European 3G mobile services suffer further setbacks

A fresh wave of delays in rolling out third-generation networks and phones across Europe threatens to create still more...

A fresh wave of delays in rolling out third-generation networks and phones across Europe threatens to create still more uncertainty in an already unstable telecoms market.

The latest company to stall is Germany's Vodafone D2, which has decided to push back commercial 3G service from the second half of this year to an undefined time in the first half of 2003 or even possibly later.

Only the day before Vodafone's announcement, Orange, the wireless subsidiary of France Télécom, asked the Swedish government for an extra three years to build a network capable of providing coverage to 8.3 million people instead of the initial 8.9 million promised.

Orange has had problems with obtaining base-station permits, equipment that failed to arrive on time, questionable demand for wireless data services, and financial markets that have turned on 3G operators.

The day before the Orange request, Tele2 asked the Norwegian government to ease its requirements for 3G rollout. The operator said it would not make any further investments in its 3G operations in Norway, citing high costs and uncertain profit prospects for the technology in the next year and beyond.

Just over two weeks ago, Spain's Telefonica and Finland's Sonera decided to pull out of Germany altogether.

Telefonica, which had also put its 3G expansion on hold in Austria, Italy and Switzerland, said "significant changes in the marketplace from a competitive, technological, financial and regulatory perspective" prompted the draconian move.

The decision of the Spanish and Finnish operators to write off their €8.5bn (£5.4bn) investment in Germany is expected to trigger other write-downs and withdrawals across the European telecoms market. Increasingly it looks as if only the big and rich operators will survive Europe's 3G battle.

Vodafone D2, Germany's second largest mobile operator, blamed handset suppliers for the delay, citing dissatisfaction with various performance features, such as call handover from network to network.

The company's phone suppliers, Motorola and Nokia, "have not been able to keep agreed timetables, delaying again and again features and handsets", von Kuczkowski claimed.

Licence holders for 3G are required by law to meet a series of rollout specifications. In Germany, for instance, operators must provide 25% coverage of the population by the end of 2003 and 50% by the end of 2005.

The problem with calls being dropped in 3G networks is known in the industry, but has not kept some operators from delaying commercial service.

Last month, Canning Fok, group managing director of Hong Kong's Hutchison Whampoa, admitted that customers could suffer dropped calls when the company launches its commercial service in Italy and the UK in October.

Dropped calls, he said, could occur when users travel from areas covered by 3G networks to those covered by GSM (Global System for Mobile Communications).

For its part, Vodafone 2 in Düsseldorf is putting a brave face on the situation. Von Kuczkowski claimed that it was unimportant if the service launched a couple of months later than planned.

Vodafone D2 is in an "intensive testing phase", with plans to allow large customers and employees to use the service in the first half of next year before taking it commercial, a company spokesman said.

Demand for high-speed wireless services is growing steadily, the spokesman claimed. Vodafone D2 has 200,000 GPRS (General Packet Radio Service) customers and around 15,000 MMS (Multimedia Messaging Service) users.

The handset situation with 3G, according to the spokesman, is similar to what happened during the launch of GSM networks in the early 1990s. The networks were ready but the handsets were missing, prompting cynics to dub GSM "God Send Mobiles".

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