Nokia wins $1.1 bln German network order
By Sarah Knight
MUNICH, July 10 (Reuters) - Viag Interkom, Germany's number four cellphone group, said on Tuesday that Nokia would build its new generation mobile phone network in a deal sweetened by a small loan from the Finnish group.
The German arm of British Telecommunications Plc said it chose Nokia for a five-year contract to build the network in Europe's top telecoms market in a deal which sources close to the situation said was worth $1.1 billion.
Four days after Nokia said it had stopped supplying equipment to Telsim after the Turkish group failed to repay part of a vendor-financing loan, the sources said the Finnish group had pipped Germany's Siemens and Canada's Nortel to win the German mobile network order.
Viag Interkom declined to divulge the size of the order -- which includes penalties if Nokia fails to deliver on time -- but confirmed that it included a "small amount" of vendor financing.
Nokia said later in a statement the value of the initial part of the deal was 400 million euros ($341.9 million) but it declined to give the full value. It denied granting vendor financing but said it had agreed to "deferred invoicing terms" for Viag.
"We have selected this single vendor to obtain the best solution from both a technical and financial point of view," Keith Cornell, Viag Interkom's acting chief executive, said in a statement.
"By the end of 2005, approximately 80-90 percent of the population will be able to use our network," he added.
Nortel, the world's biggest telecoms equipment supplier, has said it is unlikely to offer credit to telecoms operators in return for European contracts for high-speed, third-generation (3G) cellphone networks because it is not a bank.
In the hope of fresh revenue streams from speedy mobile Internet and data services as cellphone growth in Europe reaches saturation point, mobile operators have taken on vast debts to spend 120 billion euros ($103 billion) on 3G licences. They now face heavy costs to build networks and develop services.
Loss-making Viag Interkom is hoping its 3G network, coupled with a roaming and partial network sharing deal with Deutsche Telekom, will help it leapfrog Dutch-controlled rival E-Plus to take the third spot in the German market.
Viag is hoping to overtake KPN Telecom's mobile phone unit by focusing more on lucrative business customers as it readies for a "soft" launch of 3G handsets at the end of 2002, with a full commercial launch in the first quarter of 2003.
3G, or UMTS (Universal Mobile Telecommunication System) networks, allow cellphones to offer high-speed Internet, data and video services.
JOSTLING FOR GERMAN POSITION
In a six-player market dominated by heavyweights D2, the German arm of Vodafone Group Plc and Deutsche Telekom's T-Mobil unit, analysts expect the battle between the country's smaller players to focus on taking the third spot.
However, it is likely Viag Interkom will be loss-making for several more years -- and continue to be a drain on the resources of BT, which in May launched a record 5.9 billion pound cash call to help slash a 28 billion pound debt pile.
Although BT's investments in Viag Interkom totalled around 12 billion pounds ($17 billion) this year, the British group was forced to announce in May a 3.0 billion pound charge for an expected delay in building a German 3G network.
Viag Interkom, which in May saw its chief executive and chief operating officer quit amid a row over strategy with BT, said it may not appoint a new CEO until January 2002 -- although Cornell, who stepped into the breach last month, said candidates were currently being interviewed.
BT plans to demerge its mobile operations BT Wireless, which include Viag Interkom as well as British, Irish and Dutch operations, by the end of the year in a move interpreted by the market as hoisting a "for sale" sign over the business.
12:58 07-10-01
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