Vodafone insists networks, not handset makers, call the tune in new phone era

Vodafone yesterday began its campaign for dominance of Europe's Christmas market for mobile phones with nine new handsets it will use to provide 3G services offering everything from video calls to downloadable games and television clips.

The company is the first big European mobile phone operator to show its hand, having spent billions buying up 3G licences in the heady days of the dotcom boom. Rivals including Orange, T-Mobile and O2 are expected to follow suit in the run-up to Christmas as they take on market entrant 3.

Using its position as the world's largest mobile operator, Vodafone has secured exclusive rights to a third of its new handsets for the festive season - signalling, industry analysts say, that it means to take a leading position in the new market.

"This is a statement of Vodafone's intent, and it will have certainly generated cause for concern among some of its smaller competitors," said Ben Wood, principal analyst at industry watcher Gartner. "This is Vodafone saying, 'we are the biggest and we have got the toys first'."

Although details of the prices Vodafone will charge for the phones and the services on offer will not be revealed until November, the move is a further attempt by chief executive Arun Sarin to increase the power of the brand at the expense of the handset manufacturers, especially market leader Nokia, which have dominated consumer choice in the past.

As the mobile phone moves from being a device for making voice calls on the move to an integrated media and communications tool, with the advent of 3G services, Vodafone believes the brand of the operator providing these services should be far more important than that of the handset maker.

Vodafone is not alone in this. Although none of its rivals has come up with anything like as comprehensive a range of 3G phones, there are some early statements of intent. Orange has lined up LG's U8150 and SonyEricsson's Z1010 for its 3G service, both of which are likely to carry a network logo.

T-Mobile, which already has a 3G service in Germany using Nokia's 7600, has promised to introduce the SonyEricsson Z107, Nokia 6630 and Motorola E1000 to the UK before Christmas. It is expected to seek a prominent position for its logo.

O2 has yet to show its hand but has had considerable success in producing own-brand products for niche markets such as its XDA integrated phone and personal digital assistant.

Network branding demands are anathema to Nokia, but the firm is in its weakest position for years. Its failure to produce handsets priced for the mid-range market allowed rivals from the Asia-Pacific region as well as European manufacturers such as Siemens to steal market share.

Two years ago the launch of the Vodafone Live suite of services, which use existing network technology, presented the world's biggest operator with the perfect opportunity to teach Nokia who is boss ahead of the launch of 3G.

The service went live with a Vodafone-branded phone produced by Asian manufacturer Sharp that immediately garnered praise - and awards - from the rest of the industry. More important, the phone was a big hit with consumers, proving that operator-branded data services could produce an increase in the amount customers spend every month.

The phones announced by Vodafone yesterday continue the trend of putting the operator's brand ahead of the handset manufacturer's.

Seven of the nine handsets - made by Motorola, Sharp, Samsung and SonyEricsson - carry the red Vodafone Sim-card logo on the front. One of the other two phones, Motorola's C980, carries a large red "speech mark" - Vodafone's logo - in the centre of the phone.

The odd one out is the sole Nokia handset in the portfolio, which Vodafone has also not secured on an exclusive basis.

By way of proof that the Finnish company is still putting up a fight, Nokia's 6630 phone has the Vodafone name in grey rather than red and a very small speech-mark logo on the zero key. This will operate as a "hot button" to take consumers straight to the operator's suite of new 3G services.

Vodafone's chief marketing officer, Peter Bamford, yesterday denied that the 3G phones mark a dramatic shift in the way the company deals with handset manufacturers, but he admitted that the dynamics in the industry have to change because of the new technology.

"Once upon a time the men from Nokia, Ericsson or Motorola would appear with a box of handsets and we would buy them. Now, if a customer wants to get the full breadth of the services that the technology can offer, the phone has to be integrated."

That means network operator and handset maker have to work more closely together. But Nokia does not seem to be playing ball.

"What you see happening is that in the portfolio of terminals there are different levels of integration with Vodafone. We started working with different people along the way and had different levels of opportunity to get the branding on in the way we would like," Mr Bamford said.

"If you have a very, very strong brand in a market, you're going to feel more keen to protect that than if you are a new entrant. The starting positions of Nokia and Sharp were quite different. [But] we have reached alignment with all the handset manufacturers that both brands are important."

Mr Wood believes the fight between Vodafone and Nokia is far from decided either way. "This is very much a case of the posturing going on between Nokia and Vodafone. There is absolutely no question that, with over 30% market share in western Europe, Nokia is still a product that is well liked by end users, regardless of what us commentators might say about their decline."

From The Guardian