Europe's 3G Launch Depends On What You Mean By "Launch"
By Gren Manuel, Of DOW JONES NEWSWIRES
Friday August 9, 11:25 am Eastern Time
LONDON -(Dow Jones)- While Europe's mobile operators grapple with the technological complexity of the third-generation (3G) mobile networks, analysts who follow them are having to grapple with something just as complex: what is the definition of "launch"?
It's a question that has moved into sharp focus in the last few days as media reports have repeatedly stated that Vodafone (NYSE:VOD - News) PLC (VOD) is delaying the launch of its 3G networks in the U.K. and Germany, while Vodafone itself says there is no change to its plans.
Declan Lonergan, Director for wireless research & consulting for Europe, Middle East and Africa for Yankee Group says differing definitions of launching a service "is a source of some confusion. There is no consistent, industry- accepted definition."
While Hutchison 3G Ltd in the U.K., controlled by Hutchison Whampoa Ltd (HKSE:HUW.HK - News; H.HUW) is using the word launch to describe the time the first customers start paying in October this year, rival mmO2 PLC (NYSE:OOM - News; OOM) is reserving the word for full commercial services, open to all and with substantial commercial promotion.
Vodafone, meanwhile, has been picking its words carefully. Asked earlier this month when it would launch 3G service, chief executive Chris Gent said that although the company would have networks open for service in October "we will not be promoting it because we've got to make it work first."
Although the real economic returns of operators, whose licenses are for 15 or even 25 years, aren't affected by short delays, the issue is a key one for equities analysts trying to estimate current-year revenues and capital spending for operators, and the level of orders for equipment suppliers.
"This does have an impact on investor perception," says Yankee Group's Lonergan.
Bear Stearns analyst Fanos Hira suggested Friday that Vodafone's slow-burn rollout of 3G could mean GBP1 billion less capital spending in the financial year to March 2003, which would drop straight into free cashflow, boosting it to at least GBP3.5 billion.
Phil Kendall, a U.K.-based director of Strategy Analytics' global wirelss practice, says he's heard phrases such as "soft launch", "commercial launch", " commercial pilot", and even "hard launch" all of which mean that defining when a launch is taking place "is a pretty inexact science."
In some cases, a fuzzy definition of launch may be helpful to operators which may want the option of slowing down their deployment as uncertainty about the availability of handsets continues.
But it also reflects that operators want to roll out the technology slowly to ensure that it works, and find out how customers use it before the big advertising dollars are spent.
Kendall notes that a slow move towards full commercial launch follows the pattern set by operators' last technology step-up, the services based on general packet radio service, or GPRS, a cheap upgrade to existing networks that enabled Internet-style data transfers over the airwaves.
Although mmO2 and some other major operators have had GPRS networks running for around two years, they have only been promoting it aggresively to business customers in the last six months and the real consumer push will come in the run up to Christmas.
The real push for operators in some markets, according to Dave Murashige, vice president of Strategic Marketing at equipment supplier Nortel Networks (NYSE:NT - News; NT), may come in part from regulatory requirements for network coverage and launch dates.
The obligations to launch are, in general, weakly worded to allow operators to offer only a nominal service. Indeed, because of license obligations, Sonera Corp (NasdaqNM:SNRA - News; SNRA) has had a 3G network operating in four of Finland's largest cities since Jan. 1.
The network is described as "open" and "operating", but as yet there are no handsets available. Sonera says launch on a wider scale will come in 2004 and 2005.
But the key threshold is looming in Germany, where 25% of the population must be covered by end 2003 - a major undertaking in Europe's largest country.
"It's important to recognize that license obligations are ticking," Murashige said.
Below is a guide to the current commitments of major operators:
** Deutsche Telekom (NYSE:DT - News) AG's (DT) T-Mobile International (G.TMO): For Germany, a spokeswoman said a commercial service with public availability would "start in the middle of 2003"
In the UK, a spokesman said: "We would aim towards offering commercial service by the end of 2003" - but this was contingent on supply of suitable handsets.
** Hutchison Whampoa-controlled (H.HUW) operations: In the U.K., a spokesman said: "We will have customers in October" who will be generating revenue, but that a move to full, open commercial availability would be phased.
In Italy, a spokesman said internal trials were already underway but couldn't say whether external trials or a full commercial service would be ready by the end of this year.
** MmO2 PLC (OOM) said it was currently planning open commercial services to be launched in the U.K. and Germany "next summer, or in the second half of next year".
** Orange SA (F.ORA) - In the U.K. and France commercial launches, in which the service will be open for fee-paying customers, are currently scheduled for " the end of 2003 and the beginning of 2004", a spokesman said.
** Telecom Italia Mobile (I.TIM)'s spokesman said a service would be launched in Italy in the last quarter of 2002 - but that the definition of launch was internal and external trials. He did not specify when a public service would be available.
** Spain's Telefonica Moviles (NYSE:TEM - News) SA (TEM) said its network in Spain is already operating. However no date has been set for commercial launches and no date will be set until handset availability is more certain.
** Vodafone PLC (VOD): A spokesman said the company would be conducting closed-user group trials in most of the subsidiaries where they had majority control towards the end of 2002, and commercial services would be launched in 2003. The company didn't specify when in 2003 commercial services would be launched.
"Our 3G plans are on track and not delayed," she said.
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