3, the network owned by Hutchinson Whampoa, is making waves in the mobile market by shoving Skype, the popular Voice over IP service, down the throats of its competitors.
The announcement yesterday that anyone with a 99p Pay As You Go SIM card can access Skype on their phones forever without any charges, is bound to have a major impact on the mobile phone market, at least in the UK.
Here are five ways through which the duo are in the process of changing the UK mobile market.
(1) Pushing For Data
3 started as a 3G-only network and its latest venture with Skype brings it back to its roots. 3G is essentially a conduit for data rather than voice. 3 has not said how much it will be paying for the millions of Skype minutes that are made everyday over its networks but it is likely to be an opportunity cost rather than a real one. Its network, which it claims is the biggest in UK covering 99.5 percent of the population, is almost certainly under-utilised. Which is certainly why it can afford to offer 15GB worth of data transfer for £15 per month.
(2) Showing that VoIP actually works (for now) !
In yesterday's press release, which contained the Skype/3 announcement, 3 made it clear that Skype users aren't actually as bad as they are (ed: I like the analogy with MP3 freeloading pirates).
They make more paid calls, tend to send more SMS, are higher margin customers, are more likely to browse the web AND are more likely to STAY with their networks. This shows that VoIP actually add value to the network until and unless the other major network providers say adopt Skype as well (in which case, 3 will no longer have that unique selling point).
(3) Introducing New Revenue streams
Skype could well be paying 3 not only for bringing in more users (cost per acquisition) but also for each paying customer. By cutting the umbilical cord between users and their desktops, Skype is actually encouraging them to make more calls and hopes a small number of users will make paid calls. Given the fact that some sources claims that Skype pays out around 25 percent commission on Skype credit purchases, that could well bring in a few million pounds for 3. Bear in mind as well as surfing Ebay is free and the auction website routinely give 40 percent commission on profits made.
(4) Changing the role of networks
For way too long, networks valued themselves as being more than mere data pipes. Like AOL and Compuserve in the days of Yore, mobile phone companies want to position themselves as know-it-all, have-it-all, trying to control access, content and revenue. The mobile manufacturers - with the notable exception of Apple - abide by this rule. 3 on the other hand, appears to be more relax. It allows mobile phones to be used as modems, encourage people to watch streaming content and listen to the radio.
(5) Slashing ARPUs & bringing down price
3 is likely to be looking for a more streamlined operation structure. The mobile phone operator appears to be gradually concentrating more on its high street "3" and online stores rather than using the likes of Carphone Warehouse and Phones4U.
A quick look over at Carphone Warehouse for example showed that there were no "3" new phones like the Nokia E71 on offer. Three was also the first company to offer a monthly deal under £10, showing the the company doesn't fear slashing down the average revenue per user to gain more marketshare.
Now, and here's a very long shot, Ebay wants to sell Skype and our guess is that given the right price, Li Ka-Shing, the owner of Hutchinson-Whampoa, could well be interested, even if it means stomping a few billions for that.
As we mentioned before Skype has more registered users than Facebook and Myspace put together and unlike those two, turned out a decent revenue since the beginning. So could 3 buy Skype?