VODAFONE appears to have finally accepted what its critics have long told it: the revenue uplift from putting fancy 3G phones in its customers’ hands does not justify the cost.

Along with the rest of the mobile industry, Vodafone had hoped that 3G mobile networks would encourage customers to spend more money on services such as browsing the internet, downloading music and watching video clips.

However, less than two years since launching these services, Vodafone has discovered the incremental revenue they generate does not justify the hefty subsidies it has to offer on expensive 3G handsets. It has recently cut the level of subsidies it offers retailers, causing a sharp fall in the proportion of 3G phones it is selling.

After last week’s trading figures, James Barford of Enders Analysis estimated that sales of 3G phones have “plummeted ... from 20% of all handset sales in the prior quarter to just 12%”.

Vodafone would not confirm the size of the fall but said the Enders assessment was “reasonably accurate”. A spokesman said: “3G is being de-emphasised. You’re seeing a commercial evaluation.”

Vodafone said it had seen some revenue uplift from early adopters, and it is still promoting services such as mobile television and music downloads. But for the mass market, 3G networks will increasingly be used to offer cheaper voice calls to win market share from landline companies such as BT.

Claire Enders, who heads the analysis firm that bears her name, said Vodafone’s rethink on 3G was “the first good news we’ve had in a long time”. It showed Arun Sarin, the group’s chief executive, was prepared to listen to his critics, she said.

There was more bad news for 3G in a market-research report commissioned by Enders. This found that 63% of adults were not at all interested in 3G services, and a further 18% were not very interested.

Even those with a 3G phone showed little interest in the possibilities. Seven out of ten had either never made a video call, or had done so only once. More than half of 3G phone owners had never watched a video clip or downloaded music after an initial test. Three-quarters of consumers said they were unwilling to pay £5 a month to watch mobile TV.

The telephone study, conducted by BMRB, also makes grim reading for 3, the newest of the mobile networks and the only one dedicated to 3G. Only one third of 3’s existing customers plan to resubscribe with the network — less than half the loyalty displayed by its principal competitors.

O2 has the most loyal customers, with 81% planning to stay with it. Virgin Mobile also scored well, its 76% loyalty score putting it ahead of Orange, Vodafone and T-Mobile. 3 said it did not consider the findings statistically significant because only a “very small” number of its customers were interviewed. It said the level of its customer “churn” was in line with its rivals.

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