Quam (once Group 3G) is currently acting as an MVNO, reselling E-Plus' 2G services. Its aim is to win a customer base now, and migrate users to its own 3G services late next year. But while this is a good customer acquisition strategy, it is also certain to be expensive. It looks like Germany's 3G market will not be a good place to make money for some years.
German new entrant mobile operator, Group 3G, launched its first handsets on Thursday, providing GSM and GPRS services under the Quam brand name. The company, 57.2% owned by Spain's Telefonica Moviles and 42.8% owned by Finland's Sonera, is currently acting as a mobile virtual network operator (MVNO) using E-Plus' network.
Quam does not intend to stay in the MVNO space. It paid $7.63 billion for its 3G license, so launching a real network is a good plan to say the least. However, going as an MVNO looks like a wise move for now.
The operator is trying to build customer loyalty as soon as possible, rather than waiting until its 3G network is ready in late 2002. It has already been advertising and marketing its name for a month, but selling real, Quam-branded phones should be a better way of building brand awareness than mere advertising.
Quam's current handsets undercut their rivals, in an effort to driver customer switching. A major difficulty for new entrant 3G operators will be the lack of a strong customer base that they can migrate to 3G. It should be easier to persuade customers to switch technologies than to persuade them to switch both technologies and operator at once.
But while this is a good customer acquisition strategy, helping Quam to reach its target of 10% market share by 2011, it is certain to be extremely expensive. The company has already spent millions of euros on advertising, and subsidizing handsets and call plans to keep prices below rivals' levels will not be cheap. Quam has also said it will heavily subsidize its 3G handsets when they launch, and the other five operators are likely to follow suit.
Germany will eventually be a vast market for 3G data services. But it may take years before services make money, due to the combination of enormous upfront cost and cutthroat competition. Quam's prospects may depend on whether it can secure funding during this consolidation phase.