3G Cell Firms Have Invested Much, but Results Less Than Impressive

Half a year has passed since Partner and Pelephone launched their third generation cell phone devices with much fanfare.

Half a year has passed since Partner and Pelephone launched their third generation cell phone devices with much fanfare. Are we talking about a success here, or one of the bitter disappointments of the cellular industry in Israel? One executive at Cellcom is ready to declare the venture a failure.

Pelephone reports 20,000 third generation device customers. Partner refuses to supply up-to-date numbers regarding its clients in this field. The last official figure the company published regarded the first quarter of 2005, when it was said to have some 20,000 customers. According to current estimates, some half a year after their launch, the company likely has 30,000 3G customers. In other words, at this stage 3G users comprise only 1 percent of either company's customer base.

Data obtained by Haaretz indicate that Partner sunk some $3 million in image and sales campaigns over the past six months for 3G services and devices, and for the content brand Obox Live. In contrast, Pelephone has invested some $1.5 million in advertising over the past six months. In other words, the two companies have collectively put up over NIS 20 million in advertising in half a year, and they are still shelling out, as both companies are currently running campaigns for 3G services.

The two companies have invested in addition a considerable sum in subsidizing 3G cellular devices (though it is impossible to estimate exactly how much) in order to make upgrading the phones more attractive to clients. To this figure can be added investments of huge amounts of money in expensive content agreements for broadcast rights of movie and music clips in the 3G networks.

Some 70-80 percent of customers who were recruited to 3G devices are existing clients who simply upgraded their phones, so in practice the two companies failed to utilize 3G technology as a factor in attracting new clients.

Cellcom, for its part, is sitting on the fence. The company currently has several thousand 3G customers because of a partial distribution of the network in the Sharon and central areas only. "Cellcom will continue to extend the network through the end of 2005, and then we will invest more in marketing the field," says Cellcom vice president for marketing Yossi Lubaton. "Fifty thousand customers in seven months is a resounding failure," he added.

Pelephone's vice president for marketing, Nir Stern, said in response, "It seems convenient to announce the failure of others when you don't have an active third generation network."

Regarding his Cellcom counterpart, Stern added, "We'll see what Lubaton will say at the end of 2005, when Partner and Pelephone will have 100,000 third generation clients each, and Cellcom will be left far behind."

Partner vice president for marketing Iris Beck said, "I'm sorry that Lubaton is speaking out of the misery of Cellcom in that it doesn't have an available third generation network." She added, "We have no doubt that the third generation is a great success in Israel, and it is a positive wave in the world, too."