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3G licensees face new cash crunch

Next-generation wireless services will bring in paltry revenues for next four years, says report
Written by Matthew Broersma, Contributor on

In the same week that Japan's NTT DoCoMo announced it would delay its full rollout of 3G wireless services, a new report from MMXI Jupiter Communications is predicting that revenues from next generation services -- once they get off the ground -- may be far less lucrative than network operators had hoped.

Next generation services include the GPRS high speed, always-on mobile networks that are currently rolling out, as well as the coming 3G services. However, 3G, despite the hype, "will not dramatically change the market situation" before 2005, according to the report. "Only between 2003 and 2005 will 3G devices penetrate the market and the main difference from today's handsets will be better screens. Bandwidth will be improved but it will still not be enough to stream music or video," it says.

Revenues from mobile advertising, shopping and other interactive services in Europe will rise from £116m last year to £8.1bn in 2005, the report predicts. By comparison, operators Vodafone, Orange, BT Cellnet, One2One and Hutchinson 3G spent £22.5bn last year on 3G licenses in the UK alone. Industry analysts estimate the cost for all European 3G licences will top £100bn, with a similar expenditure to follow on building 3G infrastructure.

Total revenues from mobile phone subscribers will hit £124bn by 2005, but the lion's share will come from voice calls, according to Jupiter. Compared to this figure, revnues from interactive services will be miniscule. The report predicts that it will take two years for technical issues to be resolved to the point where interactive revenues take off. "Only in 2003 will revenues exceed £1bn but, divided among all players, this revenue is small," it says.

The European telecoms industry continues to suffer from bad news related to next-generation wireless, following the high hopes that led them to spend so much on licences and plunge themselves into debt. GPRS, expected to enable more usable mobile data services, has faced delays and glitches. Most recently DoCoMo said it would delay full 3G services because of technical issues, leading to fears that it will take longer than expected for European carriers to begin making revenues from the expensive technology.

British Telecom subsidiary Manx Telecom, on the Isle of Man, said this week it is on track to launch 3G services next month -- making it the first to do so. The Isle of Man services were helped along by the island's small size -- and the fact that the island's government granted a free 3G licence.

Find out more about what's coming up in the wireless world with ZDNet UK's Special Report: The Road to 3G.

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