<An estimated 170 billion euro ($163 billion) bill facing European telecoms companies for new generation mobile phone licences may be a blessing in disguise for savvy telecoms investors.> I feel sick! Assume USA and Asia have similar spectrum values for 3G, that's $500bn going down the government gurgler.
That money should have been going to QUALCOMM.
This might rate as the biggest blunder in corporate history. Understandable, as it seems to have caught everybody by surprise, me included.
The bid that a service provider makes for spectrum is simple arithmetic. First, how much revenue will subscribers be willing to pay for the WWeb services which will be available in the bandwidth being bought?
Then, add up all the costs of providing that service:
Handsets:
Battery
Plastic case
ASICs
Advertising
Insurance
Royalties
Labels
Boxes
Profit
A bit more profit
Lunch
Nice company cars
Infrastructure:
ASICs
Land
Antennae
Lunch
Profit
Royalties
Wiring
Fibre
More profit
Blah blah blah.
The difference between what subscribers will pay and what those costs add up to is how much to bid for spectrum!
Pretty simple eh?
As we can see from the UK auction, the service providers expect there to be huge revenues from 3G services. Microsoft/Samsung, .Net, Palm, WirelessKnowledge, Kyocera, Nokia, Ericy and every other company remotely connected with the field is desperate to get in on the action. There are $$trillions going to be poured into Communication Without Limit. Revenues will be stupendous.
Now, suppose we can cut those costs by getting cheaper plastic, cheaper royalties, cheaper lunches and economy class airfares, then we could increase our spectrum bid without hurting our profits.
But suppose the royalty supplier has a monopoly and charges heaps for using the technology, that means the costs go up so the spectrum bid will have to go down.
Okay so far folks?
Now the battery people can't increase their prices and neither can any of the other suppliers because their boring technology is nothing special and there are many ways of skinning a cat and making a plastic case. But there is only one CDMA technology and guess who owns that! So whatever they ask for, gets paid or you are out of the auction and have to go into sheep farming or something.
Q! knows how much the spectrum is worth now, but damn, curse, oh dear and other more vociferous expletives, there are already 3G technology agreements with L M Ericsson and others who got amazing bargains. L M Ericsson should have been nailed to the ground - they have achieved the biggest swindle in corporate history by conning Q! into selling them a 3G licence at absurdly cheap rates.
Now there is Nokia still to go.
This is obviously all new as Nokia doesn't seem to have figured out why spectrum auctions are so hugely expensive. Nokia, fortunately, has got huge revenues so will be able to pay very high royalties to Q! I mean very, very high royalties to Q! There is going to be a transfer of market capitalisation from Nokia to Q!
Oh, oh! DON'T SELL WARNING!!!
Q! is going to be bought by Nokia or some other company which does not yet have a 3G royalty arrangement with Q!
Nokia can buy the whole damn company for a song at today's share price. Irwin was worried that Q! would be bought in 1998. Well, if he was worried then, he should be scared witless now.
I think Nokia might have figured it out, because it isn't that hard - they will be preparing a buyout as we speak. If they aren't, Ollila really hasn't undergone a true conversion.
Mqurice
PS: Well, whatever happens, the rest of Y2K is NOT going to be boring! As Irwin might say, "The fun is just beginning!" Okay, he did say it. This could get very, very interesting. Okay, very, very, very interesting. Pierre, sure, a two tier level is fine, but put a zero on the end of your figures. |
