£5bn
lost by European giants as other firms face failure : By JIM STANTON
Deputy Business Editor of Edinburgh News www.EdinburghNews.com
FEARS about the future prospects for third-generation (3G) mobile phone services have grown, following the collapse of Quam, which had not even launched any services.
Two European phone giants, Telefonica Moviles and Sonera admitted that they wasted more than £5billion in a failed attempt to build a 3G operation in Germany.
The first admission of failure in what was supposed to be the beginnings of a bright new dawn for mobile communications, could spark a wave of further closures and asset writedowns by other operators.
In the UK, ambitious telecoms operators forked out £22.48bn just to secure operating licences. Billions of pounds more are needed to create the network infrastructures.
Analysts believe that the France Telecom-owned Orange - which yesterday announced a 12.9 per cent rise in sales to £4.95bn - and mm02’s German operations together with Hutchison Whampoa’s operation in Britain are most at risk of failure. All are understood to own small operators with scant prospects of securing sufficient subscribers to achieve profitability.
The collapse of Quam - a 57:43 joint venture between Spain’s Telefonica Moviles and Finland’s Sonera - came just six months after its commercial launch.
Quam’s departure from a competitive scene may mean good news for Vodafone and mmO2, the British companies that have German 3G licences.
But it may also spook investors, causing further questions to be asked about future returns.
In the UK, a spokesman for 3,which is controlled by Hong Kong’s Hutchison Whampoa, said it had "no intention" of writing down the value of its investment.
As yet, 3 - whose operating licence cost its owners £4.4bn - has no customers and is not expected to launch any sort of service until November.
Orange, and its parent France Telecom, are also under pressure with regards to their German affiliate, Mobilcom. Both parties are trying to take control of Mobilcom, which also has no network although it does bill about five million customers on behalf of other network operators.
Graham Howe, the chief operating officer of Orange, said: "We do expect to see more consolidation in Germany. We always thought the market would drop from the current six to four and we’re seeing the beginning of that."
And mmO2, the BT spin-out which owns the number four operator with 3.9m customers, has to prove it can deliver. It needs to grow its eight per cent market share to 12 per cent before it can confidently expect a return on capital, analysts said.
Kingston Communications has seen first quarter core profits surge to £8.6m, from £2.8m, on the back of increased sales to businesses.
