MOBILE PHONES: Wireless telephony is all the rage in Europe

MOBILE PHONES

HAVE PHONE, CAN TRAVEL

From Oslo To Rome, Old And Young Alike Are Talking About, And On, Portable Phones

JAY BRANEGAN/BRUSSELS

It was a historic moment last month when a jubilant Romano Prodi, economics professor turned politician, stood before a cheering throng and a nationwide TV audience to proclaim the first-ever victory for the Left in Italy's national elections. As the crowd finally quieted and Prodi got ready to speak, the din of driinng, driinng erupted from the belts and pockets of the journalists and cameramen jostling around him. "Per favore, per favore," he pleaded. "Please turn off the telephones."

Sorry, professor, but those portable phones will keep ringing in Italy, and everyplace else in Europe, for that matter, as mobilemania sweeps the Continent. The boom that started in the late 1980s has caught a second wind, and wireless telephony has now become a European rage. The number of cellular-phone subscribers in Western Europe leaped 56% last year, to 23.4 million users, and is sure to keep climbing.

Once a pricey toy for high-flying executives, the mobile phone has broken into the personal market. Teenagers chat with their friends, parents use them to keep track of their kids, and the elderly carry them for an extra measure of security. The result has been dizzying price wars in Britain and phonophilia in Scandinavia, where portable handsets have become nearly as common as digital watches. Danish schools have even found it necessary to ban the phones from classrooms. "This is no longer a niche product," says Lauri Kivinen, spokesman for Finland's Nokia, which, along with Motorola of the U.S. and Sweden's Ericsson, dominates the hardware market.

The Euro-craze is part of a worldwide trend. Total global subscribers soared 57% last year, to 85 million, according to the International Telecommunication Union, and could reach anywhere from 200 million to 350 million by the year 2000. North America still accounts for about half the world market, but Europe, though lagging in subscribers per capita--save in Scandinavia--is fast catching up. Indeed, it already leads the U.S. in the use of digital technology, which is better at transmitting computer data, harder to eavesdrop on, and can fit more voice channels into the wireless spectrum than traditional analog systems. Last year only about 10% of new cellular connections in the U.S. were digital, while in Europe some 60% of new customers signed up for GSM (Global System for Mobile Communications), the European digital standard used everywhere in Europe, Australia and much of Asia outside Japan. GSM users can "roam" throughout the Continent making and taking calls on their mobile phones. Many European GSM units will even ring in Sydney or Hong Kong.

Stepped-up competition is fueling the boom, as virtually every European country has added at least one new mobile operator to an industry that typically started out as a monopoly in each nation. "The arrival of a second operator in any country brings a surge of new customers. The third sparks another surge, and so on," says Sam Paltridge, a mobile-phone expert at the Organization for Economic Cooperation and Development in Paris.

Nowhere is this competitive frenzy more evident than in Britain, where four operators with six networks are deluging newspaper readers and TV viewers with ads for $15 handsets, free calling time, and other promotions to grab market share. "They used to try to bribe the dealers to sell their flavor of mobile phone. Now it has got down to bribing the customers," says Simon Rockman, editor of What Mobile & Cellphone, a monthly magazine. Three years ago, upstart One2One challenged the two established players, Cellnet and Vodafone, by offering free off-peak local calls seven days a week, a deal that proved so popular it had to be scaled back to weekends only. The latest rival, Orange, made fast inroads into the market by offering per-second instead of per-minute billing--a money saver on quick calls--and is running neck-and-neck with Vodafone in signing up new customers. Consumers are lapping up the bargains: the number of British mobile subscribers has doubled in 18 months, to 5.8 million.

In Italy, just the threat of challenger Omnitel coming on the scene sent entrenched operator Telecom Italia Mobile scrambling to slash rates and lock up new customers. The resulting price war has put a telefonino, or little telephone, into the hands of 1 in every 6 Italians between the ages of 21 and 60. "It used to be a fashion statement, but now the cost has dropped so much that anyone can afford one," says Rome accountant Marino Brugnola. Italians chat on them at trendy restaurants, on the ski slopes, driving motorbikes or just walking down the street. Says Milan management consultant Antonino Busacca: "It's still a sign you've made it. After the car and the washing machine, you buy a telefonino."

In Germany, where a cell phone is called a "handy," the two heavyweight operators, Deutsche Telekom's DeTeMobil and Mannesmann's Mobilfunk, with 3.6 million customers between them, introduced new low consumer rates last year along with interloper E-Plus. Now half the new accounts are personal ones, up from just 20% before, and the market is expected to balloon to 11.6 million users in four years. France, normally gadget-happy, is a major laggard in the cell-phone race, thanks to desultory competition between state-owned France Telecom and private rival SFR. That may be changing: with construction giant Bouygues set to launch services next month in the Paris area at half the present monthly subscription rate of some $40, both current players have been forced to push similar packages.

Scandinavia, which pioneered international cell-phone connections in the 1980s, shows no sign of losing its ardor for mobile phones. In fact, just the opposite: sales exploded in Norway last summer, pushing subscriber rates to a Europe-leading 25.3% of the population, and the number of Danish mobiles doubled last year, to about 1 million, serving 18% of the people. Every third person in Stockholm now has a cell phone; Swedes often use portable models as the phones in their summer houses.

Teenagers are as addicted to going mobile as they are to fixed-line phones: "If I see a pretty girl in a disco, I like to impress her by talking on my mobile," says Copenhagen high-schooler Attila Zelikdemir. Even Denmark's vagabonds, who roam the countryside during the summer, use cell phones to keep in touch. "My wife didn't like the idea of my being so isolated on the road," says wanderer Sune Olsen, 47. "She calls me every second day." Recharging? No problem--Olsen carries a car battery in the pram he pushes along the highways.

While all the competition may be an economist's dream, it can be a consumer's nightmare. Handset prices vary according to size, battery life, power and an ever growing menu of options from message storage to a computer link-up. There are connection charges and monthly fees along with a bewildering variety of pricing packages--as many as 80 in France alone--tied to frequency of use, time of day and call destinations. So often are the handset and usage charges linked--in Germany a $591 phone costs only $65 if you sign up with one service for a year--that "you can no longer tell if you're buying the phone or the subscription," says Denis Branche, an expert at French brokerage Cholet Dupont.

Outside their home country, "roamers" pay a surcharge when they make a call and get charged for ones they receive. Moreover, even with all the discounting, mobile talk is not cheap when compared with fixed-line calls, and many a new customer's first bill makes for breathtaking reading. The European Consumers Organization in Brussels calls the one-year contracts that typically accompany the sale of discount phones unfair, because they lock the consumer into a service before he can tell if its quality and real costs match the advertising hype, and complains that too many operators overstate their systems' geographic coverage.

Despite such growing pains, industry expansion is sure to continue, if only because new technology will make it easier for cellular phones to send faxes, computer messages and other nonvoice data, which could account for as much as 40% of mobile air time within five years. And prices will keep plunging since today, says the oecd's Paltridge, "there is no relation between prices being charged and what it costs to provide a mobile network." The operating expenses for some mature cellular systems are already comparable to fixed line. In Norway, for instance, predicts Telenor Mobil spokeswoman Berli Lund Gronning, "we will see a whole generation of young people who have cellular phones as their only phone. It is less expensive for them than a stationary one." If the day comes when there is no real price advantage to staying with stationary phones, real status for consumers may derive from not having a mobile that goes driinng, driinng at inopportune moments. --Reported by Greg Burke/Rome, Bruce Crumley/Paris, Helen Gibson/London and Jette Luthcke/Copenhagen