Would-be 3G operator goes bankrupt

Finnish telecommunication operator Sonera Corp. and Enitel AS of Norway announced last week that they have shut the doors of their jointly owned third generation (3G) communications subsidiary Broadband Mobile ASA, but this might not be a harbinger for similar companies.

Additionally, Sonera returned its 3G mobile telephone license to the Norwegian government and plans to take an 18 million euro (US$16.1 million) write-off, the company said in a statement on Friday.

"This is the first time a company has returned its 3G license, but I think this is a one-off case that is particular to Sonera since the company finds itself with such a lack of funds," said International Data Corp. (IDC) analyst Paolo Pescatore on Monday.

Sonera's decision to return the 3G license was due to its inability to secure a similar license in Sweden, making its planned pan-Scandinavian network impossible, Sonera said. The fact that Broadband Mobile is to be declared bankrupt will not have an effect of Sonera's other 3G investments, the company said.

Sonera and Enitel each own half of Broadband Mobile and paid 200 million Norwegian kroner (US$22.2 million) for its 3G license in October of last year, Sonera said. In total, Sonera invested 18 million euros in Broadband Mobile, the company said.

For its part, Enitel estimated it has invested 137 million kroner in Broadband Mobile, and has outstanding claims totalling 100 million kroner related to the sale of Broadband Mobile's operations, which Enitel will write off in its second quarter, the company said.

"Sonera has been trying to sell itself for awhile and its current refocus is a consequence of its inability to fund its various projects. This may affect the development of 3G in Norway since there are only two operators there, but mainly, this is a situation that is Sonera specific. Sonera is basically a small Scandinavian operator, but we can't get away from the fact that the networks are struggling to fund the new technologies," Pescatore said.

The value of 3G licences has plummeted since last year and even the largest telecommunication companies, such as Vodafone Group PLC, are announcing the delay of 3G networks. But according to Pescatore, 3G will work simply because the companies have already invested too much in the new technology.

"Basically, 3G has to work. The networks first must roll out GPRS (General Packet Radio Service) -- or 2G -- and make sure that they get those services right, but though its been slow and there is only one GPRS handset on the market now, I think it's on track to make a significant appearance on the corporate market sometime next year," Pescatore said.

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