O2 to axe failed UK i-mode service

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Mobile phone operator O2 is to phase out its i-mode mobile internet service, blaming the failure of the service on poor handset support.

O2, which is owned by Spanish telco Telefonica, said it would continue to support the service for the next two years but it would not launch any new i-mode handsets from July 2007.

I-mode is a proprietary mobile data system developed by NTT DoCoMo. O2 launched the i-mode service less than two years ago in September 2005, long after i-mode's Japanese heyday and at a time when cheap and unmetered GPRS connectivity and the arrival of 3G services in the UK made it pointless. The service has also suffered from a chronic lack of content since launch and a failure to allow i-mode micro payments made to third-party providers to be billed to the user's phone bill, as they are in Japan.

With i-mode, customers pay depending on how long they use the service or how much they download.

John Delaney, principal analyst at Ovum, said in a note to press and clients that O2 was wise to axe the service as it no longer fits with current and emerging mobile use trends.

"In the i-mode business model, operators keep only a small amount of content revenue, making most of their money by charging for data network usage," he said.

"But regular users of the internet on mobiles will become increasingly dissatisfied with 'having the meter running' while they surf, and the trend is already moving in favour of flat-rate data tariffs."

O2 launched its largest marketing campaign since the launch of its own brand to promote the i-mode service. The company said it had around 260,000 active users.

(Additional reporting from Reuters)

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