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The Dutch company said on Tuesday that the USD8.79 billion write-off includes its 15 percent stake in "3" in the UK, Hutchison Whampoa's 3G company, which owns one of Ireland's 3G licences. Currently the Hong Kong giant owns 65 percent of the UK licence, along with NTT DoCoMo of Japan's 20 percent. KPN said its 15 percent Hutchison 3G stake is non-core and the company is selling all of its non-core business units.
In making this move, KPN is not alone. Last month Spain's Telefonica wrote-off EUR4.9 billion of its 3G assets in Italy and Germany and Finnish telecom Sonera has written-off its 3G assets in Germany. Following that announcement, Orange, which is owned by France Telecom, asked regulators in Sweden to allow it to delay its 3G rollout. Sweden's Tele2 did the same in Norway and then said it was going to stop investing in 3G services there, claiming that there was not sufficient demand to justify the investment.
Throughout Europe, telecoms have invested USD150 billion in 3G licences and infrastructure over period of three years. But in that time, these same companies have earning almost nothing from 3G since UMTS services are only currently available on the Isle of Man. And the write-offs by KPN and others suggests that many operators will never accrue a significant return on their massive cash outlays.
This environment has led to further speculation that T-Mobile, Orange, mmO2 and Vodafone will be forced to follow suit and write-off their 3G investments. The fact that Vodafone is reluctant commit to 3G in Ireland suggests that it too is concerned about the viability of the service.
But some analysts see the field in a different light. It is thought that while there may be more write-offs, it will be only the weaker players that will be forced to abandon these assets. To date, operators have only written-off assets in Europe where they had small market shares, with little prospect of improving that share.
These same analysts point out that KPN's move on Monday follows this trend, in so far as it did not write-off its 3G investment in Holland, its home market. And Vodafone, which is facing the most speculation about its 3G plans, holds the number one or number two position in most of its markets, and subsequently its 3G service may in fact be more profitable than competitors' services.
But with the abundance of licences in Europe, including four in Denmark for just 3.8 million mobile users, and four in Switzerland to sell services to its 5.3 million users, industry watchers agree, there is likely to be to further consolidation in the European 3G market.
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