Orange says mass market for 3G is still at least three years away

The mobile phone operator Orange warned yesterday it did not expect third-generation mobile phone services to become a mass-market proposition until 2006.

Graham Howe, the deputy chief executive who is leaving the business this year, said Orange was still planning a test launch of its 3G services this year and a commercial launch next year but he cautioned that a number of issues still needed to be ironed out before 3G would become a mass-market proposition. The technology, for example, needed to be more reliable while the handsets needed to be cheaper with better battery life. "Only when all these things come together does it make sense for us to put the pedal down fast on 3G,'' Mr Howe said.

While he said he had not lost faith in 3G Mr Howe admitted: "The time for it [3G] has not yet arrived.''

The shift came as Orange reported a loss of €4.54bn (£3.13bn) for 2002, after accounting for exceptional items, compared with a loss of €4.5bn a year before.

Sales were €17.1bn, up from €15.3bn. Orange took a €5.2bn charge to cover exceptional items including a €3bn charge to cover the write-down in the value of its 26.6 per cent stake in the Italian telecoms company Wind and a €1.3bn write-down of its Dutch business. There was also a charge of €252m to cover the cost of pulling out of Sweden and a further €254m charge to cover group restructuring. Stripping those charges out, Orange made a profit of €633m – its first ever annual net profit – compared with a loss of €885m in 2001.

The company also said yesterday it had cut net debt by six per cent to €5.9bn and predicted it could be debt-free by 2005. "On current trends, by 2005, Orange could be debt free,'' Mr Howe said. He also said yesterday that Orange's stake in Wind was "not a strategic asset'' and said the company would look at selling it "at some point''.

He also reiterated the belief that there would be consolidation in the industry in the Netherlands but pretty much ruled out the possibility that Orange would buy assets from rival operator O2. "The likelihood of us wanting to buy that business is quite small,'' he said, noting that "at the moment'' Orange could not see a business case for a deal.

Mr Howe also said that Orange was preparing to file its documents with a judge about the Competition Commission's planned regulation on mobile phone calls. Rival T-Mobile, owned by Deutsche Telekom, and Vodafone, are also planning to file their objections.

Orange's new chief executive, Solomon Trujillo, cast aside Orange's old mantra of a wire-free future yesterday as he hinted the group were looking at ways of integrating fixed and mobile telecoms services.

Mr Trujillo, who took up his new post on Monday, said he would continue to focus on improving Orange's financials but was also keen to expand services such as allowing customers to have one phone number for both fixed and mobile. "Things have changed in the whole industry,'' he said, adding: "We need to think about where's the next wave of growth coming from.'' He said he would provide more details of his strategy in May but insisted it would not require "massive amounts of investment''.

"Orange has been playing the first stage game of wireless – that was a smart thing to do,'' he said, adding: "Orange has to move to the next game.''