One-2-One raises investment: Mobile telephone operator to spend pounds 230m more on expansion to reach 60 of population

MERCURY One-2-One, the mobile telephone operator owned by Cable & Wireless and US West, is to invest a further pounds 230m expanding its network, bringing total expenditure to pounds 660m. The company said the next phase of growth would bring coverage to 60 per cent of the population by early 1997.

One-2-One said the subscriber base has grown to 140,000 in the 12 months since the company was launched. It claimed it took 30 per cent of all new mobile telephone customers in London and the South-east, where it first began service. The figures, however, came as a disappointment to some analysts who had estimated that One-2-One could have had up to 170,000 subscribers.

One-2-One has already expanded into the West Midlands and will now increase coverage in the South, the North-west and further into the Midlands. Richard Goswell, managing director, said that 90 per cent of the population would be covered by the end of the decade, but he declined to say how much it would cost to complete the digital network.

Much of Mercury's growth comes from its free off-peak local calls, an initiative which took the industry by storm last year and which for a period left the company overwhelmed by demand. The majority of subscribers opt for the Personal Call Tariff which provides these free calls and, according to Mr Goswell, about half of those are businesses.

One-2-One has been coy about its revenue per subscriber. Analysts say the company is privately dismayed at the number of people who have signed up mainly to get the free calls. Mr Goswell claims that One-2-One has opened up a huge consumer market in mobile telephony and that the company is happy with that approach. 'The opportunity in mobile communications is in the mass market. It is not in fighting for the top tier of business customers,' he said.

Orange, the mobile network launched by Hutchison Telecom earlier this year, decided against the free call tactic and instead offered much wider coverage than One-2-One at launch and a faster expansion rate. But the company is not doing as well as many observers anticipated. The company refuses to give figures and has no plans to do so. Some analysts say the subscriber base is only about 50,000 to 60,000.

Orange is on target to provide coverage of 70 per cent of the population by Christmas and 90 per cent next year. Despite the ambitious expansion plan, it appears to fall between the two stools of One-2-One mass market appeal and the coverage and quality offered by the dominant players, Cellnet and Vodafone.

Cellnet and Vodafone are still expanding rapidly and have both launched digital networks operating in parallel with the original analogue system until customers migrate across. Vodafone has more than 1.4 million subscribers and Cellnet 1.28 million.

Cellnet claims to be closing the gap but it has a smaller proportion of high-paying business subscribers. It plans to launch a new budget package to attract more businesses. The idea is to charge a monthly fee of pounds 45 in return for a set number of peak and off-peak call minutes.

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