Outed as the road to revolutionizing mobile phone use and boosting business for telecommunications companies, 3G technology has yet to live up to expectations in the Czech Republic.

3G transforms mobile phones and other electronic gadgets into portable communication and entertainment units by offering Internet and data services. Expectations for the technology were high here when T-Mobile became the first operator to introduce it in October 2005, but, 10 months later, telecom operators have still not found a large customer base for it.

The demand problem was highlighted earlier this month when Vodafone ťR, the newest operator on the market, announced it would not launch a Universal Mobile Telecommunications System (UMTS), a network that supports 3G. The company, which paid 2 billion Kč ($88.8 million) for its UMTS license in February, said the technology has not been as profitable as hoped for the country's two other mobile operators, Telefónica 02 and T-Mobile.

"The interest isn't as high as was expected," said Jakub Hrabovský, a spokesman for Vodafone ťR.

Telecoms thought 3G would bring in hundreds of thousands of new clients at a time when revenue from fixed-line and mobile services are waning, but it has so far only appealed to a narrow market of businesspeople and information technology experts, according to analysts.

T-Mobile only has a few thousand 3G customers, according to Martina Kemrová, a spokeswoman for the company. This figure is negligible when compared to its overall client base of 4.7 million people.

Expensive breakthrough

3G has only really had success in tech-savvy countries such as South Korea and Japan, where the per capita income is high.

"This technology did not catch on anywhere in Europe," said Tibor Bokor, an analyst at Wood & Company.

There are several reasons for this. First, it is too expensive. Building a UMTS network runs around 20 billion Kč, and the cost of this is passed on to customers in higher fees and other surcharges. 3G-capable phones and handsets also tend to be prohibitively expensive.

Another problem is that providers haven't come up with attractive services that would justify the costs for customers, said Eva Sepešiová, managing director of ES Consult, a telecom consulting company.

"Just building a network is not enough," she said. "Operators need to invest time and energy into coming up with services and offer handsets that support this technology. Neither Eurotel nor T-Mobile has managed to build a real business based on the new technology yet. They are not that far ahead of Vodafone, and they won't be in the near future."

All this means that Vodafone ČR probably made the right choice to wait and see how the market develops. Indeed, it still holds its license, which means it can launch a UMTS network at any time.

"I don't see Vodafone's decision as a tragedy," Sepešiová said. "If they had given up the license for good, it could have hurt the company in the long run."

Vodafone ČR's Hrabovský said the company is looking for ways to reduce the costs of building a network.

"Building a 3G network is expensive, and if every operator creates its own network the service will be very expensive and not attractive to customers," he said.

As a result, the company is considering sharing a network with another operator. This has worked in other countries, including Austria, and would probably be a smart move for Czech mobile providers. That's because the market is so competitive that large investments are a big risk.

"Operators don't want to make headlong investments," said Wood & Company's Bokor.

For the moment, T-Mobile is not considering sharing its network, Kemrová said, adding that the company has invested hundreds of millions of crowns into 3G and is still trying to increase coverage.