It has been another sobering week for mobile phone operators in the UK with analysts questioning the future of the UK’s first commercial third generation phone service and one of Europe’s leading players writing down the value of its 3G investments.
In the heady days of 2000, the British government succeeded in raising £22.5 billion from the sale of five 3G licenses. The phones were expected to revolutionise communications as they offered mobile broadband services, essentially high-speed data transmission, the internet and video links.
However, the telecoms downturn intervened and with consumers showing little interest in upgrading their handsets, UK operators were forced to review their 3G strategies (see 3G Is A Turn-Off With Consumers, Finds Study).
Only Hutchison Whampoa has yet braved the market but its 3 service has attracted just 25,000 subscribers since its launch in March (see Hutchison Brings 3G To The UK). The company has sought to draw attention to 3G features such as video calling and messaging in a high profile advertising campaign. However, its year-end target of 1 million UK customers is looking ever more optimistic (see 3G Makes A Slow Start In The UK).
According to a report by Enders Analysis, quoted in the Independent this week, Hutchison will have about 84,000 British customers by the end of 2003. At anticipated rates of growth, the company will remain unprofitable through 2010, when losses could be as much £400 million.
It may not even come to that. If its business model is shown to be unworkable, funding will be withdrawn and Hutchison could be broken up or sold within the next few years.
Analysts at Citigroup are more optimistic about the company’s prospects and are predicting that 3 will make its first EBITDA profit by 2008, by which time it will have 5.5 million subscribers.
Major operators take stock Hutchison’s travails are perhaps inevitable given that it is relatively new to the mobile telecoms market. The same cannot be said of mmO2 (formerly BT Cellnet) which this week announced losses of £10.2 billion.
The company has already said that the launch of its UK 3G service would be delayed by a report from the Competition Commission (see Mobile Operators Unite In Opposition To Oftel Ruling). It has subsequently written down the value of its British and German 3G licences by £5.9 billion.
mm02 remains committed to the technology but chief executive Peter Erskine commented: “There is a recognition that too much was paid for 3G licences three years ago at the top of the market.”
Meanwhile, Vodafone has said that it will not be writing down the value of its European 3G licences, which cost £14 billion at the height of the telecoms boom. However, it is not known when it plans to launch commercial services.
