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New study indicates revenues to cover 3G licensing and network investments in Europedate: June 14, 2001 - source: The $100 billion price tag for European 3G licenses may not be out of line, according to a new, 318-page independent study from Telecompetition, Inc. covering the period 2000 - 2010. Even in Western Europe, where the Wall Street Journal reports 3G infrastructure investments will cost an additional $100 billion, Telecompetition, Inc.'s analysis shows mobile operators will share in a cumulative mobile voice and data market of $1.5 trillion - with cumulative 3G revenues exceeding these estimated capital expenditures by 28 percent. The cost of European 3G licenses has triggered significant belt-tightening among most European wireless operators and raised doubts about the necessity of 3G. However, the overall cost of licenses to date is less than ten percent of Telecompetition's projected worldwide cumulative mobile data revenue of $1.7 trillion. In the important leading edge market of Western Europe, the operators' share of mobile data revenues will be more than $470 billion, over half of which will come from services provided over 3G enabled networks. Telecompetition revenue projections use conservative price assumptions that decline over time. They do not include the less quantifiable benefit of owning scarce spectrum in key, high-growth European markets or a premium price strategy that could be used by some operators. The operators that will benefit most are the global players like Vodafone who can leverage the mobile data experience from high-cost markets and apply it to its other markets. "When PCS licenses were first auctioned off in the United States, many operators were surprised at the high prices they had to pay for some of the license areas," said Jay Kitchen, President and CEO of the PCIA, the organization that helped create the PCS industry. "Users were unfamiliar with the service and the technology was not completely proven. Today, PCS technology in the US has captured over 25 percent of the US mobile market and total mobile penetration has more than doubled in less than four years." Some look at 3G technology in a similar vein. Third generation technology will enable higher-speed mobile access to the Internet, multimedia-enhanced voice, multimedia messaging, location-based services and other new mobile multimedia services. The higher speeds for these new applications plus the sheer volume of new users with lower speed applications will eventually strain the capabilities of other mobile data technologies. Ultimately, 3G will be required to provide the required capacity as well as enable new multimedia applications, according to Telecompetition. Conclusions that people may not want the kinds of services that 3G offers are viewed by Telecompetition as premature. Such conclusions are usually based on end-user surveys showing lukewarm interest in mobile data services, not considering the natural uncertainty users have when questioned about technology and services they have never experienced. Further, higher market entry costs can always be expected in the more attractive markets, like Western Europe, and acquiring a scarce resource, like 3G spectrum, in a high growth market almost ensures sustained market share. "3G license and infrastructure investments have to be viewed in light of the total opportunity," said Telecompetition, Inc. CEO, Eileen Healy. "Our projections indicate that 3G represents a logical network evolution to enable the capacity and speed needed for future traffic demand. Overall I expect that based on the preliminary data that we've analyzed, 3G capital expenditures will be paid back within seven or eight years- a reasonable timeframe for such a large scale infrastructure investment," Healy said. Forecasts for mobile data and other mobile services for Western Europe and 151 other countries are included in the new Telecompetition WORLDWIDE MOBILITY REPORT 2001.
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