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``Those that will take off will be ones that can produce a component with cutting edge technology to make it cheaper for network builders,''
Friday February 23 12:23 PM ET
Mobile Phone Show Brings Industry Back to Earth
By Catherine Bremer
CANNES, France (Reuters) - Some 6,000 delegates walked away from the mobile telecom's industry's biggest annual event on Friday with a sharp reality check over the much-hyped mobile Internet resounding in their ears.
While the product displays were as flashy and the beachside parties as lavish as a year ago, sobering news of delays in next-generation mobile phone technology left visitors to the 2001 GSM World Congress with worse hangovers than usual.
The message, landing amid a fresh sell-off in telecom and tech shares on the back of a Motorola profit warning, confirmed what industry watchers have long suspected.
The Dow Jones European technology stock index lost 5.5 percent at 521.20 points in Friday afternoon trade, following the Motorola warning. Telecom stocks were down 2.0 percent at 419.81 points.
``I've been coming to Cannes for four years, and the mood is nothing like before,'' said a Finnish venture capitalist, scouring the crowds for contacts at a Nokia-hosted party.
``The hype has gone and there's one question on everybody's lips -- where are the blasted revenues?,'' he added.
Japanese cellphone giant NTT DoCoMo (news - web sites) will take the lead in May, when it plans to hook up the world's first fast wireless Internet phones to so-called third-generation networks. The rest of the world will be much slower.
Europe has yet to embrace so-called 2.5-generation GPRS services, and many operators and equipment makers now expect this will also delay the roll-out of third-generation UMTS networks.
All these delays mean revenue gains will take a lot longer to help cut the debt burden of mobile operators, which are expected to invest around $180 billion on third-generation UMTS mobile phone licenses and equipment.
``So far in Cannes, we've seen a hell of a lot of technology and vision but not many actual numbers. People have been selling the future; it's been very over-hyped, people are disappointed,'' Olav Ostin, UK managing director of venture capital firm ETF Group which has $800 million invested in techs and wireless, told Reuters in an interview.
``It's no good spending billions of dollars on infrastructure and saying we'll have to wait four years before you put any services together. Operators have to develop new services now and not wait around for capacity to increase,'' he added.
Order Delay
As analysts tear out their hair over the slower-than- expected rollout of the mobile Internet, many carriers, equipment makers and service developers reported delays.
Alcatel said this week it did not expect the bulk of its UMTS contracts to be signed for another three to six months.
Europe's number two mobile operator Orange, which wowed delegates with its vision of a futuristic voice-controlled 3G home and still insisted UMTS will be profitable four to seven years after its 2002 launch, has yet to sign up suppliers.
Orange has also pushed back its expectations for a full commercial GPRS rollout until next year.
French rival Bouygues Telecom, the only European operator to opt out of a UMTS license in its home turf, will focus on interim GPRS technology.
It plans to start testing GPRS services with 4,000 clients from the summer and hopes to launch in December. But it has yet to sign a deal with its GSM supplier, Nortel Networks, about upgrading its network.
Partnerships, Consolidation Key
As consumers and investors become increasingly impatient, mobile operators are likely to forge more alliances with service and content providers. Equipment makers are also likely to work more closely with component and software suppliers.
Sending text and picture messages between phones is seen as a key application to squeeze revenues out of subscribers ahead of more sophisticated services. Software firms are racing to add catchy new visuals to SMS (short messaging services) and mobile email.
For the smallest players, for whom the delays throw cashflow forecasts into turmoil, industry watchers expect ever faster consolidation.
``A one year delay in revenues for a small company is the difference between life and death. There are too many of these firms around, and even if 50 percent go bankrupt in the next 12 months, we need to clear the space, so we will definitely see more consolidation,'' said ETF's Ostin.
``Those that will take off will be ones that can produce a component with cutting edge technology to make it cheaper for network builders,'' he added. |
