3G down but not out of the picture – finance – Brief Article

3G down but not out of the picture – finance – Brief Article – Statistical Data Included

One2One’s announcement that it may take ten years for the company to break even from its $5.7B 3G mobile investment is sounding alarm bells across the wireless sector. Certainly, it has heralded a much-welcomed European Commission (EC) first policy document on 3G: The Introduction of Third Generation Mobile Communications in the European Union: State of Play and the Way Forward, aimed at alleviating the problems of debt-burdened 3G license holders.

Importantly, the document identifies that the readjusted financial outlook for the sector could have serious implications for the development of a competitive 3G market. As a whole, the wireless sector “is burdened with very heavy front-end expenses for the deployment of new networks and for development and marketing of new 3G services.” The report ascertains that the financial burden will weigh particularly heavily on new entrants that do not yet have an established presence in the market.

Already the commercial value of 3G spectrum has significantly decreased after the UK auctions, as operators and potential entrants have re-assessed the risks associated with rolling out 3G infrastructure. The EC highlights that the pending licensing procedure in France, for instance, has attracted only two operators for four licences whilst in Belgium only three operators applied for four licenses.

The EC proposes that member states, operators and equipment vendors consult on ways to share network infrastructure as a means of cutting buildout costs. In sharing equipment, operators could save between 30 per cent and 40 per cent on total construction costs. However, as there is no unified 3G regulation as yet, this option is not available to all — German 3G licence-holders, for example, are forbidden by regulator RegTP from co-building networks.

Looking ahead, a shake-up in the wireless market seems inevitable with pan-European consolidation a likely event. Richard Holway, a non-executive director at consultants’ Ovum envisages that telcos will have to adapt to survive the consequences of the 3G license bidding war: “With well over 250bn [pounds sterling] having being wiped off the share price of just six FTSE100 telcos in the last 12 months, the telcos worldwide are already facing problems. With the added burden of the 3G debt this could mean the end of some of the telcos, as we know them today.”

This sentiment is picked up in Frost and Sullivan’s report Profiles of European Mobile Operators, which expects that the five largest operators — Vodafone, T-Mobile International, the Orange Group, TIM and BT Wireless — will maintain their dominance but forecast a shake-out in their market positions,

Despite the gloomy outlook there is hope for the industry. Ben Donnelly, mobile telecoms analyst at Frost & Sullivan comments: “There is enormous potential for success if the operators move fast and act on redefined success factors. The winning operators will be those with a thorough and accurate understanding of what services the market actually wants, and the ability to market these services effectively.”

The European Commission advises just that, and gives prioritisation to 3G research, explaining that data services will be to key 3G’s success. The report also concludes by highlighting that 3G is built on very strong foundations and that in the foreseeable future it is the only viable, widely supported common platform for all broadband mobile Internet applications.

COPYRIGHT 2001 DMG World Media Ltd.

COPYRIGHT 2004 Gale Group