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Wednesday, 5 December, 2001, 10:32 GMT
MMO2 admits further 3G delay
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MMO2 wants to be Britain's first 3G operator
Mobile-phone firm MMO2, on the eve of launching trials of its high-speed third-generation (3G) service, has admitted that 3G would be available nationwide six months later than planned.

Patchy availability of 3G mobile handsets would probably push its full service launch into early 2003, MMO2 chief executive Peter Erskine said.

"Our guess is that we get volumes towards the end of 2002,"Mr Erskine told reporters.

"3G doesn't become significant in terms of users until 2003."

MMO2, which was spun off from British Telecom in mid-November, is activating its trial 3G network on Wednesday in the Isle of Man.

After almost six months of delays, the firm will hand out 3G phones to around 200 Isle of Man consumers and businesses.

For companies like MMO2, much is riding on the launch of 3G services, which potentially allow subscribers a vastly wider range of interactive services - and therefore promise more sources of revenue for network operators.

In contrast to its parent, British Telecom, MMO2 is at least remaining - so far - popular with investors.

In a note to clients, Credit Suisse First Boston said it had a "strong buy" rating on the company, saying its should be trading at a minimum of 100p.

By 1013 GMT, MMO2 shares were up nearly 7% to 84.3p.

"We believe the market is understimating the extent to which MMO2's new management team intend to shake up the company," the broker said.

Handset hold-ups

MMO2, which aims to become the first UK operator to offer 3G services, is investing 4bn in the technology.

The company hopes to begin an island-wide service on the Isle of Man next spring, pending a successful trial.

But as elsewhere in the world, 3G plans have been dogged by a shortage of appropriate handsets.

Many prototype 3G phones lack sufficient battery life and software capability to be commercially successful, operators fear.

In Japan, the first country in the world to have a fully-fledged 3G network, launch was repeatedly delayed by handset glitches.

Consumer complications

And concerns over the likely extent of consumer demand have weighed on mobile operators' share prices this year.

Many operators paid billions of pounds for 3G licences, in the expectation that the service could bring exponential growth in revenues.

But in early trials, consumers have proven unwilling to pay for more than the most basic - and therefore low-margin - interactive services.

The potential of the business has been further hit by the economic downturn in the past few months.

The result has been a rash of deals among operators to share the burden of building the new networks which 3G will require.

MMO2 is expecting to save about 1.2bn over 10 years thanks to such deals, particularly in Germany, the company said.


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