Rumor Mill: Hutchison to walk away from 3
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Rumors continue to grow that Hutchison will walk away from its new 3G service, 3. Some speculate that Hutchison will sell portions of the carrier's 3G network off to rivals such as Vodafone or mm02. Thus far 3 has attracted only 25,000 subscribers in the U.K. and 100,000 subscribers in Italy since its launch in March. Last week, 3 cut its prices in the U.K. in a move to boost the service's subscriber growth. The price cut was not received well by the industry, prompting many stock analysts to fear a next-generation wireless price war in Europe. Shares of Orange and mm02 fell by as much as 50 percent in trading last week because of 3's price cuts. Hutchison currently expects its 3G business to be cash flow positive by 2005, something which now seems increasingly unlikely due to the service's poor performance.
bwcs.com
Could Hutchison Walk Away from 3G?
(10/06/2003, BWCS Staff) As 3G handsets finally arrived in shops across the UK, rival operators were considering their response to the drastic price cuts announced by Hutchison 3G last week. According to the Financial Times, both Orange and mmO2 said that they were not worried about the price cuts, which are up to 70% below the UK average, and that service quality and customer experience were more important than price. But their cool reaction did not stop shares in the operators from sliding as markets feared that the European mobile phone industry was headed for a price war.
In Italy, however, Hutchison says it has no plans to follow the strategy of its UK sister company. Instead, it is offering a discount on 3G handsets, which brings down the cost of one of its most popular models, made by NEC, to EUR495.
Some analysts believe Hutchison may pull the plug on 3G if it continues to fall short of expectations rather than let its credit rating slip into non-investment grade. Dilip Parameswaran, director of credit research at Credit Agricole Indosuez, said, "We believe Hutchison would be prepared to walk away from 3G, given the great care it has taken to structure 3G financing separately from the rest of the business."
To date, Hutchison has signed up 25,000 3G subscribers in the UK and 100,000 in Italy, a long way short of its combined target of 2 million for the end of the year. The operator is said to be expecting its 3G business to be Ebitda positive by 2005, which in the light of slow take-up and recent price cuts is looking increasingly unlikely. |
