Love them or hate them, mobile phones are here to stay. The booming industry is engaged in a price war.
There was a time when mobile phones were regarded as executive toys, confined to City wine bars and boardrooms. More than 10m people in the UK now keep in touch with a mobile, as anybody from housewives to hairdressers have rushed to get hold of handsets.
High Streets are now full of shoppers clamped to their phones.
And this Christmas promises to be the best ever for the industry.
More than 1m people, and perhaps as many as 2m are expected to buy mobiles in the run up to the festive period. In other words one in five of us will own a mobile phone by the end of the year.
And the industry expects that figure to rise to one in two people within five years, no doubt to the annoyance of the other half of the population.
Intense competition between the large mobile phone suppliers has forced down prices and boosted sales. Mobile phones are not just to be found in specialist outlets as in the past. Customers can now pick up phones that are ready to use from supermarket aisles or well known High Street chains.
Another major advance has been in the way people can pay to use the phone. Customers can avoid facing monthly rental charges by paying for a fixed amount of calls in advance, giving a clear idea of how much is being spent.
Asda, for example, have teamed up with Cellnet to provide a phone for £69.99 which includes £10 worth of calls. These ‘pay as you go’, or pre-paid phones have proved a hit, especially with younger customers. Three in every four phones sold this Christmas are likely to be sold with pre-paid packages.
“Mobile phones are now an essential tool for everyday life. Pre-paid phones have opened the market up to a whole new group of people,” said a spokesman for Cellnet.
Mike Cordwell, head of communications at Vodafone, said: “Competition is more fierce than it has been over the past few years, which has to be good for the consumer.
“The moves of the likes of Tesco and Somerfield into this market means that the mobile phone has been marketed as a mass market product. You have to make the product attractive,” he added. Vodafone has already reduced its prices twice this year, and said another cut was likely next year.
Ian Volans head of public relations at One 2 One said: “We have always faced price competition. Across the industry revenue per subscriber is falling. But there is plenty of scope for it (the market) to double.”
So far the strong growth in mobile users has allowed mobile phone operators to ring up higher profits. Vodafone, the UK’s largest operator, proved the point by announcing a large rise in earnings on Tuesday. It added more than half a million customers in the six months to September and expects to add the same again in the run up to Christmas
But while lower prices are good for the consumer, a price war could damage the long term health of the industry. Existing mobile phone operators are already engaged in a bitter struggle for customers and next year the government plans to open up the market further by auctioning new licences to run networks.
This will herald the advent of a new generation of advanced mobile phones which will be able to provide anything from fast Internet access to banking services. The new licences are likely to prove popular and lead to the emergence of new competitors.
Nor is British Telecom likely to stand by and watch mobile operators win its customers by slashing prices.
Mobile phone operators face another significant threat. The UK competition watchdog, the Monopolies and Mergers Commission, is investigating the industry over the high prices levied on calls charged to mobiles from fixed line phones. It is rumoured that the government may force mobile phone suppliers to give up some of their capacity to encourage new entrants into the market in an attempt to cut these prices.
Growing competition has lead City observers to believe that some operators could face difficult times ahead. After a party this Christmas, several of the mobile phone operators could end up with a hangover.