Hutch's Weekend Hangover
Hutchison 3G UK Ltd. had a weekend to forget, following rumors in the British press that parent company Hutchison Whampoa has recalled commercial director Keith Bradley to Hong Kong after widespread problems with the carrier’s launch of next-generation services.
It's reported that Bradley has been axed from his current position and will return to Harbour Ring, a toy company that plays a critical role in the Whampoa empire through the manufacture of, amongst other things, soft toys and plastic figurines.
Hutchison 3G spokesman Edward Brewster says Bradley was not sacked, but confirms that he is set for a new role. “It is wrong to suggest that his move is linked to the progress of the business, but he is moving to Hong Kong,” he tells Unstrung.
Bradley's move into the cuddly toy industry [ed. note: and the cuddly SARS epidemic] comes as KPN Mobile has said it will refuse to grant Hutchison 3G further funds (see KPN Mobile Nixes Loan). KPN Mobile, which holds a 15 percent stake in the operator, has already publicly written off a bunch of money it had previously invested in the Hutchsters (see Hutch Gets the Hump With KPN).
In March, Hutchison 3G appealed to its shareholders for a £1 billion (US$1.59 billion) loan to help convince its bankers to support the business and its ambitious targets, despite delays in rolling out the high-speed, multimedia wireless service (see 3G Startup Needs Cash!). Last week NTT DoCoMo Inc. (NYSE: DCM) (holding a 20 percent stake) agreed to fund the company with a £200 million ($317 million) loan, a move widely expected, in light of the two companies' recent partnership to develop and promote 3G services (see DoCoMo Stumps Up £200M for 3 and Hutch, DoCoMo Team on 3G).
Brewster declined to comment on the impact KPN’s refusal would have on the company’s European rollout of 3G, claiming that “it is a shareholder issue.” He did however add that parent company Hutchison Whampoa, which owns 65 percent of the company, will fund the shortfall, providing a loan of £800 million ($1.2 billion) as opposed to its original promise of £650 million (£1 billion).
Today’s rumors lend further support to stories that all is not well at Europe’s first 3G network operator. The carrier has delayed the launch of its U.K. service on numerous occasions (see 3 Keeps Europe Waiting), and its first users have experienced handover problems when moving from a 3G coverage area back to a traditional 2G zone. The company is still targeting two million subscribers in Europe by year-end, but the numbers leaked so far are only in the tens of thousands.
Despite Hutch’s troubles, telecom consultancy Current Analysis has offered what it terms a "slightly positive stance" on the carrier’s chances of success in Europe, where it is rolling out networks in Austria, Denmark, Ireland, Italy, Sweden, and the U.K. A recent report from the analyst group highlights the decision to sell dualmode handsets as part of a roaming agreement with O2 Ltd. (NYSE: OOM) as a good thing. The researchers also feel comfortable with its prospects, given the fact that it's following in the footsteps of mobile operator Orange SA (London/Paris: OGE), a company that was itself a market virgin before becoming one of the most successful technology brands of the last decade. Orange was initially owned by Hutchison Whampoa, and a number of Hutchison 3G’s top executives used to work for Orange, including managing director Dr. Colin Tucker [ed. note: managing director or cockney rhyming slang?].
Michael Ransom, senior analyst at Current Analysis, believes that success for Hutchison 3G is a case of when, not if. “3G UK has all of the ingredients to repeat the success of Orange in building a brand and educating customers as to its unique 3G proposition,” he asserts.
— Justin Springham, Senior Editor, Europe, Unstrung