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Hard times seen for European wireless

Industry Standard

(IDG) -- Rising competition and the high costs of implementing third-generation (3G) wireless networks will lead to a major shakeout in Europe's mobile telecommunications industry, according to a new report from Forrester Research in Amsterdam.

Mobile carriers' operating profits will disappear by 2007 and take six years to return, said analyst Lars Godell in a statement late last week. He added that he expects consolidation to leave only five major players standing in Europe by 2008.

The companies Godell listed as certain winners of the shakeout are Vodafone Group, Deutsche Telekom's subsidiary T-Mobile International, France Telecom and its U.K. subsidiary Orange, and British Telecommunications' mobile operator BT Cellnet.

An additional fifth "wild card" company is also likely to survive, the report added, listing as possible contenders KPN Mobile, a subsidiary of Dutch telecommunications company Koninklijke KPN, Spain's Telefónica, Telecom Italia and Japan-based NTT DoCoMo.

Deutsche Telekom spokesman Hans Ehnert greeted his company's winning score cautiously. "The mobile market will continue to grow, but not as rapidly as in recent years," he said. "We're reaching a certain saturation level, which we've seen here in Germany, too. That affects the industry as a whole, it's in the nature of things." INFOCENTER
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Asked whether his company foresees further acquisitions as the market continues to consolidate, Ehnert declined to give details. "We would just be speculating ... we're planning the takeover of [U.S. mobile operator] VoiceStream, and we have holdings in Eastern Europe, that's no secret."

Not surprisingly, potential losers rejected Godell's findings.

"I may as well go home now, apparently, let's give up," said Edward Brewster, a spokesman for the company, which is majority owned by Hong Kong's Hutchison Whampoa, with additional stakes held by NTT DoCoMo and KPN Mobile. Brewster said that Godell "didn't contact us on this report -- this report was done, as I understand it, purely by talking to existing European mobile operators, and so it doesn't relate to us."

He continued, "We are a pure 3G player. All we're going to be focused on is providing the best, obviously, 3G UMTS service, and so we feel it's slightly an advantage, because we don't have the problems other operators have regarding transferring customers [of older mobile technologies] to our network."

Finland's Sonera also rejected the idea that the industry is headed for a shakeout. "I do see a consolidation going on, but I don't see anything revolutionary going on," said Project Manager Nina Siitari of the company's Sonera International Mobile division. "Consolidation has been going on during last year and the year before, it's nothing new."

She added that smaller players can share network building costs without completely merging operations. Sonera joined consortia to bid in several European 3G license auctions and was awarded a joint license in Germany along with Telefónica.

Asked whether her company is considering further cooperation on network building, she said, "We are discussing with partners, so we are open for this kind of thinking. We have specifics, but it's not open information."

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(The Industry Standard)
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Forrester Research, Inc.
Vodafone Group
France Telecom

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