3G Powers Renege on Deal

Hutchison 3G UK and Crown Castle cut site deal by more than half, but who's to blame?

October 13, 2003

2 Min Read
3G Powers Renege on Deal

Hutchison 3G UK Ltd. and base-station site owner Crown Castle UK Ltd. have slashed the value of their original deal for network rollout across Britain by more than half.

Under the terms of the original agreement -- struck back in February 2001 -- Hutchison agreed to lease space on a minimum of 4,000 sites owned by the antenna tower company. The 3G carrier intended to use the sites to install base-station equipment for its nationwide 3G network, launched to a skeptical customer base earlier this year (see 3 Keeps Europe Waiting).

Both companies have now reneged on this deal, stating that Hutch will only offer a “1,350 minimum site commitment” over a four-year period. According to Jay Brown, VP of finance for Crown Castle International Corp. (NYSE: CCI), “almost 900 sites are up and running” at present.

Brown refuses to point the finger of blame at the 3G startup, insisting that Hutch’s network rollout remains on track. “This does not affect the total number of sites Hutch will deploy,” he tells Unstrung. “It has more to do with recent adjustments at Crown Castle than it does with Hutchison.” (See Crown Castle to Amend Credit and Crown Castle Amends Deals.)

Analysts are less convinced, given the carrier’s disappointing subscriber numbers and persistent rumors that it may sell its network to a rival player (see Hutch Bullish on Targets and Hutch UK Clings to Network). The 3G startup has also cut voice tariffs in a last-ditch effort to lure customers away from existing 2G service providers (see 3 UK Touts Pricing).

“A large part of their service base is voice. If the major source of traffic on your network is voice, you don’t need as many base-stations to support the network,” says Gartner Inc.’s principal analyst for mobile communications, Jason Chapman. “It could also be that the sites that Crown Castle were offering didn’t match where they wanted to roll out their base stations. I hesitate to say they have cut back their 3G investment, but it certainly alters it.”

Hutchison -- honoring tradition -- did not return calls by press time.

White Castle also declined to comment.

— Justin Springham, Senior Editor, Europe, Unstrung

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