O2 blames Oftel ordered price cuts for 3G delay

Mobile operator O2 is to delay in the rollout of its commercial 3G services until the second half of 2004.

Mobile operator O2 is to delay in the rollout of its commercial 3G services until the second half of 2004.

The move came in immediate response to a ruling by the telecoms regulator Oftel that it intended to force mobile tariff price cuts on the operator.

Chief executive of O2 Peter Erskine said: "We are determined to take the necessary action to recover the lost revenue, and protect our operating margins and cash flow. As part of this we will review all of O2's UK investment programmes and, in particular, the timing and scale of our 3G rollout."

Oftel has ordered mobile operators to reduce charges from fixed lines that terminate on their networks by 15% from 25 July, with three further reductions of 15% each in the period up to March 2006.

Gartner analyst Jason Chapman did not believe the news would significantly hamper the rollout of 3G in the UK.

"The reduction in interconnection tariffs is a good opportunity for O2 to announce a delay in its rollout, though it is only a slight delay. Vodafone still plan for later this year and Hutchison for the first half of this year."

"Having said that, Gartner does not expect there to be a significant take-off until 2005 and businesses should be planning to use GPRS for the next two or three years for mobile working."

Oftel claimed the cuts could save fixed-line customers £190m a year to 2006. However, Vodafone plans to seek a judicial review of the price cuts.

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