December 5, 2002 11:56 AM PST
U.K. wireless carrier suspends 3G plans
Graham Howe, chief operating officer of Orange, said the company will postpone the launch of its so-called 3G, or third-generation, service in Britain until sometime in 2003 in an effort to cut costs. The carrier has also suspended plans to launch the service in Sweden and is delaying offering 3G services elsewhere across Europe, Howe said.
As part of the announcement, Orange said it plans to lay off up to 2,000 employees, or 6.7 percent of its work force. The job eliminations, along with the 3G delays, will boost the company's financial performance, Orange said.
Carriers across the globe are suffering declining revenue; increased competition has forced the companies to drop the price of cellular calls to levels that aren't as profitable. As a result, carriers have been building better telephone networks in a push to offer new features such as Web surfing, game downloads and the ability for customers to work behind a corporate computer network's firewall.
European cell phone providers once were considered ahead of their U.S. colleagues in the race to install faster and better wireless networks. But in the past year, European wireless carriers like Orange have delayed or scrapped their plans. Meanwhile, in the United States, next-generation networks from Sprint PCS and Verizon Wireless are already in operation. "The U.S. is taking the lead," said Keith Waryas, a wireless analyst at IDC.
Orange's primary suppliers for its telephone network equipment--Nokia, Ericsson and Alcatel--will likely suffer as a result of the delays in launching Orange's network outside the United Kingdom, Howe said during a conference call.
Alcatel supplies a relatively small amount of the wireless network gear for Orange, according to an Alcatel representative, but the telecom equipment supplier will likely still be affected. Orange's parent company, France Telecom, is fighting to cut down approximately $70 billion in debt, and Alcatel is one of France Telecom's major suppliers of landline telephone equipment.
An Ericsson representative said Orange's move was expected, and any impact from the delays has already been factored into Ericsson's financial plans. "From our standpoint, we think the effect will be minimal," the representative said.
A representative for Nokia had no comment on the effects of Orange's 3G delays. Nokia is considered to be a major supplier for Orange and has seen its equipment sales suffer as carriers across Europe delay 3G launches.
Orange's delays are the second bit of bad news for the Finnish phone maker. On Tuesday, Nokia told investors that it expects the market for mobile network gear to drop 10 percent next year.