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Last Updated: Friday, 25 April, 2003, 13:25 GMT 14:25 UK
UK 3G firm loses 150m loan
Close up of 3G phone

Britain's only operational 3G mobile network has been dealt a blow after its partner, Dutch phone firm KPN, turned down a request for a 150m loan.

The 3 network, controlled by Hong Kong conglomerate Hutchison Whampoa, had asked for the money to pad out its funding for the massively expensive build-out of its mobile phone network.

But KPN, whose relationship with Hutchison has been stormy, said the agreement under which it owns 15% of 3 does not require it to lend the money.

"KPN Mobile considers that the request for funding... is a purely voluntary invitation to fund," the firm said in a statement.

NTT DoCoMo, the Japanese mobile giant which holds 20%, has already stumped up the 200m requested of it, and Hutchison Whampoa said it would increase its own loan to 800m from 650m to make up the difference.


KPN's decision does not, at least for the moment, leave 3 out of pocket.

Strategically, it must be a blow for 3
Dirk Bout
Cartagena Capital

But observers believe it could foretell a potential parting of the ways.

"Congratulations to KPN for making the decision," Dirk Bout, director of research at Munich-based Cartagena Capital, told BBC News Online.

"KPN is believed to be considering getting into bed with MMO2 [the UK-based mobile operator], and that means you've got something of a hiccup" in the relationship with 3."

Third-generation networks are so expensive to build that the companies involved need overseas partners, and losing KPN would not be a good omen for 3, he added.

"Strategically, it must be a blow for 3."

Rocky relationship

KPN's 3G history is chequered, especially where Hutchison is concerned.

The Dutch company, which is partly state-owned, wrote off its 15% stake in 3 and offered it for sale last year, as part of an attempt to deal with the overhang of its late-1990s attempt to become a big player in pan-European telecoms.

Part of that push involved paying 8.4bn euros for a German 3G licence, in partnership with Hutchison and US carrier BellSouth.

But Hutchison dropped out right after the licence auction, leaving what many traders feel is some residual bitterness - a favour KPN now seems to be returning, they said.

The 3 network looks likely to get a 200m cash injection from Japanese mobile giant NTT DoCoMo to help it reschedule a key loan.

Japanese newspapers carried the story on Friday, even though DoCoMo said it had yet to make its mind up about lending the money to Hutchison 3G, which operates the 3 network.

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