PricewaterhouseCooper's Clark on Mobile License Costs: Comments
By Christine Harper
London, June 29 (Bloomberg) -- The following are comments from an interview with Graeme Clark, partner in the telecommunications practice at PricewaterhouseCoopers, about the prospects for phone companies that have bought, or are seeking, licenses for so-called third-generation mobile phone services, which will carry data faster than existing services. He spoke as Ericsson AB, the world's largest market of wireless network equipment, said industry growth may slow because of the prices that European phone companies have to pay for the permits.
``The values of the licenses are to do with three things: defending your existing value, buying an option on the service proliferation that 3G offers and a simple capacity gain.''
``In the U.K. penetration and daily usage of (existing mobile services) is about one-third of what you see in most developed markets, so there's a pretty compelling point of view that there's a scarcity value attached to (the third-generation) frequencies. And so that provides a certain surety to the cash flows.''
``The issue about protecting the customer base is an important one. None of the existing operators can afford to have their business cannibalized by new operators.''
``That leaves the big unknown about just what demand there will be for these new services and how they will be priced and whether people have overpaid for the value attaching to that option. For certain companies I think this has now become an act of faith.''
``With a company as successful as Orange, the evolution of (third-generation) is just the next logical step and given their history I would be very skeptical about naysaying that.''
``Every time we read of an astronomical amount being paid, we roll our eyes and think how can you justify that? But when you retrospectively take a view, you think how could we have been so conservative?''
``My watchword would be don't jump to the conclusion, potentially fatal from an economic point of view, that the technology will work instantaneously and without risk. It's still very difficult if you're a regular cellular user today to go a week without dropped calls and fade-in and fade-out. So some of the more extravagant claims for functionality are likely to take a few more ye |
