BT warns of massive 3G costs
By Ian Lynch [15 May 2001]
BT has warned shareholders that it may have to spend between £15bn and £20bn to run third-generation (3G) mobile internet services in the UK, Germany and The Netherlands over the next five years.
The UK's second largest telco, which is around £28bn in debt following an ambitious expansion plan, is currently seeking investment through a three-for-10 shares rights issue to the tune of £5.9bn. It recently unveiled restructuring plans to eventually reduce its debts by the same amount that its 3G commitment looks likely to cost.
In the prospectus for the rights issue, the telco warned that the development of 3G could "require a further investment of up to £10bn over a five-year period".
However, a BT spokesman was quick to point out this morning that the figure quoted was the maximum the company thought the bill could come to.
He reiterated recent estimates that BT would spend £2bn to £3bn in each of the trio of European countries it holds licences for. As BT has committed to paying around £9.5bn in licence fees, this would bring the total cost of launching and developing the networks to between £15bn and £20bn.
Operators are gambling heavily on the attractiveness of multimedia mobile internet services to consumers, but are not expected to make profits for many years.
Claire McCarthy, consulting director for wireless at Ovum, commented: "3G was never going to be a short-term investment. It is a medium- to long-term investment and they should make a profit within the 20-year period of their licences. However, it's unlikely that BT can make 3G profitable within the next five years."
Once BT and other operators have invested the many hundreds of millions per year needed to get 3G networks up and running with attractive services, costs are expected to fall to the low hundreds or even tens of millions per year.
McCarthy also warned, however, that BT was in for more pain before launching 3G thanks to software problems and the availability of working handsets.
"These problems are significant and could push back the launch of 3G services until 2003," she said. "[Spain's] Telefonica, which along with BT originally planned to launch at the end of 2001, has already said it will wait until 2003."
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All the 3G sucks news is getting rather boring, time to quit beating the poor thing? |
