK mobile market.
When it comes down to choosing a new phone over the next six months and you’re in the market for a top of the range 4G phone, which network are you going to choose? These contracts are the most valuable to the networks and are almost invariably tying people into 2 year contracts. That way Everything Everywhere stands a very good chance of poaching the most valuable customers from the other networks for a whole two years. Pretty good business, right?
Exactly. If you’ve got shares in Everything Everywhere, buy more, as they’re in a great position to expand their market share and hugely increase revenue for very little cost – they already own that spectrum. The other networks will have to buy their 4G networks in an expensive auction next year. That means the cost of providing 4G to their customers will be more expensive than for Orange and T Mobile. Seeing that they are currently undergoing a brand renaissance, you’ll be seeing a whole lot more of these two brands in the coming months.
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