B
B1
THE UK MARKET
The UK Economy
Introduction
The UK comprises England, Scotland, Wales and Northern Ireland. As seen in Table B.1 below, in 1998, the UK was ranked fifth in terms of total GDP among the G7 economies.
TABLE B.1: GDP, G7 COUNTRIES, 1998 ($US BILLION, CURRENT PRICES) 12
Rank 1 2 3 4 5 6 7 Country USA Japan Germany France UK Italy Canada GDP 8,231 3,777 2,136 1,434 1,357 1,172 582
B1.1
Table B.2 summarises the main UK economic indicators. During this period government finances were in surplus.
TABLE B.2: UK MAIN ECONOMIC INDICATORS, 1998 UNLESS OTHERWISE SPECIFIED13
Population (1997) Total Area (1991) Gross National Income Gross National Income per capita Real GDP Growth Unemployment Rate14 Consumer Price Inflation, national definition15 Consumer Price Inflation, EU harmonised series General government financial balance (as % of GDP)16 Current Account balance (as % of GDP) 59 million 241,752 square km £855,462 million at market prices £14,497 1.2% (to Q2 1999) 6.2% ( March - May 1999) 2.1% (12 months to June 1999) 1.3% (12 months to June 1999) +0.5% +0.0%
12 Source: OECD Main Economic Indicators (September 1999) 13 Sources: ONS Monthly Digest of Statistics (August 1999), ONS Annual Abstract of Statistics (1999), ONS First Release: Government deficit and debt under Maastricht Treaty (31 August 1999) 14 International Labour Organisation basis 15 All items excluding mortgage interest payments (% change over 12 months) 16 Maastricht definition
B.92
THE UK MARKET
B
B1.2
Gross domestic product by sector
The UK is a modern economy with a large and growing finance and service sector. Table B.3 shows that in 1998 this sector accounts for around a quarter of GDP. Manufacturing is significant, comprising around a fifth of GDP, but declining in importance.
TABLE B.3: CONTRIBUTION TO GDP, BY SECTOR, 199817
Sector Financial & Business Services 19 Manufacturing Distribution & Catering Education, Health & Social Work Transport, Storage & Communications Construction Agriculture, Forestry & Fishing Other Total
21 20
Contribution to GDP %18 23.7 19.7 15.1 11.9 8.5 5.3 1.3 14.5 100.0
B1.3
Population distribution
The UK population is highly urbanised, with a large proportion of the population living in major cities. Table B.4 below shows that about one eighth of the population lives in the London area while approximately 21% live in the six largest cities.
TABLE B.4: POPULATION IN MAIN UK CITIES, 1997 (‘000) 22
City Greater London Greater Manchester Birmingham Leeds Glasgow City Sheffield Total 6 Largest Cities Total UK Population 7,122 2,572 1,014 727 616 530 12,581 59,009
17 Source: ONS Blue Book (1999) 18 Value added at current prices 19 Net of financial intermediation services indirectly measured 20 Of which telecommunications accounts for around 3.0% out of the 8.5% total (source: OFTEL) 21 Mining and quarrying, electricity, gas and water supply, public administration and defence, and other services 22 Source: ONS Regional Trends 33, 1998 ed. (tables 14.1 & 16.1)
B.93
B
B2
THE UK MARKET
The UK telecommunications market
The UK telecommunications market is considered to be one of the most competitive and open in the world. The former state owned provider of all telecommunications services, BT, faces a diverse range of competitors utilising a range of different innovative technologies. Table B.5 illustrates some key UK telecommunication statistics. OFTEL estimates that UK 23 telecommunications revenue was about £23.8 billion in 1997-98 which accounted for almost 3% of gross domestic product (GDP). In 1997-98, it was estimated that mobile telephony accounted for 16% of total telecommunications revenues.
TABLE B.5: LATEST TELECOMMUNICATIONS INDICATORS24
Telephone exchange Lines ( 12/98 000s) Lines per 100 population Mobile phone Subscribers ( 1/10/99 000s) Mobile phone Subscribers per 100 population Telecommunications Revenue (1997-98 £bn) Telecommunications Revenue as % of GDP 32,626 55.3 19,544 33.1 23.8 3.0
Further information on the UK telecommunications market can be found through the OFTEL website.
B3
B3.1
The UK mobile telecommunications market
Overview of the UK mobile telecommunications market
Table B.6 gives the key dates in the development of mobile services in the UK. The first service was launched in 1985. As of 1st October 1999, there were about 19.5 million subscribers, representing 33% of the population.
TABLE
TABLE B.6: KEY NETWORK LAUNCH DATES
Jan 1985 Jan 1985 July 1992 Sept 1993 Jan 1994 April 1994 BTCellnet analogue Vodafone analogue BTCellnet digital One2One digital Vodafone digital Orange digital
23 1997-98 refers to financial year ending March 1998 - the last full year of statistics available. 24 Sources: OFTEL Market Information Update (August 1999), OFTEL Market Information 1993-94 to 1997-98 (March 1999), FT Mobile Communications
B.94
THE UK MARKET
B
The following graph (Figure B.1) summarises the growth of mobile subscribers in the UK by network:
FIGURE B.1: MOBILE SUBSCRIBER GROWTH IN THE UK 25
Table B.7 below gives the current shareholders and market share figures for the four network operators.
T TABLE B.7: UK MARKET SHARES
Subscriber Share (%) 26 1/10/99 35.1
Operator Vodafone BTCellnet
Shareholders 100% free float 60% BT 40% Securicor27
30.4 17.8
Orange
44.8% Hutchison Whampoa28 5% British Aerospace 50.2% free float
One2One
100% Deutsche Telekom
16.6
The first operators to launch, BTCellnet and Vodafone, still have the biggest market shares (30.4% and 35.1% respectively) but have been progressively losing share to the newer operators, Orange and One2One, who now have a combined market share of 34.4%.
B3.2
Paging
Paging entered the mainstream consumer market in the 1990s and demonstrated high rates of growth for several years, although more recently sales have slowed due to the increased availability of cheap mobile phone packages.
25 Source: Rothschild analysis of FT Mobile Communications 26 Source: Rothschild analysis of FT Mobile Communications 27 BT acquisition of Securicor’s 40% stake announced summer 1999 28 Mannesman acquisition of Orange announced October 1999
B.95
B
THE UK MARKET
TABLE B.8: UK PAGING CUSTOMERS29
31st Dec 1995 UK paging subscribers Annualised growth rate UK mobile subscribers Annualised growth rate Paging subscribers as % of total paging & mobile subscribers 894,000 5,410,000 14% 31st Dec 1997 1,640,000 35% 8,344,000 24% 16% 30th Jun 1999 2,300,000 25% 16,790,000 59% 12%
At present, there are 17 licensed paging operators in the UK.30 In addition to those operations linked to the four incumbent mobile operators,31 there are several independent national or regional operators. The largest operator is BT, followed by Page One Communications.32
TABLE B.9: UK MOBILE COMMUNICATIONS RADIO PAGING LICENSEES 33
Air Call Plc (now called Vodafone Paging, and part of Vodapage Ltd) Bell Bay Ltd British Telecommunications Plc Digital Paging Systems (UK) Ltd Euromessage Ltd Hutchison Paging (UK) Ltd Infowave Ltd Inter-City Paging Ltd Mercury Paging Ltd Millicom Information Services Ltd National Transcommunications Ltd Pageboy (London Paging) Ltd Pagenet Ltd Page One Communications Ltd Paging Network (UK) Ltd Racal Vodapage Ltd Radiopage Ltd
In addition to the above mobile communications radio paging licensees, four companies hold licences under the Wireless Telegraphy Acts for Enhanced Radio Messaging Services (ERMES). These are: BT Mobile Communications Ltd, Vodafone Paging Ltd, Paging Network (UK) Ltd and Page One Communications Ltd.34
B3.3
TETRA
TETRA (Terrestrial Enhanced Trunked Radio), which has certain voice and data mobile radio capabilities, is a standard defined by ETSI. TETRA’s packet data transfer operates at up to 28.8 kbps. Dolphin, whose network launched in the first half of 1999, with commercial service available from 24th July 1999, is the only commercial TETRA operator in the UK. Private use of TETRA is limited because of the scarcity of available spectrum. The Police Information Technology Organisation is negotiating a contract with Quadrant, a BT-led consortium, for the provision of a TETRA-based network for the emergency services. The contract is expected to be signed in the next three months. In addition, Citylink Telecommunications Limited will be using TETRA to support the telecoms network for the London Underground. A small number of test and development licences are in issue.
29 Source: UKPIA website, FT Mobile Communications 30 Source: OFTEL 31 BT's paging operations, Hutchison Paging (UK) Ltd, Vodapage Ltd and Mercury Paging Ltd. 32 Controlled by the Champion Group (Hong Kong) 33 Source: OFTEL 34 A call for applicants for ERMES licences in the UK was made on 20th February 1996. Following this public competition and a consultative document published in November 1997 on the future of public paging in the UK, four ERMES licences were allocated in June 1998.
B.96
THE UK MARKET
B
Further information can be found on the TETRA MoU website (www.tetramou.com).
B3.4
Mobile Data
There are a small number of mobile data network operators (e.g. Cognito, Ram and Paknet) which support the transmission of data-only services. In addition there are data system integrators and service providers. The mobile data networks do not offer voice services. Applications include the transmission of large data files and various telemetry services. The Mobile Data Association web site, which provides more details on mobile data, can be found at www.mda-mobiledata.org.uk.
B3.5
Satellite mobile
A number of companies offer or plan to offer mobile phone services by satellite. Of the global systems, Inmarsat is the most firmly established, with its mini-M service providing voice data and fax at 2.4 kbps. Iridium is the only other company currently providing a global service but it is in US Chapter 11 bankruptcy protection. Globalstar has started to roll out its service and other operators plan to launch service between now and the end of 2000. Some satellite operators propose regional service via geostationary satellites. Eutelsat has recently launched its Emsat voice data and fax service, intended for vehicle installation, and providing broad European coverage. Thuraya, based in the UAE, also intends to provide voice, data and fax services from September 2000 to countries in Africa, Europe, the Middle East, Central Asia and the Indian sub-continent. Many of those presently operating or developing voice services have expressed ambitions to offer higher data rates, usually in a later generation of satellite, but, for the moment, only Inmarsat offers ISDN speeds (currently 64 kbps) in a portable package. The market for satellite phones is perceived by commentators to be a niche market. Industry forecasts suggest that there will be only 47,000 satellite phone users in Western Europe by 2000, with this figure rising to just over 250,000 by 2003.
B.97