Independent, The (London): MmO2 gains brownie points for acknowledging reality on 3G

"A RED herring" is how one City analyst yesterday described the massive pounds 10.2bn write-off of assets announced by the mobile phone company mm02, if only because the stock market has thought them valueless for some years now and reflected this in the share price. But although this is just an accounting adjustment and not a cash item, he's wrong to think it an irrelevance. That pounds 10.2bn represents real money spent in the madness of the bubble on acquisitions and the rush for now redundant spectrum. It's all gone down the pan after one of the greatest speculative investment booms of all time.

Three years ago today, the 3G licence auctions were still in full swing, and I can still vividly recall Sir Peter Bonfield, then chief executive of BT, incredibly claiming that the business plan remained "robust" as the price of each licence was bid up through the pounds 5bn mark. He must have known he was playing Russian roulette, for within months it was clear what a ghastly mistake everyone had made.

Yesterday's write off amounts to final recognition of the management failure that allowed such profligacy to run riot as the boom reached its zenith. It's much easier for mm02 to grasp the nettle than Vodafone, because those ultimately responsible have long since gone. At Vodafone, the management is still largely the same, so the humiliation of writing off 3G licences will be that much greater. We'll know next week, when Vodafone announces figures, whether they've managed to swallow their pride. It will be interesting to hear the explanation, for there are tax and amortisation advantages in taking the hit, if they haven't.

Perhaps significantly, even mm02 continues to believe the licences are worth something, if only a fraction of what was paid for them. Despite the fact that Peter Erskine, chief executive of mm02, is much more sceptical than any of his rivals about 3G's mass market appeal, he's keeping a little over 40 per cent of their value on the books. That may be a good sign, for it suggests that even if 3G never lives up to the high hopes once placed in it, some use for the spectrum, perhaps as just an overspill for ever growing mobile voice telephony, might eventually be found.