I'm close to freaking, but not quite there... there's no doubt that Ericsson will get a huge chunk of the Orange, Vodafone and One2One orders. Probably Cellnet as well. That's very impressive and possibly depressing. But if these deals are split, Nokia can land two of them and perhaps a chunk of TIW.
That wouldn't be enough if England was a good proxy for the global 3G market - but it's not. It's a showcase for Ericsson, because many of the networks were launched in early Nineties when Nokia wasn't a real contender in the network business. That's why Cellnet is still a Motorola stronghold - or was before the Nortel thing.
The Mediterranean, Middle European and Asian GSM networks were launched later: and here Nokia has an upper hand. Nokia should do a lot better in Spain, Italy, etc. - and it's already doing better than Ericsson in the Asian GPRS market. Ericsson's triumphant success in England has not crossed over to Asia or Southern Europe when it comes to GSM-1800 or GPRS. That's the reason to expect it won't cross over in W-CDMA either. Nokia's Bolivian GSM deal is a good omen, coming after the Colombia order. It sets the stage for the battle over Brazil. Hutchison's Australian GSM-1800 network should be Nokia's to lose.
England is the toughest infra market for Nokia in Europe, because it's one of the oldest. That's why I hope that Spain is going to announce the 3G deals as soon as possible; that would bleed Ericsson of some PR momentum it will get from England. In any case, the identity of Nokia's 13-15 "secret" GPRS customers is interesting. It would be good if at least one of them was in England.
Ericsson's strength in infra is awesome... but trying to calculate the magnitude of the handset trouble is a bitch. Apparently there's been another wave of recent price cuts; T28 is now suddenly priced as a mid-range phone in Sweden. Ericsson's phone margins were hovering below 2% even when T28 was still priced as a high-end phone. What's going on now is anyone's guess.
Both Siemens and Alcatel are now probably ahead of Ericsson in Europe - which leaves it on the outer edge of the top 5 for the first time in living memory. This is not a question of whether Ericsson can hit 10% margins - it's a question of whether it can stay above zero. It looks like the US launch of the CDMA T28 is pushed back to next autumn. The vaunted WAP model, R380, doesn't seem to be on the horizon and it was suppposed to be a spring launch as well. It's a long litany of delays and escalating price cuts of 6-month old models.
Does Wall Street really care if the network biz is booming? Maybe we end up back to Greenspan again. If Nasdaq perks up, all sorts of flaws are forgiven. If we're headed below 3'000, it's hard to explain a zero margin division in any telecom company.
Tero |
