Mobile Network Comparison

Ofcom’s long-awaited 4G spectrum auction has fallen far short of expectations as it was revealed that, at its end, it only raised £2.3 billion for the public purse. Analysts had pencilled in a far greater amount with mobile phone companies predicted to spend about £3.5 billion. The massive 35% deficit is a huge disappointment and is much lower than we would have thought following results from 4G auction in similar European countries.

Economists have expressed shock at the figure and said that it provides a stark warning about the shape of the UK economy. The UK Treasury now has a shortfall of about £1.2 billion.

This will be humiliating for troubled Tory Chancellor George Osborne. The failure of the 4G auction to bring as much funds as he relied upon is the latest blow for Osborne whose reign as Chancellor has been peppered with mistakes and incompetence. In his autumn statement, he used the included the amount forecast for the 4G auction earnings against government borrowing to help reduce the deficit. Now he faces an embarrassing climbdown as he must scramble to find the funds from elsewhere.

Rachel Reeves, shadow chief secretary to the Treasury, said the débacle showed “how foolish and short-termist” the chancellor had been to bank the cash before it had been raised, adding: “His trickery has now badly backfired.”

These results come after high-ranking industry experts and economists expressed concern about the state of the economy under Osborne. Although he has claimed that unemployment is falling, leading figures are warning that the weakness of the economy signals very major problems with the labour market. A triple-dip recession is also on the cards.

Here at Mobile Network Comparison, we’re a little unsurprised at the low amount that the 4G spectrum auction raised. Nobody truly expected anything like the results we got in the midst of the 2000 boom in mobile when the 3G auction raised a massive £22 billion. 4G has shown to not be the money-spinner some expected following EE’s very poor results.

The 4G-specialist network has completely failed to capitalise on its initial monopoly and financial results from the rest of Europe show that once there is more competition in the 4G market, additional revenues fall even further. Mobile phone networks would have been foolish to spend more on 4G. They would only have ended up burdened with so much debt for so long that they couldn’t afford the necessary investments in infrastructure to provide a workable service.

What do you think? Were you surprised by how little money the auction raised? Is there money to be made from 4G? And are the networks right to save their cash for other services?

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EE, formed by the merger of Orange and T-Mobile and the UK’s first 4G mobile network, has slumped to some truly appalling financial results for 2012. The latest figures show that its losses have doubled since 2011 with a pre-tax loss of £249 million ($385 million). The results are far worse than last year’s which added up to a loss of “only” £113 million ($175 million). This failure to turn a profit wasn’t unexpected but the size of the losses is a bit of a shock. Despite huge marketing campaigns, EE only had earning of £1.41 billion ($2.19 billion) which was less than in 2011 and the total revenue fell too £6.66 billion ($10.34 billion).

The big launch of 4G services and EE’s monopoly gifted by Ofcom didn’t seem help the company in the way they hoped. In fact, EE actually saw its subscriber numbers fall compared with the same time last year. In the final quarter of 2011 EE had 313,000 new contract customers. However, in the same period in 2012, EE suffered from a massive 35% year-on-year decrease. They only managed to attract 201,000 new post-pay customers in 2012’s fourth quarter.

As for 4G usage, EE have claimed that the uptake is fast although most analysts expect that it has fallen far below what they had hoped. EE probably predicted great results from their head-start over rival networks but they have admitted that only about 10% of their corporate customers are trialling or using their more-expensive 4G plans.

When EE first launched its 4G service it came under quite intense criticism for the pricing of its various tariffs. It was also lambasted strongly for not offering any unlimited data plans when superfast broadband needs to have no restrictions to be genuinely useful. While the company later u-turned and introduced a plan with a larger bandwidth allowance, uptake has been pretty poor and the customer response has been far from promising.

Although EE is reporting that it makes 10 percent more money off each 4G customer compared to a 3G customer, the fact that is is charging more for this service is probably meaning that more people stick with the cheaper option. It also seems that many would-be buyers are waiting to see what the other networks can offer before committing to a 24-month contract with EE.

Especially now 3 Mobile have announced that they will offer an unlimited 4G data plan without charging a premium, it’s hard to say that EE have made the most of their monopoly. The results really put the pressure on CEO Olaf Swantee who has held the position for only just under 18 months.

EE’s public relations department have already started desperately spinning the profits news to make it seem less dire. Despite doubling its losses, EE is claiming that it has “maintained solid commercial momentum” and successfully built its brand.

What do you make of the latest profit results from EE? And what about their attempts to excuse them? Have you tried its 4G service yet? And do you think its revenues will improve over the coming years?

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Apple has been dropping even stronger hints about a new smaller and cheaper iPhone model at the next release cycle.

There have been rumours for some time now about Apple releasing a cut-price model aimed at the lower end of the smartphone market. Lots of analysts have noticed that Apple’s rivals such as Samsung are doing so well simply because they have such a vast range of smartphone models available.

No matter what your price range, there’s a Samsung phone to suit every budget. And recently it’s looked more likely that Apple will be moving in this direction as opposed to the current situation where all the iPhones are relatively expensive and are aimed at the more wealthy demographic.

Tim Cook, Apple CEO, recently appeared at the Goldman Sachs Technology and Internet conference. There he strongly hinted at his company offering cheaper iPhones in the near future. He said that when they reduced the price for older iPhone models they were surprised by how quickly the demand increased. He also went on the record claiming that Apple has a history of releasing cheaper products to satisfy demand for those who can’t afford its flagship range. For example, the iPod Shuffle was massively successful in the wave of the iPod Classic and iPod Touch.

But one aspect that Tim Cook did reiterate is that Apple is not interested in making products cheaper for the sake of it. He made it clear that a cheaper iPhone will be designed with the goal of making a great new product rather than just trying to make a cheaper version of the iPhone. Apple won’t try to simply make a cut-price version to fill a gap in the market – they’ll reinvent the device from the ground up in the same fashion as what happened with the iPod Shuffle.

Even so, this is the clearest indication yet (and from the most senior source) that Apple is going to release an iPhone that’s priced much lower than current offerings. It may well also turn out to be smaller as well but it’s not clear yet where Apple will try to cut costs in the design. We should know soon for sure whether or not these rumours turn to have any truth behind them.

What do you think? Will Apple release a cheaper iPhone this year? And would you want to buy one? How much do you think it should cost? Let us know!

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