O2 and Vodafone, rivals until recently, have joined forces and are pooling their networks although Kevin Russell, Chief Executive of 3 UK, may land himself in trouble as a result of the deal. Talking about the current recession, he said “People may stop spending on gyms and golf clubs, but, they won’t stop using mobile phones.”
The new technology cost £4 billion and the company has tried in vain to catch up with dominant players such as Vodafone and O2. They have 4.9 million customers i.e. 8 per cent of the UK market and have successfully formed alliances with new technologies such as Skype and the free Internet calls group.
It was expected that the traditional business model would collapse as the company allowed customers to make free mobile calls using Skype. However, most Skype calls by 3 mobile customers are to PCs, and has not emerged as a replacement for mobile-to-mobile or mobile to fixed-line calls.
Kevin Russell said, “ We are emerging as a data network, which appeals to mass market users”. Kevin’s approach seems to attract customers with offers like Skype allowing them to make “free” mobile calls 24/7 and then encouraging them to spend more by offering other services.
Mr. Russell is confident that the group can grow to at least twice its present size. However, this may not be so easy during the recession especially as the mobile market had shown signs of saturation before the recession. According to the industry watchdog Ofcom’s research, Tesco will be a new rival to phone operators. It is another problem for the company. Mr. Russell ruled out speculation that they may sell the company and said “3 UK has never been for sale but if someone comes up with a very large sum of money, then we will consider the thought”.
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