Mobile phone battle shifts to youth sector

A war has broken out: its prize, the UK youth market. Last week, mobile phone operator Cellnet launched U, a pay-as-you-go package for young people. It sparked a flurry of activity in the market and a High Court writ from a rival operator.

Operator One-2-One alleges Cellnet’s U is trading on its own pre-pay package, Up 2 You. Cellnet, sixty per cent owned by BT, rejects the charge, saying U is “a distinctive brand and 100 per cent different from Up 2 You”.

The speed of the reactions to U’s launch demonstrates the importance mobile phone operators, retailers and manufacturers place on 16- to 24-year-old consumers, who make up 20 per cent of mobile phone users.

Orange slashed the minimum price of its Just Talk pre-pay talk time vouchers to 5 after U’s launch, and Vodafone launched its Christmas advertising campaign for Pay as you Talk. Meanwhile, retailer The Carphone Warehouse cut the price of Cellnet’s original pre-pay brand EasyLife and threw in a leather case free.

Recently, Ericsson sponsored Muzik magazine’s dance awards and Nokia opened a retail store with create-your-own design handset covers. The company is also planning to sponsor the Snowboard World Cup.

Fixed-line operators BT and Cable & Wireless have not followed the mobile operators’ lead so far. Some BT insiders believe the company should make the brand more attractive to young consumers, or it will risk losing out. It is an area that BT is believed to be looking into.

The mobile companies’ interest in youth was triggered by the boom in pre-pay phone packages. Cellnet believes the number of pre-pay customers (1.4 million or 15 per cent of all mobile users) is likely to double over the next six months. Three-quarters of those new users will probably be young people.

The pre-pay packages have also opened up new distribution channels for the operators. Sainsbury’s Savacentre sells Vodafone’s Pay As You Talk, One-2-One is in discussion with Sainsbury’s, U has signed a deal with Asda, and Boots, Woolworths and Argos are all selling phones.

But Carphone Warehouse founder Charles Dunstone questions whether young people will want to buy mobiles from supermarkets: “The youth market is a lot smarter than Cellnet thinks. It’s not as simple as putting packages into the shops and saying ‘buy this’.”

Cellnet is “not at all worried” that U will cannibalise sales of its original pre-pay brand Easylife. It has repositioned Easylife as “more for folks interested in utility” says Cellnet head of consumer marketing Paul McAleese.

But some think Cellnet could be making a mistake. Dunstone says: “Young people won’t be fooled by pack design, they buy on value and are much more interested in handsets.”

Alison Brolls, Nokia Mobile UK and Ireland head of marketing, adds: “They [youth] take value for money and the best deal from the networks into account as well as handsets.”

Motorola UK and Ireland head of marketing Anne Burkhardt says usefulness is as important as style: “Kids are not scared by the technology, that is the big difference. They are growing up with it, and it is natural for them.”

A spokesman for brand connection company A Vision issues a warning to the mobile operators: “There is a danger that a brand can be seen to be trying too hard to get ‘in with the kids’.”

Nightclubs are favoured locations for launch parties and advertising. Cellnet is no exception – U is holding its launch party at the Ministry of Sound and will run competitions which offer tickets to clubs and gigs as prizes.

Cellnet’s McAleese is well aware of the dangers of the brand trading too obviously on club culture: “Intrusion concerns us. The market tells us not to advertise heavily in clubs, but clubbers are part of the market we are trying to get to.”

Ericsson went one better than Cellnet when it bypassed the mainstream clubs and used “underground” venues and young, un- known DJs to promote its 768 range of phones.

Ericsson promotions manager Vijay Anand explains: “I wanted to make sure that dance culture respected the brand and that it had credibility, so we targeted the music makers.”

The youth market is under-exploited by fixed operators, says Cable & Wireless brand director John Aarons: “Trying to make a fixed-line telecoms company look cool is a challenge. We are not actively looking at youth, but our brand has more personality than other companies, which is a good starting point. The problem is that ours is a mass-market product, so we can’t risk alienating our core customers.”

Although the pre-payment schemes have attracted more mobile customers than ever, the average monthly bill has fallen 20 per cent year on year, according to Continental Research figures.

But with pre-pay packages at-tracting more users than ever, mobile players’ head start in establishing a relationship with 16- to 24-year-olds is worth capitalising on.