Vodafone cuts back spending on 3G network base stations

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Vodafone is scaling back expenditure on building third generation mobile phone networks because of fears the necessary new handsets could be delayed. In the UK, the company is now planning 750 new base stations this year, rather than the 1,200 originally envisaged.

New handsets able to operate on existing and 3G technology were due to become widely available in the second half of next year but Vodafone believes this may not now happen until 2003, which could force yet another postponement of Vodafone's planned 3G launch.

Vodafone's chief executive, Sir Christopher Gent, said: "There is, despite what some manufacturers may say, a slip in the availability of handsets.... There's no point in putting your foot down on the accelerator [for rollout]." The company had planned to spend £5bn this year on 3G infrastructure but analysts estimated that this may be cut by £1bn.

Vodafone's shares closed down almost 5 per cent at 141.25p, further weakened by the bleak outlook for the mobile phones market reported yesterday by Ericsson. The Swedish company, which is focusing on providing telecoms infrastructure equipment, said it is now expecting the market for mobile phone systems to be broadly flat in 2001. It had previously estimated growth of 5 per cent to 15 per cent. Ericsson posted a second quarter loss of 5.3bn Swedish kronor (£343m), before massive restructuring charges of Skr15bn.

Like its rival Nokia earlier this week, Ericsson said that lack of visibility meant it had given up trying to forecast the timing of any rebound in its sector.

"Now uncertainty has increased even further, particularly in the United States and Western Europe regarding the duration and severity of the current unfavourable market environment," Ericsson said. "As a consequence, we refrain from specific guidance for the third quarter and the full year."

The company said many wireless network operators were reducing their capital expenditures by running existing networks at higher utilisation levels and deferring network expansion.

For handsets, the manufacture of which Ericsson now outsources, it estimated the total global consumer market this year would be 400 million to 440 million units ­ down from its previous forecast of 430 million to 480 million.