EU may help mobile phone companies with 3G costs

The European Union's lending arm is to consider plans to offer long-term loans to telecom companies battling to cover the costs of third generation mobile phone networks, the Observer newspaper reported on Sunday.

The newspaper quoted a spokesman for EU Telecommunications Commissioner Erkki Liikanen as saying the proposals to involve the European Investment Bank were at an early stage.

"We have to consider all the ideas that pop up," the spokesman told the Observer, which added that a plan put forward by a member of the European Commission's industry committee was likely to be discussed after Easter.

Europe's telecoms groups took on heavy debt to spend around 110 billion euros on new-generation mobile phone licences last year, chasing unproven returns from high-speed mobile data and Internet services that have yet to be launched.

British Telecommunications has been a notable casualty of the scramble for third generation licences. It paid almost 10 billion pounds ($14.37 billion) for licences in Britain, Germany and the Netherlands alone, pushing its debt up to 30 billion pounds.

Some industry experts say it could be two to three years before proof of returns from new services will convince investors to pile back into battered telecoms shares, while some firms could collapse under the strain of setting up new systems.