3 UK targets voice callers, limits data usage

LONDON, July 1 (Reuters) - Hutchison Whampoa's (0013.HK) 3 UK, Britain's smallest mobile carrier, joined a growing number of operators capping mobile data use in the face of an explosion in Web surfing, emailing and social networking on the go.

After years of all-you-can eat data offers designed to tempt consumers to fill up empty and expensive third-generation networks, some carriers are becoming victims of their own success as their networks start to feel the strain.

Earlier this month, U.S. carrier AT&T (T.N) became the first major mobile service provider to shift back to tiered pricing for email and Internet access. [ID:nN02173229] Telefonica's (TEF.MC) O2 carrier in Britain followed a week later.

"It's astute timing by 3's management team to move to a capped tariff for data," said Ben Wood, a director of communications research firm CCS Insight.

3's new One Plan tariff announced on Thursday limits mobile data consumption to users of smartphones like Apple's (AAPL.O) iPhone to 1 gigabyte per month -- while offering large amounts of call minutes as it begins a serious push into the voice market.

The carrier said the data allowance was enough to watch 30 minutes of YouTube (GOOG.O) video a day and was more than twice what the vast majority of users currently consume. But it may well look meagre by the end of the contract's two-year term.

One Plan also includes 2,000 minutes of voice calls to any network and 5,000 minutes to other 3 customers, as well as 5,000 texts starting from 25 pounds ($37) per month. Until now, 3 has been seen mainly as a mobile data company.

The carrier is banking on Britain's telecoms regulator enforcing cuts next year in mobile termination rates -- the fees carriers charge other operators to connect incoming calls.

As a small player in the market with far more outgoing than incoming calls, 3 has been discouraged from pushing voice services and now stands to gain from the expected fee cuts.

It had about 3.5 million phone customers as of the end of 2009, versus more than 30 million for Orange (FTE.PA) and T-Mobile's (DTEGn.DE) new joint venture, Everything Everywhere, O2's 21 million and Vodafone's (VOD.L) 19 million.

Bigger rivals have accused 3 of destructive pricing, saying that as a small unit of Hong Kong-based conglomerate Hutchinson Whampoa it is under less pressure to turn a profit than others. 3 also has far more empty network space than its rivals.

3 UK's Chief Executive Kevin Russell told Reuters: "We're under as great pressure as everyone else to build a solid, profitable business."

He added: "Our strategy is different from the rest of the market -- we're looking to gain market share."

3 has recently enjoyed a significant increase in network quality due a network-sharing agreement with T-Mobile. It has also just added the iPhone to its line-up, after holding out -- unsuccessfully -- for a better deal from Apple on its own terms.

"There's a number of things coming together for 3," said CCS Insight's Wood.

"They've got a great network, the direction of travel of termination rates is favouring them, they've got the iPhone -- so they've got the right things in the window -- and now they've got a very attractive tariff offer." ($1=.6697 Pound) (Reporting by Georgina Prodhan; editing by Simon Jessop)