``Anyone who thinks GPRS is going to offer services at 120 kilobits per second is on crack,'' says one London-based analyst."
"And analysts now acknowledge a potential litigation risk over health concerns surrounding powerful new handsets."
Tuesday January 30 10:33 AM ET
Nokia, Ericsson Fuel Mobile Data Doubts
By Paul de Bendern and Kirstin Ridley
HELSINKI/LONDON (Reuters) - As Europe's top telecoms equipment makers report flagging cellphone sales and operators face vast bills for new-generation mobile Internet services, the future of the entire industry hangs on an unproven technology.
The plan was that new technologies such as General Packet Radio Service (GPRS) would help unlock the potential of mobile Internet services -- and provide a litmus test for even faster, third-generation UMTS mobile services planned for 2002/3.
But Finland's Nokia, the world's biggest mobile phone manufacturer, on Tuesday delayed plans for shipping GPRS phones in volume until the fourth quarter, while Swedish rival Ericsson
admitted it was difficult to forecast sales.
All eyes are on GPRS after its forerunnner WAP (wireless application protocol), the first mobiles supporting online services in Europe, disillusioned Internet-savvy clients because Web access is limited, slow and sometimes impossible.
But concerns are mounting that the launch of GPRS phones will be delayed, that they will not offer the ``always on'' Internet access initially promised, that handsets will overheat and have poor battery life -- and that memory-heavy, multimedia services will steal network capacity from voice services.
It remains unclear how to bill for services as disparate as looking at a Web page to watching a video clip or ordering a pizza. And analysts now acknowledge a potential litigation risk over health concerns surrounding powerful new handsets.
Although GPRS commercial tests in Finland, Sweden and Britain are beset by technical difficulties, Ericsson's Chief Executive Kurt Hellstrom forecasts 30-40 million GPRS users by end-2001. But he conceded that GPRS had had teething problems.
``It seems the introduction of GPRS has been more complicated than expected,'' he told reporters in Sweden last week. ``It is somewhat difficult to say what is going to happen...''
If GPRS proves problematic, investors may continue to shun a sector that has taken one of the biggest financial risks in history. Europe's telecoms operators have paid some $100 billion for new-generation cellphone licenses -- and future returns hinge in part on the success of GPRS.
In the hopes of as-yet nebulous revenues, Europe's telecoms groups saw credit ratings come under pressure as they loaded up with debt to pay for Universal Mobile Telecommunications System licenses, which, once networks have been upgraded, are expected to allow mobiles to offer e-mail, games and quality video links.
Gprs Leaves Nordic Shoppers Cold
U.S. handset manufacturer Motorola Inc, the world's number two telecoms equipment group, has been the first to bring GPRS handsets to European consumers.
But Nordic shopkeepers are far from impressed with the idea of marketing a mobile phone that retails at around $460.
``GPRS is unstable and often breaks down,'' said Sakari Klementtila, a shop assistant at retailer Veikon Kone in the Finnish capital Helsinki.
``They call it 'always-on' Internet access but that's far from the truth... maybe next Christmas it will work fine and people will want these phones,'' he added. ``We don't get many inquiries about it because it's a non-starter at the moment.''
GPRS was expected to offer data speeds of up to some 140 kilobits per second, compared to current 9.6 kbit/s, and help pave the way for faster, new-generation UMTS services.
Nokia expects to launch UMTS phones around Q3, 2002. But investors are impatient amid worries that speedy mobile data has been over-hyped and that customers may shun high tech phones.
``Anyone who thinks GPRS is going to offer services at 120 kilobits per second is on crack,'' says one London-based analyst.
TELECOMS RECOVERY?
Although telecoms shares have staged a small recovery this year, with the European Dow Jones telecoms index rising around six percent, the former stockmarket darlings are still trading 50 percent below a peak hit on March 6 last year.
Telecoms stocks are now trading near 1997 levels as mobile subscriber growth hits near-saturation point. An average of 62 percent of the European population already owns a mobile phone and the pressure is on to keep customers on their phones longer.
But if Swedish shoppers are any guide to customer sentiment, it does not bode well. Maria Johansson, who works in a Stockholm store of Sweden's top carrier Telia, said: ``We don't even bother trying to sell the GPRS idea to customers.
``They're so skeptical about WAP that if you talk about GPRS, they'll definitely not buy a phone and subscription from you.''
Cellphone market leader Vodafone Group and Italian flagship mobile group Telecom Italia Mobile insist that GPRS services are on track and will be available in volume in Europe in the second half of the year.
But Vodafone, which has the greatest purchasing power because of its sheer size, declines to specify whether it has placed any GPRS handset orders.
While bears such as Forrester research warn that heavy UMTS license and network costs will weigh on telecoms companies' operating profits until 2007, others argue that mobile data services will be successful -- but possibly only next year.
``I think mobile data will come in time to save (telecoms) operators,'' insists UBS Warburg telecoms analyst Daniel Stillit. |
