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Super-fast 4G set to spark mobile price war

Samsung Electronics' smartphone Galaxy S III
AP
Samsung Electronics' smartphone Galaxy S III

Mobile network giants Vodafone and O2 rolled out their first 4G data services in the U.K. on Thursday, in a move which analysts said could spark a price war among rivals.

The companies will take on EE, which has had a 4G or "super-fast" mobile data monopoly in Britain since October last year, when telecoms regulator Ofcom allowed it to use its existing 4G spectrum. As such, consumers should expect some "aggressive" marketing efforts, according to Ronan de Renesse, principal mobile analyst at Analysys Mason.

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"O2 and Vodafone are entering the market quite light, which means the prices are lower than what you would see in other European markets, which is really good for the market and is going to drive competition and push adoption further," said de Renesse.

Fourth generation mobile services can provide data to mobile devices – like smartphones and tablets - up to 10 times faster than standard 3G connections.

Rival network Three, the smallest mobile provider in the U.K., is also set to up the ante in December, when it launches "all you can eat" 4G data packages at no extra charge. This is likely to drive providers to offer better deals, especially in the run up to Christmas.

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"It will make the market even more competitive - by mid-next year I don't see any premium on 4G at all," said de Renesse.

Michael Hewson, senior market analyst at CMC Markets, said the challenge for Vodafone and O2 would be to "muscle in" on the foothold currently established by EE.

"EE's latest figures show that the company is making record profits, and appears ambivalent to the threat posed by their rivals, and the prospects of a price war, given comments by its finance director Neal Milsom a month ago," said Hewson.

"But if the price point is too high and there is a choice, then customers will take the cheaper option and now that U.K. consumers now have a real choice we could well see how well EE's margins stand up to the competition."

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Some analysts, however, were relatively unphased by Vodafone and O2's entry into the marketplace, as the launch date had been known for some time.

"We are not expecting any surprises or any aggressive price announcements in the near future from O2 and Vodafone," said Emeka Obiodu, principal communications and broadband analyst at Ovum.

The notion that 4G data would suddenly transform the competitive landscape was a "misconception," according to Obiodu, but he added that if customers started moving away from EE the situation could change.

"The reality here is that this is just an evolution, like an upgrade. If it means that EE will start to lose customers, they will have to do something to realign their position in the market place. It is simply a case of how many customers do you have, how many are taking up premium packages," he added.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

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