3G Startup Needs Cash!

Things at Hutchison 3G UK Ltd., also known as 3, could be going better. The 3G newcomer, still not quite in full commercial launch mode (see 3 Keeps Europe Waiting), has appealed to its shareholders for a £1 billion loan. The responses from two of its owners are lackluster, to say the least (see Hutch 3G Seeks Loans).

NTT DoCoMo Inc. (NYSE: DCM), which owns a 20 percent equity stake in the U.K. operator, has been asked for £200 million (US$320 million). The Japanese company is contractually obliged to hand over the cash "if certain pre-conditions are fulfilled." DoCoMo has said it won't respond to the loan request until mid-April.

In October last year, DoCoMo wrote down the value of its stake in Hutchison 3G UK by ¥126 billion (US$1.08 billion) to ¥39 billion (US$334 million) (see DoCoMo Takes a $4.7B Hit).

KPN Mobile holds a 15 percent stake in the operator, which it wrote down to zero [as in nothing, zippo, zilch] last August (see Hutch Gets the Hump With KPN). 3 is looking for £150 million (US$240 million) from the Dutch company. The KPN brigade says it will take a month to decide whether this is "a valid funding call."

The remaining 65 percent is owned by Hutchison Whampoa Ltd. (Hong Kong: 0013), which is tucked up in bed for the night. It hasn't issued a release regarding any begging bowl activity, but its share of the new cash injection round would be a cool £650 million (US$1.04 billion).

There was nothing lackluster about the response on the phone when Unstrung called 3's offices to ask about the loan requests. No, it was sharp and to the point: "We're not talking about this," snapped communications head honcho Edwardo Brewster. [Ed. note: wasn't he a character in The Beano?]

Brewster seemed a little peeved that KPN Mobile and NTT DoCoMo Inc. (NYSE: DCM) had issued press releases about the loan requests.

Shortly after our call, an emailed statement from our man Brewster hit the Inbox: "3 has begun the rollout of commercial services in the UK and is delivering handsets to customers within the next two weeks. As we begin to enter the next phase of our business, with plans for aggressive growth in the future, in line with the terms of the original shareholders agreements we have approached our shareholders regarding next-stage investment. We have no further announcements to make."

Further calls to 3 regarding the matter, especially KPN's "validity" question, went unanswered.

— Ray Le Maistre, European Editor, Unstrung

lrmobile_castro 12/5/2012 | 12:29:38 AM
re: 3G Startup Needs Cash! Hutchinson has arguably been one of (if not the) most aggressive 3G proponents.

If they go down then so will 3G. This could be ugly.
Slippyhips 12/5/2012 | 12:29:32 AM
re: 3G Startup Needs Cash! Not necessarily....Hutch's backers may get cold feet and 3 could go down in flames but 3G will survive. Much cheaper 2.5G service offerings from O2, Vodafone, Orange etc are more viable and will be more attractive to consumers who should baulk at paying -ú400 for a handset (where are they, BTW?) and -ú50 per month subscription.

Once mobile data use picks up and users can relate it to their lives/jobs more, the market will have evolved to receive 3G (3/4 years?). However, by then Hutch's backers may have sold out 3 - and its attractive IT assets - to one or other of the above to exploit profitably.

3 walks a fine line between seeding the market and disappointing it. This is commonly called being on the 'bleeding edge' of technology.
lrmobile_castro 12/5/2012 | 12:29:02 AM
re: 3G Startup Needs Cash! I can agree with that. I'll bet it will take years to find the "apps" that will actually entice users to do more than voice and SMS with their phones.

Still, If 3 goes so does a lot of wind in the 3G sail and that boat is going to slow to a crawl which will really screw up the vendors.

Ultimately, these vertically integrated behemoths are a thing of the past anyway. The 3G experience will open up their eyes to the new world and force them to change or die.
Reloaded 12/5/2012 | 12:28:07 AM
re: 3G Startup Needs Cash! Surely not - the initial rush to get hold of the ridiculously priced handsets and connections show that the interest is there.

While early adopters are a long way from the mass market, the UK is almost at mobile saturation point and the money spent has to go somewhere, and that somewhere will be on upgrades, eventually to 3G.
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