Ipse spending cuts pile on 3G pain in Europe
news.ft.com
By Fred Kapner in Milan
Published: January 29 2002 19:34 | Last Updated: January 29 2002 19:51
Europe's efforts to develop third-generation mobile telephony
are expected to receive another blow on Wednesday when
Ipse, a 3G venture in Italy partly owned by Telefónica of
Spain, will cut spending plans.
Ipse's board is likely to approve a plan that finances the
venture just enough to keep the company afloat and avoid
breaking covenants with the Italian government, which would
have forced Ipse to lose its 3G licence.
Most of its 600 employees are expected to be laid off, people familiar with the project
said.
Telefónica, which owns 46 per cent of Ipse, joined up with Finland's Sonera and
several Italian investors two years ago and agreed to pay E3.3bn for the 3G licence.
By keeping Ipse on a financial life support, Telefónica and other shareholders can
avoid writing off their investment while hoping that public demand for 3G networks
eventually grows enough for Ipse to become a viable business, analysts said.
After spending more than E100bn ($87bn) to acquire licences during the past two
years, most European phone companies have been scaling back development plans
for 3G.
Last year, Sonera handed back its licence in Norway and a small Spanish operator,
Xfera, froze investment in its 3G plans.
Once promised for this year, most 3G networks allowing continuous internet access
and multimedia services over handheld devices are planned for late 2003 or 2004.
Ipse faces a particularly difficult task because it is a start-up venture with no existing
client base or phone services, analysts said.
In addition, Italy's mobile phone market, the second-largest in Europe, is nearly
saturated and is dominated by former monopoly Telecom Italia and Omnitel, a unit of
Vodafone.
Those two companies and a third incumbent, Wind, have said they plan to slowly
build up 3G networks.
The only group hoping for a quick start in Italy with 3G is Hutchison Whampoa, the
Hong Kong conglomerate.
Its Italian venture, H3G, wants to launch a 3G service this year in several large cities.
Ipse's board meeting comes two days after phone companies submitted bids to buy
all or parts of Blu, the smallest and newest of Italy's five mobile phone operators.
Blu's key shareholders, including British Telecommunications, last year decided the
Italian market was too crowded to be able to make money.
Blu lost an estimated E500m last year.
Ipse will continue to operate with a drasticlly reduced staff and will hold on to its license. |
