O2 To Dump i-mode In UK; No New Handsets Anymore

Updated: This is official now, and O2 has said it would continue to support the service for the next two years but it would not launch any new i-mode handsets from July 2007. Ovum’s anlysis is here: “the i-mode service concept itself runs counter to trends that are emerging in the mobile Internet market. In the i-mode business model, operators keep only a small amount of content revenue, making most of their money by charging for data network usage. But regular users of the Internet on mobiles will become increasingly dissatisfied with ‘having the meter running’ while they surf, and the trend is already moving in favour of flat-rate data tariffs.”

Original post: Hot on the heels of the latest iPhone in Europe news, here’s another speculative story surrounding U.K. mobile operator O2, spotted today in the Guardian: the mobile operator is planning to dump the i-mode platform because of low subscriber take-up and lack of attractive handsets.

The move is a major volte face for Telefonica-owned O2, which in 2005 had originally planned to dump its own home-grown mobile portal, O2 Active, in favor of the DoCoMo-developed platform. The move sparked a lot of controversy, since Active was one of the few successful operator portals around, and was resulting in some of the highest usages of data of any mobile operator in Europe.

Ultimately, O2 decided to run the two simultaneously, and today’s numbers tell the story of what came of that: i-mode has 260,000 active subscribers using a dozen phone models, while Active is available to some 15.8 million users, on 240 handsets (the number of ‘active’ Active users is not broken out).

If the news is true, the news comes at a bad time for DoCoMo (NYSE: DCM), which has been struggling against some severe price competition in its Japanese home market. For O2, closing down a much-touted, imported service that was a smash hit abroad may prove to be instructive when it chooses business partners for consumer mobile ventures in the future.

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