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Friday, 23 March, 2001, 16:51 GMT
Vodafone shuns 3G reforms
man on mobile phone
The costs of advanced mobile phones are weighing heavily on the telecoms sector
Vodafone has shunned an initiative to help telecoms firms cut the costs of building the high-speed mobile networks needed for the next generation of phones.

Competing mobile phone firms are pushing to establish a shared infrastructure in order to cut costs and help reduce debt-mountains.

We will fight against any cooperation that will depart from licence conditions

Juergen von Kuczkowski
D2 Vodafone
A proposed link-up, aimed at shaving 20-30% off the cost of setting up the new high speed mobile network, is expected to be unveiled in the coming weeks.

But D2 Vodafone, the German cellphone arm, is not willing to share its network with its competitors, even for the sake of cutting costs.

The huge cost of 3G licences - which will allow mobiles to provide access to the internet or near-TV quality video - is the key reason why telecoms stocks have plummeted on the world's stock markets over the last eighteen months.

Damaging competition

"Such a cooperation would be a brake on competition," said D2 Vodafone boss Juergen von Kuczkowski at the Cebit trade fair in Germany.

"We will fight against any cooperation that will depart from licence conditions," he added.

The auction winners
Deutsche Telekom
Mobilfunk (Vodafone-Mannesmann)
E-Plus (Hutchinson Whampoa, KPN)
Viag Interkom (BT, E.On, Telenor)
MobilCom (with France Telecom)
Group 3G (Sonera, Telefonica etc)
Six mobile phone companies won 3G licences in Germany at a total cost of more than 50.5bn euros ($46.1bn, 30.4bn).

It is the smaller companies that are suffering most from the huge capital expenditure demanded from the 3G auctions, whereas Vodafone has weathered the financial pressures better than some of its rivals.

And Vodafone may have already invested more in its network hardware than the smaller firms.

If Vodafone agrees to share its network, it risks presenting its rivals with a better position in the market.

"From the moment when infrastructure is shared with another operator, competition ceases.... we do not want our competitiveness to be threatened," said Mr von Kuczkowski.

Telekom enthusiasm

But the co-operation package has been welcomed in principle by other leading companies such as Deutsche Telekom's T-mobile subsidiary.

We do not want our competitiveness to be threatened

Juergen von Kuczkowski
D2 Vodafone
And Viag Interkom, the German mobile phone group that is part owned by BT, has said that it hopes to reveal a cooperation proposal with its rivals in the coming weeks.

Deutsche Telekom paid the highest price for its licence, and was forced to absorb a 1.06bn euro loss in the last three months of last year.

But Deutsche Telekom has also voiced doubts about whether regulatory hurdles can be overcome.

Regulatory concerns

Sharing a network reduces competition and risks lifting the lid on consumer prices, therefore needing to win regulatory clearance.

The regulator has already indicated that the operators should submit plans for cooperation.

And some companies are also sceptical about whether the licence conditions can be changed retrospectively.

The six telecoms companies who paid up to buy the 3G licences in Germany are Deutsche Telekom, D2 Vodafone, E-plus (Hutchinson, KPN etc), Viag Interkom (BT etc), MobilCom (France Telecom etc) and Group 3G (Telefonica etc).

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See also:

27 Apr 00 | Business
The auction: Winners and losers
03 Jul 00 | Business
Phone auctions left on hold
29 Jun 00 | Business
Warning hits telecoms shares
21 Mar 01 | Business
Tech firms gather in gadget heaven
21 Feb 01 | Business
Telekom profits take 20% hit
07 Mar 01 | Business
Vodafone bullish on mobile future
09 Feb 01 | Business
Vodafone shares hit two-year low
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