Voodoo's $24 Billion Writedown?

Vodafone Group plc (NYSE: VOD) is set to follow rival mmO2 plc in writing down the value of its mammoth 3G license assets later this year, according to U.K. newspaper reports over the weekend.

The Business newspaper suggests the British-based company will begin to depreciate the value of its assets by £13 billion (US$24 billion), following fears the world’s largest carrier has made a huge over-investment in third generation technology.

Financial sources told the newspaper that 3G UMTS (Universal Mobile Telecommunications System) license investments will weigh heavily on the value of Vodafone shares in the coming months.

“Vodafone should be careful what it wishes for, as when it finally launches 3G later this year, the amortisation of its £13 billion license costs will start to kick in for real,” commented Nomura Holdings Inc. analyst Mark James.

A spokesperson for Vodafone declined to address the reports.

Any such writedown will confirm market belief that Europe’s 3G license auctions in 2000 were a financial debacle that have hindered the development of the region’s cellular industry.

In May 2003 mm02 wrote off £5.9 billion ($10.9 billion) in its full-year results, attributable to the fall in value of the company’s 3G licenses (see 3G Farce Stings mmO2).

Vodafone has already pushed back the commercial launch of its European 3G operations to the second half of this year, two years later than originally anticipated at the time of the auctions (see Euro Carriers: 3G's Not Ready).

UMTS is the 3G upgrade to the GSM standard, using a wideband-CDMA air interface on top of the GSM core network to increase voice capacity and boost data-transfer speeds to a possible 2 Mbit/s.

— Justin Springham, Senior Editor, Europe, Unstrung