|re: Comments on FT's Latest Jab at 3G (BT/mmO2)|
>> BT's 3G Plans In The Spotlight
September 13, 2001
BT's plans for the build-out and capabilities of its third-generation mobile networks have come under scrutiny following the alleged leak of pre-listing documents being prepared for mmO2, the U.K. telco's wireless division.
Influential business newspaper The Financial Times claims a document seen by its staff casts doubt on a number of operational and service provision issues surrounding the construction of 3G networks. The resulting article on FT.com, British Telecom raises concerns on 3G technology, suggests the operator will be issuing a "stark warning over the financial risks of third generation mobile phone technology" when the demerger of mmO2, due on 19 November, goes ahead.
But questions have been raised about the interpretation of the draft document. BT would say nothing other than that the final draft of the report would be issued on 24 September and that "We are not making any comment in the meantime."
Analysts went further. Stephen Pentland, a partner at Spectrum Strategy Consultants, said this was an investor document, and that BT was "taking a traditionally cautious" view. The focus at present was on "the caveat section that the investors expect - other parts of the document will look at the upsides and the commercial and partnership plans. Many of the details listed come as no surprise - this is a buyer beware process, and looks like a fair assessment of the worst-case risks," Pentland told Total Telecom. "It is to be hoped that BT has a team that can outperform the average case scenario, let alone the worst case scenario," he added.
Meanwhile, Philip Crate of Bear Stearns noted that the Financial Times article stated: "The wording of the 'investment considerations' section of the prospectus is much tougher than that contained in the earlier Orange prospectus. In particular, the report points to warnings that the existing second generation network of radio masts is unlikely to be sufficient for 3G technology, while the construction of new masts could be hampered by tougher planning restrictions." However, he wondered what the fuss was about. "Both are true but neither point should surprise the investment community," wrote Crate.
Most significantly, Crate pointed out that the need for network mast build-out has always been recognized. "All 3G operators in the U.K. will encounter substantial capex over the next few years building out their coverage. In this regard, we estimate that each 3G licence holder in the U.K. will need to build about 30,000 base stations to provide nationwide coverage which is a function of the higher frequency of UMTS. BT's soon-to-be de-merged wireless unit has around 10,000 base stations. Therefore mmO2 could have to triple the number of sites in order to provide comparable coverage to its GSM network.
"However, the actual increase in base stations is likely to be less than our estimates. Better technology will enable mmO2 to better exploit their current infrastructure, while the recent network sharing agreement reached between BT and DT in the U.K. and Germany should also reduce the number of base stations that mmO2 will need to construct to provide national coverage ... With regard to planning permission issues, while it is clear that local opposition to building base stations in populous areas shows no signs of abating, nevertheless national government appears to be taking a more pragmatic approach to this issue.
In addition, "On the technology front, concerns about the availability of handsets and software are not new issues and certainly the situation has not greatly deteriorated since Orange issued its prospectus in February. Discussions we have had with equipment suppliers in Europe suggest that the manufacturers are ready to meet demand but the take-up of equipment is uncertain because some operators themselves are taking a more cautious approach about the timing of providing commercial 3G services," stated Crate. <<
The FT article:
- Eric -