By
Rico Ngai and Alison Leung 
www.Reuters.com
HONG KONG (Reuters) - Conglomerate Hutchison says its third generation mobile network will launch in Britain and Italy in October but users will suffer dropped call problems.
Group managing director Canning Fok told reporters in a telephone conference that Hutchison's 3G network will be the best in the areas where it provides coverage but dropped calls are inevitable.
"There will be dropped calls but we don't think dropped calls are a problem since every network has dropped calls," he said.
Dropped calls can occur when users travel from areas covered by 3G networks to those that are covered by 2G networks, said Fok. Hutchison's 3G networks will initially cover about 50 percent of each market when they are launched, he said.
COMPETITORS DROP OUT
Hutchison, controlled by Asia's richest man, Li Ka-shing, is among the most bullish investors in the commercially unproven technology with plans to spend as much as US$16.7 billion (10.7 billion pounds) on 3G in Europe by 2005.
The announcement by Spanish telecoms operator Telefonica SA
last week to pull out of the 3G markets in Germany, Italy, Austria and Switzerland to cut costs is a good sign for Hutchison, said Fok.
"One less competitor is better for our business," he said.
Analysts agreed. "That will be a good thing to be honest. The more people to drop out the better for Hutchison," said Morgan Stanley Dean Witter analyst Rob Hart.
Fok said Hutchison has signed 10-year pacts with mmO2 in Britain and Telecom Italia Mobile in Italy to provide Hutchison's users with second-generation service when they are outside Hutchison's 3G coverage area.
Third-generation networks allow for graphics and sound-rich data applications to be accessed via mobile phones.
Fok said Hutchison's 3G networks will have 3,500 cell sites in the UK and about 2,200 in Italy in October.
Hutchison hopes to sign up between 5,000 and 10,000 users in the first month in each market, he said.
Hutchison aims to have 6,000 cell sites in each of the two markets by the end of 2003, which will cover about 80 percent of the two markets, he said.
FULL COVERAGE UNLIKELY
Fok said Hutchison will not necessarily stick to the original plan of building as many as 10,000 cell sites in each of the two markets to provide 100 percent coverage because the cost will be too large compared to the returns it will earn from the small number of widely scattered users in remote areas.
"We expect about 90 percent of our business will be coming from those (covered) areas," said Fok.
The company has said it hopes to enlist 1.5 million 3G users in each of the two markets.
Fok said 3G handsets will probably sell in the UK and Italy for less than the US$2,000 (1,280 pounds) which Hong Kong users can expect to pay when the service is launched in the city.
He said Hutchison is now at a "hectic and nerve-wracking stage" of testing both the handsets and networks to be ready for the October launch.
Hutchison plans to offer 3G services in Australia, Austria, Denmark, Hong Kong, Ireland, Israel, Italy, Sweden and the
UK.
Shares in Hutchison closed 3.7 percent higher at HK$56 on Monday. They had dropped 5.26 percent in the last month through Friday and 20 percent in the last three months.
