Feb 16: Tero-- CDMA 2000 application in Finland
Sorry if previously posted (using time throwing flies to tailing bonefish at the time, may have missed this particular reinforcement of Rich Sulpizio's sense of competitive efficiencies which would tend to nullify the useful life of an EDGE installation).
debry.com
The view from Finland
The Nordic 3G roulette... the first round
By Tero Kuittinen, Guest Columnist
Last Update: 10:00 AM MT Feb 16, 1999
The deadline for applying for Finnish 3G licenses closed with 14 applications received by the end of last week. Interestingly, one of those applications was specifically for cdma2000, while the rest chose W-CDMA or did not specify any particular standard. The surprise cdma2000 application was delivered by Saunalahden Serveri, a Finnish internet operator with no mobile telecom expertise. What made the application unique was the fact that Serveri is a very small company with practically no in-house R&D and a very narrow revenue stream - the company delivers internet to about 100 000 Finnish households at 10 bucks a pop. That's a rather unusual business model for a company wanting to deliver third generation mobile telephony infrastructure. Conservative estimates for the cost of building a 3G network in Finland start from hundreds of millions of dollars. It appears that Saunalahden Serveri is gambling on finding deep-pocketed allies willing to fund the project. Nortel and Lucent have already been mooted. It will be extremely interesting to see whether these telecom giants will be willing to invest substantial sums of money in a Finnish start-up firm that has yet to launch an IPO.
Some Finnish experts estimate that if cdma2000 license is granted, the total number of licenses may have to drop to three. If all licenses are granted to a single standard, there would be room for four W-CDMA licenses - but one cdma2000 license means that there may have to be an extra "buffer" between cdma2000 and W-CDMA, eating up frequency that otherwise could be used by licensees. It seems obvious that two licenses will have to be granted to Sonera and Radiolinja - operators currently competing in GSM-900/1800 market. These two operators dominate the current mobile phone market in Finland and ensuring the continuation of their current competition would demand that they both will have to get a W-CDMA license. At least one license will probably have to go to an established international GSM operator to ensure that a foreign competition will get a shot at Finnish W-CDMA market. The strongest contender might be Telia, which is already muscling in on Finnish mobile market. This would leave room for one maverick application. And if the last license goes to cdma2000, it might bump off the third W-CDMA license for technological reasons.
What this all means is that the stage is set for another round of bitter recriminations and hostilities between W-CDMA and cdma2000 camps. The fact that the cdma2000 license application seems weak and is being presented by a company that has neither mobile telecom expertise nor required funding nor R&D muscle to ensure success means that it will probably lose. That won't faze Saunalahden Serveri: the whole point of the plot is to use the application as a snare to get big CDMA companies to cough up the money to break into Europe. It's a shrewd move. The company has already gotten a wave of free publicity - which some suspect was the main reason for the application in the first place; it will help to get international interest in the IPO, which the company is expected to launch. The recent European wave of new, free-of-charge internet access offers means that companies relying on charging fees for internet access are facing a tough time in the near future.
But if Saunalahden Serveri won't get a couple of hundreds of millions from US companies the bid will almost certainly fail. Even if it gets the outside backing, it might still fail, because of lack of backing from an experienced operator. Vodaphone Airtouch have canceled their Finnish 3G bid and they were the only serious operator that might have considered cdma2000 (because of the large CDMA netoworks the newly merged company operates in USA). Failure of cdma2000 application, no matter how weak it is, will give the CDMA camp a perfect opening for another attack on European mobile telecommunication policies.
Personally, I wish they would grant one license for cdma2000, even if that cuts the number of licenses to three. It would shut up Charlene for a week or two, which would be a blessing in and of itself. And it would give us a chance to observe how well cdma2000 and W-CDMA would perform in a GSM market. It would be nice to see marketplace decide the competition for the GSM upgrade system. And I'd love to see the cdma2000 consortium try to come up with 3G handsets against the competition from Nokia and Ericsson. The third generation handsets will have to offer GSM compatibility - they will have to operate in both old GSM netwroks and new 3G networks. Watching firms like Lucent and Qualcomm trying to develop GSM/3G dual-mode handsets for a market where they have zero brand awareness would be worth a lot. Even more interesting would be Motorola's response - would they develop both W-CDMA and cdma2000 handsets concurrently... on top of the Iridium, iDEN, CDMA, AMPS, TDMA and GSM formats they are currently struggling to update? And would Motorola then launch two 3G models into a market where they held a whopping 2% market share in January 1999? Let's all wish the best of luck to Saunalahden Serveri... life will be a whole lot more interesting if they win their bid <TK>.
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Tero Kuittinen is a Finnish-based writer with a passion for telecom stocks. The opinions expressed are his own and should not be construed as investment advice. Readers should assume that both Mr. Kuittinen and associates of DeBry.com have positions in some or all of the securities mentioned, and may change their opinions and positions at any time.
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