try work with technology and infrastructure and the exchange of ideas for services and
price models.8
As a network operator, “3” was not able to enter the market without partnering
with handset manufactures that would develop compatible 3G handsets. However, in-
cumbent handset manufactures in the European market were reluctant to launch 3G
phones in accordance with the time schedule of “3”. Nokia for instance did not want to
introduce a phone with video-calling facility and thus did not offer a way for “3” to dis-
tinguish its offerings as it pleased.9 Rather than allying with the European incumbents,
“3” established close cooperation with US Motorola (July 2001) and Japanese NEC (Au-
gust 2001) to facilitate the closely coordinated development of terminals and services for
ensuring perfect compatibility. The firm did not dismiss the idea of having other handsets
for their services but emphasized that the handset is an integrated part of the user experi-
ence and thus “3” would be very cautious with its partners.10 In April 2004, one and a
half year after the first 3G phone was introduced to the market, “3” UK announced that it
would be selling the first 3G phone from Nokia - the 7600. However, “3” and Nokia did
not form a partnership and the 7600 was not exclusively offered to “3”. In May 2004, “3”
in contrast allied with LG Electronics of Korea, which joined Motorola and NEC as pre-
ferred 3G handset providers. LG was to supply 3 million UMTS terminals to the “3”
group by the end of 2004. The first videophone for LG Electronics produced exclusively
for 3, LG U8110, was sold in Italy from May 2004. In 2004, “3” ordered around eight
million 3G handsets from its three preferred providers and expects to buy 12 million
handsets for 2005.11
5.1.2 Vodafone’s Alliance Strategy
UK-based Vodafone is the world’s largest telecommunication company and one of the
world’s largest firms by market capitalization. In October 2002, the same time when “3”
marketed its 3G services, Vodafone launched its 2.5G service platform Vodafone Live!.12
8 Financial Times, “The Wrong Call?”, December 4 2003, p. 21.
9 Financial Times, “The Finnish Company has Dominated Mobile Telecoms...”, May 7 2004, p. 17.
10 B0rsen, April 8 2003.
11 www.3gnewsroom.com, “Hutchison to order 12 million 3G handsets for next year”, September 12 2004.
12 Interestingly, Utterback and Kim (1986) showed, innovations in an older technology may not come be-
fore the threat of the invading technology is a reality.
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