mmO2 enlists Microsoft and Handspring to wireless data cause

mmO2 Plc yesterday underlined its determination to build on what it claims is its leadership position in European mobile data services.

The London-based company with wholely owned subsidiaries in Germany, Ireland, the Netherlands and the UK announced a world first roaming agreement for Microsoft services, and an exclusive distribution agreement with Handspring Inc for the companies new Treo communicators.

The mobile spin-off from BT Group Plc is turning out to be an altogether more aggressive animal than the supine BT Cellnet operation which recently lost second place in the UK mobile market to Orange Plc. By its own estimate, the 10.7% of service revenue it earned from data last year makes it the UK mobile data leader, slightly ahead of Orange, and further ahead of Vodafone and One2One. It wants to consolidate that position and grow data to 25% of revenue within three years, reasoning that the premium prices it can charge for data will strengthen its average revenue per user (ARPU) - the new standard for measuring mobile operator performance.

According to an mmO2 spokesperson, the company's early success in data service provision stems from its decision to focus on enterprise customers, and to provide them with SMS-based services that offer value for both internal and external communications services. Most other operators have also invested heavily in SMS, but their focus has been on the consumer market, which cannot sustain the prices that mmO2 has charged in the corporate market.

Attention to corporate market needs is clearly also a motive behind mmO2's courtship of Microsoft Corp, an alliance that was first announced last October,
and which was yesterday rewarded with an agreement that will make mmO2 to the first GSM operator to be able to market Microsoft Information Server Enterprise and Carrier edition-based services. The services will support secure mobile links to Microsoft Exchange applications on corporate intranets, and the agreement covers all of mmO2's GSM, GPRS and, eventually 3G networks, and in all its operations, including BT Cellnet in the UK, Digifone in Ireland, Telfort Mobiel in Holland, and Via Interkom in Germany. Across these four markets mmO2 has 17 million subscribers, while Microsoft estimates to have 12 million Exchange users.

The full potential of mmO2's alliance with Microsoft will be realized later in the spring when the company's own brand (which will become just O2 around the same time) XDA GPRS phone and personal digital assistant is brought to market.

The Pocket PC product is, according to an mmO2 spokesperson, destined to be "our flagship device", and will clearly be pushed hard to enterprise customers.

It will also be aimed at higher income consumers for whom the XDA will offer a fashionable vehicle for accessing the mobile internet, and playing MP3 music files.

But if the O2 XDA is to be mmO2's flagship enterprise mobile device, it does bring into question the future role of the research in Motion Blackberry wireless email terminal and, following yesterday's announcements, the Handspring Treo.

Handspring and mmO2 first announced their plans to work together last November. They have now confirmed that mmO2 will be Handspring's key distributor for the Treo when it launches in Europe in the spring. Initially the two debut Treo devices, a keyboard driven version, and stylus driven version, will work only with GSM services, but in the summer Handspring said it will release software enabling them to work with GPRS, and a new color screen model.

In an interview with Computerwire yesterday, an mmO2 spokesperson agreed that the company's device strategy currently has "something of the scattergun approach about it", since it now boasts a sales portfolio containing Microsoft Pocket PC devices, the RIM email terminal, and the Handspring Treo, which is a PalmOS based device.

As a marque increasingly associated with Nokia (even if several other leading handset makers are also shareholders) mmO2's decision not to formally endorse Symbian is clearly a mark of respect to Microsoft, which the Redmond, Washington company is repaying by providing mmO2 with early, and so far exclusive access to some of its mobile server technology. It now remains to be seen whether Microsoft will also come to see the Blackberry email terminal as a competitive threat, and if so, what consequences this might have for its relationship with mmO2.

So far, Blackberry has turned out to be a major success for mmO2, which has been richly rewarded for its early commitment to bringing the former pager-network based device onto the GPRS network it uses in Europe. The company does not publish sales figures for Blackberry, but its executives claim that it has opened doors to numerous corporate accounts because of the simplicity of its interface, and its unambiguous application. As one mmO2 executive put it: "it does email. People understand that."

In a few months time though, mmO2's enterprise sales staff will be faced with the less clear cut decision of whether to sell their customers the Blackberry,the XDA or a Treo 180. If they cannot get the sales pitch straight, some may find their customers going elsewhere to buy a Nokia 9210.

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