International Herald Tribune

LONDON Not so long ago, the future of mobile phones was supposed to be about advanced services like video calling, on-the-go Internet browsing and movie downloads. Instead, the future looks like it may be about something a bit more prosaic - price - in some of the most competitive markets.

Two of Britain's biggest mobile phone service providers, 02 and T-Mobile, introduced ad campaigns last week that promote new pricing plans rather than the quality or advanced technology of their networks. The shift in strategy is aimed in part at retaining existing customers, who often jump from provider to provider in search of the best deal.

With some estimates of mobile phone penetration at more than 100 percent - some people have more than one phone - the market in Britain has little room to expand. At the same time, the constellation of competing services looks ever more crowded, particularly at the low end of the market dominated by "pay-as-you-go" plans, rather than subscription contracts.

In addition to 02, a spinoff from BT, and T-Mobile, which is owned by Deutsche Telekom, there are two entrenched network owners, Vodafone and Orange of France Télécom. A fifth, 3 of Hutchison Whampoa, joined them two years ago, offering the first high-speed, third-generation network.

There is also a rising number of "virtual" operators, which own none of their own infrastructure but sell basic service using space rented from the networks. They include Virgin Mobile, easyMobile, Fresh, which is owned by Carphone Warehouse, and even the Tesco grocery chain.

With low-price competitors like that, "the network operators have the most to lose," said Sara Harris, a British analyst for Strategy Analytics, a Boston research firm. "That accounts for the marketing shift."

In the new television ads from 02, created by the London agency Vallance Carruthers Coleman Priest, planets float overhead as a female customer walks through an imaginary landscape. Money falls from the sky, representing a program in which customers are given 10 percent discounts if they "top up" their pay-as-you-go service with additional spending.

"Imagine a world where loyalty is rewarded," the ad says. "Where it's not just the new customer who gets the latest deal. Where it's you, the existing customer, who feels new and wanted."

Analysts say marketing that focuses on customer retention is likely to spread across Europe. EasyMobile said last week, for instance, that it would move next into the Netherlands, which already has around 20 virtual services. 02 will extend its campaign into its other European markets, Ireland and Germany, by July.

T-Mobile's new approach in Britain - it uses different advertising in each market - is not aimed exclusively at existing customers, the company says. But the ads, created by Saatchi & Saatchi, introduce a payment plan called U-Fix that appears to focus on some customers who might be tempted by the low fees of a virtual provider, including young people or parents of children with mobile phones.

The plan combines elements of contract and pay-as-you-go programs, letting customers choose a fixed amount of regular monthly spending; that can be topped up as needed. Unlike many "prepay" plans, U-Fix lets customers choose their phones, as contract customers typically do.

One of the spots features a young woman walking down a street, talking on her cellphone. Though she appears distracted, she miraculously manages to escape harm from hazards like a falling piano.

"The focus of the drama is around this idea of control," said Torrey La Grange, account director at Saatchi & Saatchi in London. "It's not about features that they don't necessarily need or want."

Whether the networks can keep the virtual operators at bay with their new plans and ad strategies is unclear, analysts say.

"The best retention program," said Eden Zoller, principal analyst at Ovum, a research firm in London, "is simply to provide good service."