Looks like the honeymoon period for EE and LTE in the UK is over. This morning, Telefonica’s O2 announced that it would turn on its LTE network on August 29, becoming the second operator to offer 4G in the country. Initial cities will be London, Leeds and Bradford, with 10 more cities to come by the end of the year. The first services at the end of this month will cover 5 million people — that’s potential, not actual, subscribers, and will not include support for the iPhone 5, which will not work on the 800MHz spectrum that is part of O2’s initial rollout.
The end of the honeymoon also signifies the beginning of the price wars.
Initial tariffs will start at £26 ($39) per month, O2 says. In comparison, a contract-free, data-only, mobile broadband rate from EE is currently priced at £15 per month, and a voice-and-data tariff starts at £21 per month. There will likely be different allowances included in these figures — for example, the voice-and-data service is SIM-only and you bring your own device. Plans from EE that include devices also start at £26 per month. O2 says that those interested in registering for its LTE service can sign up here.
But you can argue that O2 will be launching with a bit of a setback: its initial rollout of LTE will not support the iPhone.
Back in February 2013, O2 was part of a group of operators — BT, EE, O2, Three and Vodafone — who were all awarded spectrum for 4G services at a total cost of £2.3 billion ($3.5 billion). As part of that, O2 forked over £550 million for spectrum in the 800MHz band. But the iPhone currently does not support LTE in that frequency, while Samsung’s LTE devices (and others from BlackBerry, HTC and Nokia) do.
O2 is posturing with confidence over this discrepancy.
Telefonica UK’s CEO Ronan Dunne told the BBC that he “would be frankly gobsmacked if their roadmap didn’t address that issue.”
Still, that’s not the same as a concrete guarantee that this will be addressed soon. Given the iPhone users are still some of the mobile world’s biggest adopters of premium-priced devices and services, and also some of the world’s most avid users of mobile data, this could become an issue.
In the meantime, O2 is doing something else: it’s offering customers who do own an iPhone 5 an easy way of making a switch to another device that will be supported. The so-called “4G phone promise” will let users who bought an iPhone 5 from O2 between September 2012 and March 2013 upgrade at any time without breaking contract. This is not a free upgrade, in that users still need to sign up for a new contract on the new device. However, O2 offers to reduce the remaining line rental by 25%, along with a guaranteed price of up to £295 for users recycling their iPhone 5.
Tapping into iPhone users, even under these circumstances of luring them away from iPhones in favor of devices that will see those users spending more money on O2’s network overall, is a logical move for the carrier.
O2 is the UK’s equivalent of AT&T: it was the first network to have the iPhone and has continued its strength in that category as a result, even as Samsung and other Android makers have gained a lot of smartphone users in the process. Kantar WorldPanel for example noted a month ago that Android OEMs took over 55% of smartphone sales in the previous 12 weeks, compared to iPhone’s 30%, and Android is currently growing faster than iPhone in sales.
EE’s LTE network, which launched in October 2012, has a big head start just in terms of setting out its stall. It is currently live in 95 cities and aims for 110 cities covering 60% of the population by the end of the year. In June of this year it announced 687,000 customers and is aiming for 1 million by the end of this year. First mover doesn’t always mean biggest in the long run, of course: Three, at the time a totally new operator, was the first to offer 3G in the UK market years ago, but it’s far behind the other three incumbent players today.
It looks like O2 made a point of acting as fast as it could; it notes that the news comes a day after Ofcom cleared the use of spectrum for 4G services. “It’s great that I am able to announce O2 4G the day after the spectrum has been cleared for use,” noted Ronan Dunne, CEO of Telefónica UK, in a statement. “Digital connectivity will be made ubiquitous by 4G and become the oxygen of modern life. It is our intention to use 4G to inspire the nation through the possibilities of technology, encouraging people to live more, do more and be more with O2.”
The hurdle, at least in the early days for all UK operators, will remain whether consumers will be willing to pony up more money for faster mobile services than they have today. O2 is supposedly going to be bundling in extra services like music with its packages to entice users. I’m not sure how well that ever worked for 3G services, although consumer tastes for streaming media, and device specs, have certainly contributed to a more fertile ground for marketing and service bundles like these to work better this time around.