Analyst Predicts End of Hutch 3G By End 2006
By Carlo Longino, Fri May 07 16:30:00 GMT 2004

Hutchison Whampoa could pull the plug on on its as yet unsuccessful 3G carriers by the end of 2006, an investment analyst has said.

Mark James of investment bank Nomura says Hutch's 3G business will lose $2.7 billion this year, but more importantly, that it's unlikely the companies will survive. He told Reuters, "We find it hard to see how H3G can ever achieve an economic return on capital, and our valuation of the company is a negative HK$63 billion (-$8 billion)." His bank's estimates for Hutchison Whampoa as a whole are now assuming the conglomerate will ditch 3G by the end of 2006.

A Standard & Poor's analyst said last month he didn't think 3 Italy, the most successful of the 3 group of carriers, could survive, echoing the sentiments of many others. 3 may have been the first mover, but it certainly hasn't been the best -- what handsets it could supply at first were bulky and overpriced, and it ran out of stock frequently, hurting uptake.

Though 3 now offers much better devices than its initial selection, it's unable to charge a premium for them or its services over competing 2G or 2.5G networks. In the UK, it took to slashing prices for voice calls in an effort to compete, a move that illustrated the difficulty it was having in attracting users to its 3G data and content services. It's also hurt by the fact that unlike incumbent operators, it doesn't have revenue-generating 2G networks already in place to subsidize its 3G efforts.

Hutch has spent about $22 billion so far on its 3G efforts, and is estimated to be blowing through $12.8 million a day, so it really wouldn't be a surprise if the company's shareholders forced the company to pull out -- the only question now seems to be when.