T-Mobile launches open mobile Internet access

By Daniel Bieler and Dario Betti

T-Mobile has launched a wireless service offering open Internet access, branded 'web'n'walk'. A push service ensures that emails are delivered automatically, and a special compression technique accelerates the retrieval and display of Internet pages. T-Mobile and Google are co-operating closely on web'n'walk. The offering is priced at euro30 for 30Mb of data and euro10 for 10Mb, with a euro1.90 charge per each additional Mb.

The offering is initially available only in Germany and Austria, but will be extended to the UK, the Netherlands and the Czech Republic. The service is supported by a number of handset models: the Sidekick II, the MDA compact, the Nokia 6680 and the new SDA model.

T-Mobile is continuing its push into the high-end data market. It opted for a strategy of targeting primarily postpaid high-end users, but has struggled to convince the market that this is working. It has seen a significant decline in top-line revenue growth and virtually no prepaid user growth. It has managed to increase its margins somewhat, but ARPUs have not really reflected its change in strategy.

As a result of its shift in policy, revenues declined by 2.2% in Q1 2005 as it attracted only 1,000 prepaid subscribers, a drop of 99.4% year-on-year. But, taking into account mobile termination cuts in December, the drop in revenues was partly due to a decline in zero-margin handset sales. Service revenues actually increased by 1.3% and, as a result of focusing on higher spending customers and cost control, Deutsche Telekom actually managed to increase its EBITDA margin by 1.9 percentage points. Of course, the likely price for higher profitability is that others will steal T-Mobile's market share. It now is shifting into second gear through its web'n'walk offering, and aiming to boost ARPUs.

Interest in Internet services over mobile phones is increasing, and T-Mobile and DoCoMo are now the clear pioneers. This is a promising area for boosting ARPU from data services. However, Internet browsing over mobile phones is still not an 'easy sell': instant messaging and email perform well, but web browsing on mobiles still needs some work. The success rate of the current generation of Internet-enabled mobile phones has been mixed. In the US, Cingular has just announced the discontinuation of its dedicated Internet browsing device, the Ogo. T-Mobile is taking a step in the right direction, but there is still a long way to go.

Daniel Bieler is a Research Director at Ovum, responsible for the German telecoms market. He can be contacted directly at dsb@ovum.com.

Dario Betti is a Senior Analyst specialising in the management and regulation of new media. He can be contacted directly at dbi@ovum.com.