Hutchison's mobiles 'give 3G technology a bad name'

Mike Newnham, Orange UK’s finance director, said that customers of Hutchison’s high-speed internet phones - branded under the logo Three - were returning them to the shops because they were not working properly.

Hutchison, part-owned by Hong Kong conglomerate Hutchison Whampoa, stole a march on its rivals by launching 3G services in March, but network coverage is not comprehensive and concerns over glitches remain.

Newnham said that Hutchison was offering prices that were unsustainable, and predicted the company would be forced to join up with mm02 to survive.

He said: "There could well be a scenario where Three and mm02 get together in the future. Up until now Three has struggled. There are a lot of issues they are facing which are technical involving handsets and the networks.

"At the moment, the only thing slightly concerning me is Three giving 3G technology bad PR. I think it’s happening, not in a major publicity way, but I think customers that have decided to buy a handset are having problems with networks and handsets."

Hutchison responded by pointing out that its prices were far lower than its rivals, and added that Orange was being left behind as it was not launching its own 3G phones until 2004.

A spokesperson denied that the pricing strategy was unsustainable. He said: "This is a new technology and when you launch a new technology, there is an element of having teething problems."

The arguments highlight the intensely competitive nature of the UK mobile phone industry and reflect the huge sums of money spent on 3G licences.

Vodafone, Hutchison, Orange and mm02 (formerly BT Cellnet) paid 22.5bn for licences in auctions three years ago, banking their futures on the technology taking off as the market for the current generation of handsets saturated.

Hutchison claims to be selling between 3,000 and 4,000 of its 3G handsets per week through Carphone Warehouse alone.