Anthony Hilton: City gives mobiles the cold shoulder

Every year around this time, financial journalists are likely to be contacted by market researchers. It can be fairly routine, but not always. The highlight this year were questions on the future threats to the mobile telephony industry.

Now given that almost everyone has a mobile, one might think that overcapacity and pricing pressure were worries.  So too is the fact that companies paid a fortune for 3G, a mass market for which has not yet been found. But there is nothing new in either of those observations, and the PR from the sector is uniformly upbeat –  yet the mobile phone firms are clearly worried about something.

What might that be? A London Business School professor was talking recently about the way companies react to innovations that pose a threat to their business.  His case study was a Boston ice-cutter who sold lumps of frozen water all over the world 150 years ago – before someone invented refrigeration. The ice-cutter denied there was a problem and told customers not to trust the new technology, while improving his product and cutting costs. But to no avail.

A few months ago Vodafone in Germany  announced that it would not allow Skype calls to be accepted on its handsets. Skype is the biggest operator in the fledgling VoIP area. It is still early days but it is easy to see how this technology might threaten the economics of telephony. This medium-term challenge from VoIP may also be behind the restiveness of the City towards mobiles – or at least towards Vodafone, which is now the only listed British company in the market.

Judging from the drubbing it got in the press last weekend, this huge British business faces the ultimate PR challenge. Growing numbers of people think its best days are behind it.

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