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O2 Passes the Buck

Blames regulatory decision for delay in 3G

January 22, 2003

2 Min Read
O2 Passes the Buck

The U.K.'s four mobile operators were hit where it hurts (in the revenues) today when U.K. regulator Office of Telecommunications (Oftel) announced it was imposing a 15 percent cut on the termination rates they can charge this July, and then similar reductions in the following three years. Ouch!

Vodafone UK and O2 Ltd. were quick to issue statements (see O2 Reacts to UK Regulator and VOD Seeks Ruling Review).

While the imposition of these cuts will undoubtedly hit revenues hard –- analysts at Lehman Brothers believe 2004 earnings before tax'n'stuff (EBITDA) will be hit by between 5 and 8 percent -- O2 seized its chance to announce a 3G rollout delay and blame it on the ruling. The operator says the resulting revenue squeeze has forced it to "delay the planned launch of commercial 3G services until the second half of 2004."

Yeah, right. The original intention was to launch services around the end of 2003, so the operator is taking an extra nine to 12 months and blaming it on Oftel.

And we're not the only ones cynical enough to think that way. "Everyone is looking for an excuse to delay 3G," says Lars Vestergaard, research manager at IDC's European wireless program. "O2 knows it probably won't get punished by the financial markets for saying this just now."

Then the IDC man polished off his crystal balls and looked into the murky near future. "I don't think this decision to cut the termination rates is a done deal. This is not set in stone. The operators will fight this. This is very bad timing -- the carriers need this cash right now. I think you might see some compromise." And with that, he disappeared into the mist, laughing wildly at the wireless antennae poorly disguised as oak trees.

— Ray Le Maistre, European Editor, Unstrung

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