Two 3G operators in the UK 'destined for bankruptcy'

Mobile commerce hasn't lived up to the hype, and two mobile operators could be in real trouble if 3G is not a big hit with the public
Written by Graeme Wearden, Contributor

The mobile industry was warned on Tuesday that two of the UK's 3G licence holders could go bust by 2004 because of the slow growth of m-commerce.

The grim prediction was made by the keynote speaker at London's Mobile Commerce World Europe, Ken Blakeslee -- senior executive at Wireless Works, a venture capitalist group. Blakeslee fears that the slow growth in the popularity of m-commerce revenues will be fatal for some operators, some of whom have spent tens of billions of pounds winning licences to roll out next-generation mobile services.

"Some network operators paid dearly for their 3G licences. I think as many as two of them could be bankrupt by 2004, just in time for the other 3G operators to buy up their licences," said Blakeslee.

Blakeslee would not say which of the UK's five operators he thought were most likely to fail, but hinted that Hutchison 3G, which owns a British 3G licence but does not already operate a GSM network in the UK, could be at the greatest risk. "It looks like some of the new operators have the ability to succeed, but it's unclear whether they will manage to achieve the subscriber numbers they will need to survive".

Despite predictions of doom, Blakeslee believes there is still venture capital for m-commerce companies. "Companies with long-term strategies and short-term revenues exist now, so there are great opportunities to invest out there," he said. However, Blakeslee cautioned that a good understanding of both the technologies involved and the turbulent stock market would be needed.

The auction of licences to operate a 3G network in the UK -- which will give a mobile device a high-speed connection to the Internet -- took place in April 2000.

In an attempt to increase competition, the British government reserved one 3G licence for a mobile operator that did not already operate in the UK. This licence was won by Hutchison 3G, which is backed by Canadian company TIW. The other 3G licences were won by MmO2 (formerly BT Wireless), Orange, Vodafone and One2One. Other experts have predicted that at least one of the UK's five 3G licence holders will fail.

The UK's 3G auction raised over £22bn -- much more than expected. At the time, the mobile industry believed there were massive amounts of money to be made from offering compelling goods and services to mobile phone users.

Since then, the failure of WAP, the slump in the technology sector, and fears that 3G networks and handsets could only arrive years later than expected have led to fears that mobile telecoms firms have spent much too much money on 3G licences, with potentially crippling consequences.

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