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Third Generation Mobile Phones Arrive in Germany

Michael Lawton (ktz)May 6, 2004

It's taken four long years, and many are wondering whether it was worth waiting for: the first handsets for the new third-generation mobile phone system are hitting the market in Germany.

Vodafone Deutschland head Jürgen von Kuczkowski shows off his company's new do-it-all phone.Image: dpa

They take pictures, surf the Web, send music and video clips -- and they still fit in the palm of your hand and make telephone calls.

The long-awaited handsets for the new third generation of mobile phone systems are going on sale throughout Germany starting this week. But the mood on the market is a very different one from the euphoria when the big telecommunication companies first bought the rights to develop the new technology.

Transmitting data at seven times the speed of the current mobile phone networks, the new Universal Mobile Telecommunications System or UMTS promised to usher in a new age in mobile multimedia connectivity when it was launched back in 2000. At the time, people might have thought the 8.5 billion euros the participating telecommunications companies had to pay the government for access to the new networks was a bit steep. But it was generally thought that the new mobile technology boom would go on for ever and the money was a good investment.

Now that giant sum seems like a miscalculation. Deadlines for building up the network have come and gone, development of UMTS handsets were put on the back burner, and one provider -- Mobilcom -- got out of the licensing altogether. The deadline for offering the technology to the public was 2003, but none of the German providers stuck to that date, and to make matters worse, the network doesn't reach outside many urban areas yet.

The two big companies with a stake in the German market, British-based Vodafone and the homegrown T-Mobile, have only spent about a fifth of what the networks originally cost on developing technology for the new system. For T-Mobile, which is just beginning to bring out their own handsets, the investment in UMTS has ended up being an extensive endeavor. In the first years after purchasing the license, the German telecommunications giant reported its biggest-ever losses and pointed the finger directly at the new network technology.

Slow market reception

It's unlikely that UMTS will turn into a gold mine any time soon, despite all the clever things the new technology promises. As with every new technology, there will only be a few early adaptors, who are prepared to pay the high price -- about 300 euros -- and hefty connection charges for the thrill of possessing the latest gadget. It will still take a while before the third-generation phones make their way into the pockets of mainstream German consumers, say many observers.

Pensionist mit Handy
How many will go after the new phones?Image: BilderBox

Vodafone, the market leader, came out with the Samsung Z105 mobile video phone and T-Mobile, Deutsche Telekom's mobile offshoot and the perennial runner-up in the market, decided to follow up with the futuristic Nokia 7600 music clip mobile. Back in February, Vodafone had already beaten T-Mobile in the race by introducing a card for a laptop computer which would allow people to transmit data at UMTS speeds of up to 384 kilobits per second.

But it wasn't until recently that consumers could even purchase mobile phones for the super-speed network. Both companies had blamed the slow process on the manufacturers of the handsets, but by the time CeBIT rolled into Hanover with the world's largest trade fair for information technology in March, several companies were already displaying the next generation in mobile phones. Other UMTS license holders, such as the Netherlands-based E-plus, have decided to hold off on launching their handsets until the big names have paved the rocky road to acceptance.

In the long term, experts say UMTS will help ease the shortage of mobile phone capacity on the existing networks, and thus help drive down the still relatively high prices of even conventional mobile phones. But that will only happen when the UMTS providers have mopped up as much initial premium-price usage as the companies can squeeze out of it.