3G phones have been slow to catch on

The company has re-valued its assets and decided to write down their value by �9.6bn ($15.8bn) - and that has pushed MM02 �10.2bn into the red.

Most of the loss - about �5.9bn - is caused by the fact that licences for the next generation of mobile phones are worth far less than when they were bought three years ago.

The rest comes from telecoms acquisitions falling in value as stock markets have plunged.

Highest bidder

"We have taken a realistic view of our asset value," chief executive Peter Erskine told BBC Radio 4's Today programme.

3G will definitely succeed - it's just later than we expected Peter Erskine, MM02 chief executive

"I think there's a general understanding in the European telecoms market that we overpaid for 3G."

MM02, which used to be called BT Cellnet, paid �4.03bn for its UK 3G licence in an auction held by the government three years ago.

The five licences on offer raised a total of �22.5bn for the government and that dizzying figure prompted a series of auctions in other countries, pushing telecoms companies into debt.

When the telecoms boom collapsed it was clear that the licences were not worth the billions of pounds that had been paid.

'Still strong'

Third-generation mobile phones can send and deliver far more information than their predecessors, including video clips.

But there was simply not the demand that telecoms companies had predicted - and that has compounded the problems.

"3G will definitely succeed - it's just later than we expected," Mr Erskine said.

He pointed out that other telecoms firms had written off large amounts because they, too, had overpaid for licences.

He insisted that the underlying figures showed that MM02 company was still strong.

Revenue, for example, rose 14% to �4.9bn.

MM02 has just completed its first year as an independent company after being spun off from BT.