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UK price cut ruling affects 3G rollout

July 24, 2003

The High Court ruling last month demanding British mobile phone operators to cut charges for cross mobile calls by around 50% over the next three years has affected the business strategies of UK’s 3G licence holders.

Mobile operators took the British telecom regulator to court as it proposed in January to slash prices of cross mobile calls. The price cuts will cause financial impact on operators battling in an already competitive market and hence regain back their investment in 3G networks.

mmO2, UK’s fourth biggest operator to hold a 3G licence, planned to launch commercial 3G service early next year but has refused to rule out any further delays because of the regulator’s decision. mmO2’s chief executive Peter Erskine said “nothing is set in stone” after the government’s intervention to force price cuts. Because of the expected fall in revenues from the decision he said the company “won’t be investing hundreds of millions” on 3G and the rollout “will be a slow process.”

Chief executive of Orange, Solomon Trujillo, said the operator had planned a test launch of its 3G service late this year and a commercial launch by mid-2004. He admitted because of the ruling to cut price, “the time for it (3G) has not yet arrived” and the government’s judgement “does not help our cause.” He carried on and said "Today's revenue is what enables 3G investment, without that I don’t think we can see 3G becoming a reality this year."

A spokesman from Vodafone, the world’s largest voice carrier, said the decision will not affect the company’s 3G launch date by the end of this year and added “we have no plans to delay it any further” but the decision by the regulator was "fundamentally flawed".

T-Mobile, a cash strip operator, has not been very active in its 3G rollout plans. The company would rather try to squeeze more cash out of existing networks than launch 3G mobile services.

3 UK, the first 3G service provider in the UK, will be unaffected by the judgement because the company already offered the cheapest cross mobile rates in the UK, hence the decision does not apply to the company.

The UK market in general is not very interested in 3G technology and Hilary Cook from Barclays Investment said 3G technology was “not that exciting”.

Stephen Pentland, wireless analyst at Spectrum Strategy Consultants in London, said the decision by the competition regulator to reduce how much they charge consumers on cross mobile calls “will have some impact on the UK being a slower 3G country than others."

 


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