Nortel says it won't become bank to win 3G deals
By Kirstin Ridley Reuters (04/12/01, 2:53 p.m. EST)
LONDON — Nortel Networks, the world's biggest telecommunications equipment supplier, said Thursday (April
12) that it was unlikely to offer credit to telecom operators in return for lucrative European contracts for
new-generation mobile networks.
Pascal Debon, the European, Middle East and Africa president of the Canadian-based giant, said he had talked
with European cellphone groups such as Orange about network contracts — but had no intention of turning "into a
bank" to win them.
Orange has clinched a $3.06 billion loan from its chosen suppliers — Finnish handset heavyweight Nokia, Swedish
network giant Ericsson and France's Alcatel — in return for an order worth $2.04 billion for new French, German
and British third generation (3G) networks.
Some analysts say building high speed new cellphone networks across western Europe will cost debt-laden mobile
groups about $66 billion initially, fuelling speculation that network contracts are likely to depend on an element of
vendor finance.
But Nortel, which last month issued its second major profit warning in six weeks as a U.S. economic slowdown
takes its toll, insisted it would not be frozen out of the European 3G network market by a conservative funding
strategy.
"We are not doing this sort of high level financing," Debon said in an interview. "We are not a bank . . . [but] a lot
of deals are without financing."
Nortel has clinched around $1.92 billion in contracts to build high-speed, third-generation UMTS (Universal
Mobile Telecommunications System) networks in Europe from Britain's BT Cellnet, Spain's Airtel and Xfera,
Germany's T-Mobile and France's Cegetel.
Debon said the company was working on other opportunities as well, noting that winning contracts was
only half of the battle.
"We still have to see who is going to deliver [on time]. The third generation game is very, very open,"
he said.
"I think at least three of us are leading the charge and . . . we'll have to wait until the end of 2002 or early 2003 to
see who is where, depending on effective contracts and delivery."
Financial strain
But Debon is not underestimating the financial strain of UMTS on telecom operators, which spent around $106
billion on licenses and now have to soup up networks which they hope will help yield new revenues from speedy
mobile Internet, data, video and music services.
Debon said he had written to the European Commission with technical proposals that would allow operators to cut
network costs by teaming up to build new 3G networks — a capital expenditure savings method favored in
Germany, Europe's biggest and most competitive telecom market.
"I really think that Europe has established a strong success with 2G [second-generation GSM mobile services]," he
said. "We have a unique chance to repeat this with 3G and we absolutely have to do everything that we can to help
this industry."
Some telecom companies are worried that one unintended consequence of ensuring competition in Europe's 3G
world by forbidding rivals to cooperate may bring some cellphone groups to their knees, or dissuade investment in
one of the few European business areas still enjoying above-average growth.
Telecom companies are facing the rising cost of servicing debt as credit ratings fall along with shares — which have
dropped around 60 percent since last March — amid investor concerns about the financial situation.
In a move to help soothe the fears of investors and telecom operators — many of which still remain partly in state
hands — the European Investment Bank said earlier this month it was in talks with a number of companies about
possibly issuing long-term loans for 3G networks and equipment from this year. |
