Hutchison takes huge losses as 3G sales disappoint

The next-generation mobile trailblazer has made a loss of more than £300m on its 3G operations, in a blow for the emerging industry

Hutchison 3G, the first company to launch a commercial third-generation mobile phone service in Britain, looks unlikely to reach its take-up targets for this year.

In its financial results for the first six months of this year, released on Thursday, parent company Hutchison Whampoa revealed that it had 155,000 3G customers in the UK, 300,000 in Italy and 50,000 in Australia -- the three territories where it operates 3G networks. This is roughly what city analysts expected to hear, and is being taken as firm evidence that Hutchison's Three service won't hit its target of one million UK users by the end of 2003.

Hutchison's success or failure is being watched as an early indication of how next-generation services will fare in Europe, with telcos such as O2, Vodafone, T-Mobile and Orange all planning to launch services this year or next year.

Company chairman Li Ka-shing insists that Hutchison will succeed with 3G, telling investors he is "encouraged by the successful launch of our new 3G operations and confident they will grow rapidly in the fall and Christmas period and create long term value for our shareholders".

Hutchison Whampoa's financial results show that the company has taken a hit from its involvement in third-generation mobile.

Its worldwide 3G operations, which also take in Hong Kong, Sweden, Austria, Denmark and Iceland, made a combined loss of HK$3.895bn (£316m) on a turnover of HK$245m (£19.8m). Much of this loss is due to the cost of starting up new mobile networks, but this means shareholders are eager to see a return on their investment.

Recently, some senior Hutchison officials talked down the original target of reaching one million UK users this year. The company will soon begin offering a Motorola 3G handset in addition to its current line of NEC phones -- and it's possible that prices could be cut, as Hutchison looks to widen its customer base before rival mobile operators launch their own 3G services.

Hutchison Whampoa's overall financial performance was more encouraging. The group -- which also has interests in ports, property, retail and manufacturing as well as telecommunications -- made an overall profit of just over HK$6bn, or £490m.