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Technology Stocks : LAST MILE TECHNOLOGIES - Let's Discuss Them Here
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To: Warren Gates who started this subject12/25/2000 6:35:31 PM
From: axial   of 12823
 
Successful bidders could fold in telecoms battle

Analysts are warning that crippling costs could destroy companies which have won the right to develop the next generation of mobile phones.

They could face the humiliation of being snapped up cheaply by rivals who decided not to bid for third generation (3G) mobile-telephone licences.

Next year will be a critical period for the volatile telecoms sector, with many big names finding their size is really a weakness.

The auction of 3G licences across Europe may have cost the winners dearly. In July, BT blamed its 38% fall in profits over the previous three months on the £4 billion cost of securing a licence.

This month, Vodafone added to the pressure on BT by buying a 15% stake in Japan's third largest telecom firm Japan Telecom. The £1.5 billion deal is the second largest investment in a Japanese company by a foreign business, and Vodafone's stake now matches that of BT.

Justin Urquhart Stuart, of Barclays Stockbrokers, says: "The traditional landline telephone businesses are caterpillars that need to go through their chrysalis stage to become butterflies. Vodafone was born a butterfly.

"What BT needs to do is develop its mobile business and leave its old landline business behind, in the same way as Transco left behind its gas business."

Urquhart Stuart says BT may also face a tough time from industry watchdog Oftel. "BT will continue to get its backside kicked by Oftel because it's a lumbering old landline network that is operating as a quasi-monopoly and will continue to get broken up.

"Confidence in companies such as Vodafone will return providing they don't suffer from credit crunch, because all telecoms companies will have difficulties with their levels of borrowing after 3G mobile licence auctions - that was the most astonishing game of corporate poker ever seen."

Urquhart Stuart adds: "Over the next few years we may see some casualties as companies that have bought the licences fold because they still have to build the infrastructure. These may be picked up cheaply by companies that didn't take part."

ananova.com
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