Spanish mobile operator Xfera will delay investment in its 3G network for a year.
Spanish new entrant 3G mobile operator Xfera has said that it is considering going into hibernation, delaying E300 million of planned investment and delaying the launch of services until the end of 2003. The company, backed by France’s Vivendi and Finland’s Sonera, also said it was frustrated that the Spanish government had denied its request to run 2G services.
No wonder Xfera is suffering. When it applied for the 3G license, most believed that the technology would be available either now or at least by early 2002. But it now looks unlikely that any commercial 3G service will launch in a major European market before the end of next year at the earliest. In the meantime, Xfera is entirely dependent on its banks and shareholders.
Xfera denies reports that the move is an ultimatum to the government to grant it a 2G license. Nonetheless, without a network of its own – and in the face of strong unwillingness from incumbent operators to allow it to operate as a mobile virtual network operator – Xfera is not only left without any revenues, but also has no chance to build a customer base.
It’s hard to tell whether Xfera’s hibernation will affect government policy or not. But the move gives a clue towards its shareholders’ state of mind. Sonera has already scaled down its 3G interests in Europe: it abandoned its license in Norway, and is reportedly planning to sell its Baltic interests to Sweden’s Telia. Vivendi created a storm of publicity this week after delaying payment on its French 3G license; many believe the company ultimately plans to leave the telecoms arena and focus on content.
In short, while Xfera recently denied it was up for sale, it looks like its shareholders may take a different view in the medium term – particularly if it doesn’t get a 2G license. While finding a buyer might not be the world’s easiest task, it’s possible that France Telecom/Orange will be interested. Given the minimal values currently being placed on 3G licenses, however, the price paid would not be high.
