LONDON — Dutch mobile network operator KPN Mobile and equipment suppliers Nortel Networks and Ericsson are the immediate losers from the decision by Group 3G, one of the six license holders to operate UMTS services in Germany, to abandon plans to start a 3G network next year. The announcement increased the uncertainty in Europe about the short-term viability of 3G services.
The main shareholders in Group 3G — also known by its intended brand name, Quam — Telefonica of Spain and Finnish operator Sonera, said they have written off the £5.3 billion ($8 billion) they paid for the license just two years ago. Telefonica has also written off the investments it has made in 3G licenses in Switzerland, Austria and Italy, taking a $4.7 billion charge in its first half results, while Sonera, which had already reduced its exposure to third-generation mobile networks, has now written off $4.2 billion to cover its investments in Germany and Italy.
Ahead of launching its own network, Group 3G had piggy-backed on E-Plus Mobilfunk's GSM networks and built up a subscriber base of nearly 200,000 by last month. It said it was looking to move these subscribers to other German operators.
The other German 3G license holders, E-Plus, T-Mobile (Deutsche Telekom's mobile subsidiary, which also controls VoiceStream), Vodafone, 02 Germany and Mobilcom, still maintain they will launch 3G services by early next year.
The Telefonica/Sonera group is not allowed to sell its license to other operators, so it may have to be returned to the government. One stipulation in the license is that an operator must cover 25 percent of the population by the end of 2003 through its own infrastructure However, a statement from Group 3G suggests it would keep the license but only invest when the partners see that UMTS is commercially viable.
Nortel and Ericsson have between them won an estimated $600 million of contracts to start building the Quam 3G network. Ericsson was to supply basestations and act as the major contractor to commission the Quam network, while Nortel said in March it would provide the Group 3G with a radio access equipment.
KPN admitted it could no longer count on about $750 million in savings it had earmarked for sharing the cost of building up its 3G infrastructure in Germany with Telefonica.
Other European network operators have slowed the pace of investment in 3G, but the Sonera/Telefonica move was the first time operators have made large scale write-downs.
