BT says 3G won't make users spend much more

BT cast further doubt on Friday on operators' hopes that increased spending by mobile customers will justify the investments in 3G licences.

Chris North, chief operating officer of BT Japan, said he did not expect a dramatic increase in average revenue per user (ARPU) after 3G services start in the country in May.

His comments follow a warning by Japan's number two wireless company, DDI Corp , on Thursday that 3G would not increase customer spending and that some European operators could go bust as a result.

The operators are gambling that 3G's provision of high-speed Internet access, video downloads and CD-quality music will encourage people to use their phones more, helping them recoup their 100 billion euro ($89 billion) bill for licences.

``I think we should be looking for trends of increasing ARPUs but not dramatically increasing ARPUs,'' North told Reuters in an interview.

North said the increase in data traffic over 3G will be offset by falling prices for voice calls, which we said would drop to the same level as fixed-line prices.

BT and other mobile operators are expecting a big boost to ARPUs in Europe following the launch this year of so-called 2.5G services, which will provide ``always-on'' connections to the Internet for the first time. They believe the more sophisticated 3G services will then provide a further increase.

But in Japan, where 2.5G-style services are already available, operators are not expecting the transition to 3G to deliver another significant rise in customer spending.

That raises questions about whether the European operators should have invested so much in 3G instead of focusing on 2.5G.

BT is a shareholder in J-Phone, the smallest of Japan's three mobile operators and the only one that will not launch 3G until next year.

The Japanese operators did not have to pay for their licences, and North said J-Phone could recoup its $7 billion investment in 3G infrastructure in ``towards'' five years.

That is about the same time frame that Vodafone expects to make a profit on 3G in Europe, despite having to bear licence fees on top of infrastructure costs.

European operators' enthusiasm for 3G has been driven in part by the success of the mobile Internet in Japan, where market leader NTT DoCoMo signs up 50,000 users a day.

But North said the high cost of fixed-line Internet access in Japan meant the trends there might not be replicated in other countries.