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Technology Stocks : Alcatel (ALA) and France
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To: pat mudge who wrote (2060)6/29/2000 7:05:00 AM
From: zbyslaw owczarczyk  Read Replies (1) of 3891
 
Ericsson warns on 3G cost
Shares slump after president warns that 3G
costs will hit equipment makers
June 29, 2000: 6:21 a.m. ET

LONDON (CNNfn) - Swedish telecom equipment maker Ericsson AB warned Thursday that the
high cost of licenses to operate next-generation mobile-phone services could dampen profit
growth in the sector and force equipment makers to take on additional risk.

The auction of five third-generation (3G) licenses in Britain last month for $35.5 billion forced
the industry to reassess the cost of building networks as other European countries prepare to
award their own franchises. The 3G system will allow companies to provide high-speed data
transfer and Internet access through cellular phones.

Ericsson President Kurt Hellstroem said in an interview with Swedish newspaper Dagens Industri
that while the high license costs would not frustrate expansion of the new services, "more creative
solutions to financing" will have to be found.

"In principle I had the opinion that the auction of mobile licenses was quite sound, but the costs
proved too high," said Hellstroem, adding that network operators would "certainly" seek to pass
some of the higher-than-expected costs on to equipment manufacturers, while growth in the
number of mobile-phone users could be crimped if operators set high charges to access them.

Ericsson officials stressed that the comments were not a profit warning, though the company's
shares slumped 7.5 percent to 168.8 Swedish crowns in Stockholm. Nokia, the world-leading
maker of mobile-phone handsets, fell 6 percent to 51.50 in Helsinki and French rival Alcatel
(PSGE) was down 6 percent at 65.40 in Paris.

Ericsson has signed a deal to provide the infrastructure for Vodafone AirTouch's (VOD)
new-generation services in Britain and is already building a 3G network in Finland. Vodafone
paid almost $9 billion for its license after a six-week auction that raised about seven times as
much in bids as the government initially estimated.
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