Vodafone Group Plc, Europe's largest phone company, will cut investment in building networks for faster mobile phone services this year because of possible delays in the delivery of advanced phone handsets.
The company will have about 750 base stations in the UK by the end of this year, down from its previous target of 1,200, spokesman Jon Earl said in an interview. As a result, Vodafone will spend less than the ?5 billion (US$7.1 billion) it planned on building networks this year.
"The cut could be as much as ?1 billion," said Louisa Green-acre, an analyst at ING Barings with a "buy" recommendation on the stock. "It's positive that they're not wasting money building a network to be ready next year when there's no chance of there being any handsets."
Vodafone spent ?13 billion on new wireless permits last year and will spend a further ?10 billion over the next four years building networks across Europe. The company plans to share those costs with other operators, lowering its investment in building masts and installing other equipment.
"We're hedging our bets," Earl said. "We're taking a prudent view on our capital expenditure. Vodafone is still focused on launching services in the second half of 2002, but that's dependent on the availability of dual-mode handsets." The Newbury, England-based company may not introduce faster services until 2003 due to possible delays in the delivery of handsets, the Wall Street Journal reported earlier, citing an interview with Chief Executive Chris Gent.
"It's the first time Vodafone's come out and said third-generation isn't going to happen next year," Greenacre said. "Vodafone's been firm until now saying it'll be on target to launch third-generation in 2002 and I'd be amazed if anyone believed them."
Libertel-Vodafone, the Netherlands' second-biggest mobile-phone company that is majority-owned by Vodafone, cut its 2001 spend for building faster networks by 25 percent earlier this year, spokesman Bert Brinkman said in an interview.
Libertel will spend 20 million euros (US$17.5 million) on faster networks this year, 60 million to 70 million euros in 2002, and 75 million in 2003, Brinkman said.
Libertel is also in talks with the four other Dutch mobile phone operators, including Royal KPN NV, to share the costs of building networks, Brinkman said. Dutch telecom regulator OPTA and the Transport Ministry today agreed to allow companies to work together to reduce costs, Dutch newspaper Het Financieele Dagblad reported.
Ericsson, Siemens AG, Nortel Networks Corp and Nokia Oyj are building Vodafone's new networks. Nortel reported a loss of US$19.4 billion yesterday, one of the biggest in corporate history, and said second-quarter sales fell 36 percent amid slack demand for phone equipment. Nokia said sales in its network unit fell 2 percent and operating profit declined 16 percent.
Vodafone's shares fell 4.6 percent on Friday, or 6.75 pence, to 141.25 pence.
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