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Germany

A Delayed Revolution

Two years ago, when phone companies adopted UMTS as the new standard in mobile telecommunication, it was regarded as a technological revolution. Today the next generation in cell phones is still in its infancy.

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It's a long ways to go before UMTS technology hits the market

Two years ago, German telephone companies paid the government a total of some 50 billion euro in license fees for the new mobile connectivity standard UMTS. At the time of the purchase, UMTS was all the rage in mobile phoning.

Billed as a technological hyper-revolution for cell phones, the Universal Mobile Telecommunications System allows for data transmission at about 14 times the speed of the current state of the art protocol GPRS – and promises to be a stunning 160 times as fast as de facto standard GSM.

There's only one snag: Contrary to earlier announcements, the general public in Germany won't even see the first UMTS units until next year.

Delayed launch

One by one, Germany’s major telecommunication companies announced they would have to postpone the launch of UMTS services. Instead of being ready for the market by the start of 2003 as stipulated by the government at the time of purchase, the mobile phone providers have pushed their start days back several months to mid-2003. They claim they are not quite ready to introduce the next generation in cell phones.

Only Vodafone, one of the largest telecoms operating in Germany, held steadfastly to the new technology's capabilities and stubbornly maintained that UMTS was to become a reality this year. But on Thursday, the CEO of Vodafone Germany told the daily Die Welt that the launch was off for the time being.

Blaming cell phone producers for the delay, Jürgen von Kuczkowski said next spring would be the new target date for its UMTS premiere – now initially restricted to Vodafone's own employees and selected big customers.

Kuczowski said phone manufacturers Motorola and Nokia had not yet delivered satisfactory mobile phones for UMTS reception, saying they "often can't stick to firmly agreed dates and keep postponing the implementation of promised technical features."

Delays are result of poor financial planning

But according to the Idate Institute in France, which monitors developments on the international telecommunications market, the cause for the delay lies elsewhere. The UMTS service providers are having a hard time setting up their networks, says Carole Manero, spokesperson for the institute.

"They're battling colossal debts and often can't afford the investments they've announced," she says. In Sweden, for example, the French owned telecom Orange has already asked the government whether their UMTS launch might not be postponed by three years.

"UMTS isn't a 100 meter sprint," said Kuczkowski. "A few months aren't an issue."

But public opinion is another thing. Back in 2000, an opinion poll by EMNID revealed that 71 percent of Germans were "probably" or "almost certainly" not going to buy a UMTS capable phone in the foreseeable future.

UMTS more expensive than predicted

At roughly the same time, Cluster Consulting was predicting that service operators were going to have to earn about 50 euro per UMTS customer per month to make their investments in the new network pay off.

In Germany, as in the rest of Europe, the exorbitant prices paid for the licenses triggered a long downhill slide for telecommunication shares.

Between March 2000 and March 2001, share values for Germany's largest telecommunications provider Deutsche Telekom dropped by 75 percent, prompting rumors that CEO Ron Sommer would be forced to resign. When he did step down about a month ago, the UMTS investment was widely cited as one of his cardinal errors.

Die Welt termed the entire project a "giant building site" that wouldn't yield profits for years to come. And if that's the case, consumers are unlikely to see the first units any time soon.

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