3G has been hailed as a major revolution for mobile phones, allowing users to download video clips and colour photos, as well as browsing the internet on their handsets.

This isn't reassuring in the slightest and should be seriously worrying operator shareholders

Nick Greenway, Datamonitor

The crisis facing 3G has intensified in recent months as operators such as Spanish telecoms firm Telefonica axed plans and other firms had to come to terms with the burden of debt they carry for 3G licences.

The fact that those pledged to roll out services have talked about long delays before services will be ready has compounded the crisis.

Do the maths

"They talk of payback somewhere in the next three to eight years. This isn't reassuring in the slightest and should be seriously worrying operator shareholders," said Datamonitor analyst Nick Greenway.

For licence holders it may be cheaper to abort 3G plans rather than attempt to pay huge subsidies necessary to get the market going, suggested Mr Greenway.

I don't think you should have any sympathy for senior executives of telecoms companies who sat around and decided what to invest

David Edmonds, Oftel

Research suggests that consumers will not be prepared to pay more than �300 for any sort of advanced mobile phones with many paying no more than �150.

With new smartphones in the offing priced at around �750, operators would have to pay huge subsidies to assist take-up.

"Do the maths," said Mr Greenway." If a European operator with 12 million subscribers wants even half of them to have a 3G handset, the cost of subsidy will exceed 3bn euros (�1.9bn),"

Add to that the fact that prototype handsets have encountered technical problems and it appears that the death knell may be sounding for the data revolution that has been so hyped.

Operators to blame

Datamonitor believes more operators will join Telefonica in abandoning services, while others may have to lease capacity to brands such as Manchester United, AOL Time Warner or Disney in order to create revenue.

One ray of light could lie with the governments that charged exorbitant fees for 3G licences.

"If governments do not revise contractual obligations, we may well see a grey market for 3G licences before 2002 is out," said Mr Greenway.

Oftel Director General David Edmonds has told technology magazine Computing that operators have only themselves to blame for burdening themselves with the �22bn bill they paid during the UK auction of spectrum.

'Nobody told them what to pay - not myself, the Radio Agency or the government," Mr Edmonds told the magazine.

"It was a commercial decision based on a business plan and I don't think you should have any sympathy for senior executives of telecoms companies who sat around and decided what to invest," he said.