Japanese antique standard messaging system [SMS] technology
Alcatel gearing up for 3G
February 06, 2001 03:00 AM ET
by Jerry Borrell
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Michel Rahier has worked with Alcatel (ALA) for over 20 years, starting in the research center of the company, then moving to engineering and later to one of the company's business units.
Rahier holds a Ph.D. in electrical engineering and was originally employed as a research scientist by Alcatel in Belgium. In 1997, he moved to the mobile-communication division, first as general manager and then as president.
As such, Rahier serves as president of one of the 15 business divisions that make up the three operational groups (carrier networking, optics, and e-business) within Alcatel worldwide.
Upside: When did Alcatel become a significant player in the U.S. market?
Rahier: We have had a lot of activities in the United States since the beginning of the '90s, in the area of data transmission in particular. We acquired the American Rockwell in 1991 and decided to move into a second wave of acquisitions in 1997 in the area of ATM [asynchronous transmissions management] and, more recently, in IP [Internet protocol] with the acquisition of Newbridge. We have made $17 billion in additional acquisitions over the last two years -- important for mobile and, especially, for third-generation [3G] systems.
How important is the U.S. market to Alcatel?
Alcatel has been known in Europe as a handset provider, and yet today most of Alcatel's business is in the United States. Somewhere between 20 percent and 25 percent of our business is in the United States.
We have 18,000 people in the United States out of a total worldwide 120,000. We opened two U.S. locations in 1990: Raleigh, N.C., and our U.S. headquarters in Dallas, Texas. Today, we have between 15 and 17 operational centers in the United States.
Do you conduct research in the United States?
Our tendency is to outsource manufacturing. Our U.S. staff of 18,000 includes sales and marketing, but a significant portion of our R&D is in the United States at this point in time.
Is Alcatel a U.S. or French company?
In Europe, Alcatel is not only a French company. We have operational locations in many countries in Europe and also outside Europe; for instance, in Germany we have a workforce comparable to what we have in France. Also, our market share is significant in Germany. Outside France and Germany, we have active teams in Italy, Spain, and Belgium. With the acquisition of Newbridge, we have resources in the U.K. and a large presence in Canada. The acquisition of Newbridge added about 6,000 people, half of them in Canada.
From the United States, it looks like there were problems with 3G auctions in Europe. What's happened?
There was a first wave of auctions for the U.K. and Germany with relatively large amounts put on the table -- sums that translate into between a $600 and $1,000 investment by carriers per potential subscriber. Speaking globally, this is huge.
Will mobile carriers recoup their huge investments in 3G?
I often illustrate this discussion with what's happening with NTT DoCoMo's (NTT) i-mode in Japan.
I-mode was the first step in mobile Internet and has little to do with 3G. It's a kind of super-WAP [wireless application protocol], or its equivalent with WAP technology over GPRS [general packet radio services]. It's packet-mode, not circuit-mode, but, for the rest, it's not very different. I-mode's average revenue is $76 per subscriber for the Japanese antique standard messaging system [SMS] technology they use. This compares to Western Europe, which is more like $42 per subscriber for messaging services. But they have higher expenses for mobile telephony than we have in Europe.
Out of $76, 15 percent comes from i-mode service, which is significant considering that there are approximately 15 million i-mode users. In one year's time, they were able, with i-mode service alone, to increase their revenue by 15 percent, and with a technology close to GPRS. They have a very nice business model. They have made sure that their service providers are motivated to work on their system. They have a lot of partners making attractive terminals like the one we will introduce for Europe for 3G services.
Alcatel has a 3G terminal for European subscribers?
Yes, to support downloadable images, MP3 -- those kinds of things. Pretty attractive, but in Japan, they have had these terminals for 12 months. If you can do these things properly with 2G -- because in Europe it's nothing other than 2G -- you are going to have a significant increase of revenues. All that discussion brings us back to the $600 to $1,000 I was speaking about before.
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