European W-CDMA Customer Numbers Top 50m in First Quarter

In Q4 2006 Hutchison Whampoa gave the first indications of the activity level of its European 3G mobile customer base, and so severe were the numbers that the restatement materially impacted the overall 3G picture in the European market. However, whilst the 3G doom-mongers may have taken this as further fodder for their arguments that third generation services are still not taking off, the first quarter 2007 figures tell a different story.

Two in every five net mobile connections made in Europe in Q1 2007 were to W-CDMA networks, after just one in four in Q4 2006, as 3G net additions figures fell only 3.9% by comparison with the traditionally strong Christmas period. The result saw the proportion of the European mobile customer base constituted by 3G connections rise from 6.7% of the total to 7.6% in the three months ending 31st March 2007, as the absolute total number of connections exceeded 50m towards the end of the period.

Of the 50.4m European W-CDMA customers at the end of Q1 2007, some 48.5m were in the Western Europe sub-region. In fact all but 400k of the quarter's W-CDMA net additions were recorded by Western European markets, meaning that more than three quarters of Western Europe's net additions in Q1 2007 were accounted for by 3G networks. In fact this is not a record: Q1 2006 actually saw net GSM disconnections in Western Europe as W-CDMA net additions accounted for 112% of the total - although this has more to do with a major definitional change by T-Mobile UK than any technology-oriented factors.

The greater proportion of organic net additions now accounted for by W-CDMA networks now for the most part reflects the increasing availability of 3G handsets, in our view, rather than any change in the strategy of the network operators in acquiring 3G customers. Of course, we are talking about net additions here rather than gross additions - at a gross additions level, which includes customers swapping networks (and sometimes swapping between services of a given network operator), the majority is still likely to be claimed by GSM.

In total there were 614.9m GSM customers at the end of Q1 2007 in Europe, which when added to the W-CDMA total leaves a remainder of just 1.3m - split between legacy analogue networks (0.5m) and CDMA mobile services (0.8m). The number of analogue customers in Europe declined by 14.0% in the year to 31st March 2007 whilst the number of CDMA connections increased by 18.0% - slightly above the 14.0% continental average. W-CDMA unsurprisingly registered the greatest proportionate growth rate of any technology grouping with an 88.9% increase in the year, whilst the GSM base rose by 10.4%, which caused a decline in the overall proportion of customers using GSM technology to 92.3% at the end of March 2007 from 95.2% a year earlier.

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