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Tuesday, 3 April, 2001, 11:46 GMT 12:46 UK
Nokia seeks to hurry 3G launches
Nokia WAP phone
Nokia: Building networks as well as handsets
Nokia, the world's largest mobile handset maker, has secured contracts to build third generation networks in France, Germany, Australia and the UK worth 2.5bn euros (1.55bn, $2.21bn).


3G promises to usher in a revolution and change people's lives

Colin Tucker
MD, Hutchison 3G
But the deals also include a large element of 'vendor financing' where Nokia effectively loans the network operator cash in order to pay for the construction of the network.

Adding up Nokia's series of deals reveals that it is loaning telecoms firms more money that it has won through its new contracts.

Investors are concerned about the large amount of money which Nokia is lending to the debt-laden telecoms firms, and its shares were hit hard.

In the first few hours of trade, Nokia shares fell 6% to 25.6 euros, a fall which also sparked a wider telecoms stock slump.

Observer scepticism

Analysts see Nokia's new commitments as an attempt to kick start the building of third generation mobile phone networks and revive demand for new advanced mobile handsets.

Nokia's deals (euros)
Contracts won
Hutchison - 500m
Optus - 490m
Orange - 1.5bn
Total - 2.5bn
Loans agreed
France telecom - 2bn
Hutchison - 740m
Total - 2.74bn
The new improved mobile services will eventually allow mobile phone users to watch videos and have always-on internet access from their handsets.

The deals are also part of a fast growing trend within the telecoms sector to try and share the costs of building 3G networks.

This is because the vast amounts paid for 3G phone licences has prompted financial difficulties for a number of big telecoms firms as their debts have mounted up at the same time as their share prices have been falling.

There has also been increasing scepticism that the costs of the 3G licences, and the huge amounts needed to build networks, can ever be recouped.

Multiple contracts

Nokia says that its willingness to provide loans to telecoms firms struggling to pay for the development of the networks is in order "to support the introduction of mobile networks and multimedia services".

In the last two days, Nokia has announced deals to supply core equipment for 3G networks in France, Germany, Australia and the UK.


We will be able to provide an unmatched, coherent, industry-leading 3G solution for Europe and the world

Nokia's Ukko Lappalainen
In the UK, Nokia signed a $440m (309m, 500m euros) contract to supply Hutchison 3G with equipment for its third generation mobile phone network in the UK.

In return, Hutchison will receive 460m of bridge financing from Nokia.

In Australia, the Finnish firm has won the contract for the sole supply of the network equipment from Australia's Cable & Wireless Optus for an estimated $430m.

And Nokia then secured a 1.5bn euro contact with Orange, a deal that will see it building a network for Orange in the UK, Itineris in France and MobilCom in Germany.

Nokia will lend Orange 2bn euros in return.

Ericsson's foothold

"With the combined strengths of Nokia's delivery capability and technology innovation, we will be able to provide an unmatched, coherent, industry-leading 3G solution for Europe and the world," said Ukko Lappalainen, Vice President of Nokia Networks.

Competing handset operator Ericsson has also won a slice of the action in Germany, with Nokia sharing its equipment supply deal with its competitor.

According to press reports, Sweden's Ericsson was also bidding for the deal with the UK's Hutchison, but lost out because it offered a less aggressive loan package.

Its share price has plummeted nevertheless, also losing more than 6% of its value in Tuesday morning trade.

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See also:

02 Apr 01 | Business
Nokia to build UK 3G network
05 Jan 01 | Business
Mobile groups to pay hefty price
05 Dec 00 | Business
Nokia: 'Best is yet to come'
20 Oct 00 | Business
Ericsson's mobile woes
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