New 3G software deals are shelved

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The Independent Online

Vodafone has cancelled key contracts with IT companies that were developing software for its new third-generation mobile telephone services. The revelation casts fresh doubt over the telecom giant's planned launch of its much vaunted high-speed internet phone services next year.

The cancellation is believed to have come less than two weeks ago when several software firms were told their contracts had been shelved for at least six months.

In a handful of cases Vodafone was to sign deals with the software developers this week.

Sir Christopher Gent, Vodafone's chief executive, had decided to cut the rollout of third-generation mobile base stations this year from 1,250 to 750. The decision, he said, was caused by a shortage for third-generation handsets, but the slower rollout will also reduce Vodafone's expenditure this year by up to £4bn.

One company understood to be affected by Vodafone's latest cutback is the US software group Inktomi.

The company refused to comment, but well-placed sources revealed that it had been working with Vodafone for nearly a year on a software program that would increase internet download speeds onto mobile handsets. The contract to develop and use the software has now been put on hold until 2001.

Vodafone also refused to comment, but the news is set to do nothing for the City's already shaky confidence in the operator's ability to recoup the billions of pounds it spent on buying mobile licences in Europe.

Vodafone produced more bad news last week when it revealed that 16 per cent of its customers were not using their phones.

This pushed Vodafone from Britain's number one operator to number three position, behind Orange and BT Cellnet, and helped to sink Vodafone's share price last week to its lowest level since 1998.

Britain's mobile operators are not just struggling with their third-generation offerings. GPRS, the forerunner to third-generation services, is to be launched by the mobile operators this year.

But One2One, Britain's fourth mobile operator, has delayed the launch of its GPRS service until next year.

Like Vodafone, One2One blamed the hiatus on handset supplies.

A spokesman for One2One said: "We feel that the available handsets are not right yet. They have not moved on much from WAP.

"We do not feel that the customer experience is good enough. We never committed to a [launch] date, but we were originally looking at later this year."

Stephen Pentland, a partner at Spectrum Strategy Consultants, said it was bad news for customers.

"Mobile users have been delaying the purchase of new handsets because they have heard about the new services like GPRS and 3G. The delays will unsettle the customers," said Mr Pentland.