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It's official: 3G systems will be late - Merrill Lynch

Despite share-boosting attempts by companies like Nokia to talk up the prospects of seeing third-generation mobile phones next year, or even this year, sceptical consulting firm Merrill Lynch has predicted that 2004 is the earliest it can start to happen.

This is a change in forecast; previously, the firm believed that industry optimism for early availability was justified (reports 3G Newsroom - but now, technical as well as market problems loom larger in its crystal ball.

Several companies continue to make bullish statements about their intentions to launch products this year, not only in the handset business, but in the infrastructure arena, too.

But Merrill Lynch is less impressed than it was. The primary difficulty it sees is the problem of dual-standard GSM and UMTS phones, which it now believes aren't going to be ready in time.

Until 3G networks are at least as widespread as today's GSM systems, a GSM user is more likely to be able to get connected. This would force owners of 3G phones to carry a spare GSM phone for use when out of range of a 3G mast, unless dual-standard phones exist at reasonable prices.

Merrill Lynch doesn't think they will be working satisfactorily "due to technical problems surrounding the "hand-off" as users move between GSM and WCDMA services."

On top of that, the firm's forecasts now see GSM capacity being adequate or nearly so, until 2004, making the initial returns from 3G look rather thin. Investment in the new network is likely to be delayed, especially since the network operators are not flush with cash, especially in the UK and Germany where they have had to bid huge sums for the licence fee auctions.