Qualcomm Dangles Phone License Bid Prospect in Front of DDI By Junko
Fujita
Tokyo, May 1 (Bloomberg) -- Qualcomm Inc., the U.S.-based developer of
the world's fastest-growing cell phone standard, says its may apply for one of
three licenses to operate mobile phone services in Japan if its advanced
technology looks set to be shut out of the world's second-largest
telecommunications market.
The licenses, to be issued as early as June, are related to the next generation
of mobile handsets, devices which promise to deliver better and faster Internet
connections, including the ability to watch video, download music and transmit
large amounts of data. Cellular phone makers and operators worldwide see
the new technology as a way of generating more revenue from users of mobile
services.
Two companies already seeking a license -- NTT DoCoMo Inc, Japan's
dominant mobile phone company, and Japan Telecom Co., the nation's No. 3
mobile phone operator -- will use the W-CDMA standard developed by NTT
DoCoMo, Sweden's Ericsson AB and Finland's Nokia OYJ.
A third expected bidder, DDI Corp., Japan's second-largest mobile phone
company, hasn't said which technology it will use. That thickens the plot for
Qualcomm, whose CMDA, or code division multiple access technology, is
currently used by DDI to provide mobile phone services.
DDI was expected to remain with Qualcomm though the company has said it
may jump ship to the rival W-CDMA standard. DDI must announce a
decision soon as the government's deadline for license applications is May 12.
Flirtation
At stake is a market the Ministry of Posts and Telecommunications expects
will grow to 42.02 trillion yen ($388 billion) by the year ending March 2011.
Some analysts suggest Qualcomm's flirtation with a license bid is merely a ploy
to keep DDI in the Qualcomm camp. ``Chances that it will win a license are
zero,'' said Yasumasa Goda, a senior analyst at Merrill Lynch Japan Inc.,
citing Qualcomm's lack of experience as a cell phone operator.
Even if it were to win a license, Goda said, ``the chance that it will be able to
successfully run a business in Japan is almost zero.''
Qualcomm Japan Inc. President Tetsuzo Matsumoto admits the company may
not apply for a license if DDI chooses Qualcomm's cdma2000 technology
developed for the next wave of wireless services. Still, he says a license
application remains an option. `We want to show that our technology is
superior to the other,'' he said.
At the heart of the issue for DDI is cost, a factor that cuts two ways.
DDI now provides cellular phone service called cdmaOne, which is based on
Qualcomm's CDMA technology. DDI may be able to develop the new
generation cellular phone network cheaper by using cdma2000 because it can
be piggy-backed on the cdmaOne system the company is currently using.
Networks
On the other hand, were W-CDMA to become the dominant technology,
DDI may end up spending more on network-building because venders will sell
the W-CDMA equipment cheaper. ``We need to closely examine the future
development of the third generation cell phone market,'' DDI President Yusai
Okuyama said on April 20. ``We need to study capital investment, we need to
see which of the two standards will be used by the majority in the world. We
need to consider which standard will have a better handset deal.'' ``What
Qualcomm really wants is for DDI to choose Qualcomm's HDR technology,''
said Shinji Moriyuki, a senior analyst at Daiwa Institute of Research Ltd.
Qualcomm developed HDR, or high data rate, technology to speed up
Internet browsing from cell phones. The technology works with chips and
equipment based on the CDMA technology.
Matsumoto said the technology is expected to be approved as a world
standard by the International Telecommunications Union as early as next year.
``Qualcomm is trying to create a path for DDI to eventually use Qualcomm's
standard,'' Moriyuki said.
If Qualcomm seeks and wins a license, the company plans to start the service
in July 2002, Matsumoto said. Qualcomm said it is negotiating with several
foreign carriers to form a group to provide the service.
The offering will be targeted at users already accustomed to data transmission
services over cell phones through mobile Internet services offered by mobile
phone companies, such as NTT DoCoMo.
Matsumoto said his company isn't in talks with DDI. DDI's Okuyama also
said there have been no talks with Qualcomm on DDI's choice of standard.
The licenses are being issued by the Ministry of Posts and
Telecommunications. Though European countries are auctioning the licenses,
Japan is giving them away to the companies the government feels holds the
best potential as an operator.
Japan had 56.9 million mobile phone subscribers at the end of March,
exceeding the number of fixed-phone subscriptions for the first time. |
