Vodafone, Rivals Need to Smooth Technology Glitches (Update1)
By Molly Schuetz, Philip Lagerkranser and Dex McLuskey
Cannes, France, Feb. 19 (Bloomberg) -- Telecommunications companies must work quickly to smooth out glitches in the newest wireless services, such as multimedia messaging, to revive growth after the industry's worst slump ever, executives said.
France Telecom SA, Vodafone Group Plc and rivals have begun selling services for handsets equipped with cameras made by companies such as Nokia Oyj and Samsung Electronics Co. They don't always work when a customer tries to send a photo to someone using a different brand phone or a different network.
``The fact is that sending an MMS even within the same network can yield some very strange results,'' Douglas Li, chief executive officer of Hong Kong's SmarTone Telecommunications Holding Ltd., said at the annual 3GSM World Congress in Cannes. ``It is a major challenge facing our industry.''
Cegetel CEO Frank Esser demonstrated the challenge when he sent a photo from his vacation at the Meribel ski resort in France from a Panasonic-brand handset over his company's network to a user with a Sony Ericsson Communications Ltd. phone. The photo that turned up was half the size of a thumbnail.
Still reeling from record losses and battered stocks, companies are trying to entice consumers to buy new phones and adopt the new services. How well multimedia messaging works may determine appetite for the next generation of mobile-phone services, executives said.
A Turnoff?
``The stories we're picking up is that it's turning a lot of consumers off,'' said Tom Lynch, president of Motorola Inc.'s phone division. ``There is that risk'' that operators and handset makers have promised too much.
Motorola, Nokia and Ericsson AB have lost a combined $400 billion in market value since May 2000 as demand for phones stagnated and spending on networks plunged. Ericsson has racked up seven straight quarterly losses, while Motorola in January reported its first consecutive quarters of net income in two years.
The Bloomberg 500 European Telecommunications Services Index fell 36 percent in 2002, erasing 294 billion euros in market value. Nokia shares fell as much as 2.3 percent to 13.25 euros in Helsinki, valuing the company at about 63.5 billion euros ($68 billion). It was worth more than 300 billion euros in 2000.
Taking Risks
Deutsche Telecom AG and MMO2 Plc are among companies planning to offer services based on the Universal Mobile Telecommunications System standard this year in Europe after paying $100 billion for the right to provide them.
NTT DoCoMo Inc., the world's second-biggest phone company by sales, launched its third-generation phone in October 2001 and has missed its subscriber targets for the service, known as FOMA, as handset deliveries were delayed and network connections patchy.
The Japanese company has since worked to address issues of short battery life and network coverage dropping out, Chief Technology Officer Kota Kinoshita said. Even if the company risked alienating some users with less-than-perfect service, there was no better way to find out what the problems were, he said.
``Many of the problems we only found out about once we launched the service,'' he said in an interview. ``FOMA's reputation was sacrificed, but I think we've got it back as we're fixing the networks and the terminals. The market expectation is very high now.''
`Huge Step Forward'
Global handset sales fell for the first time in 2001 and barely budged last year, as markets neared saturation and users put off upgrades. Earlier technologies designed to help move data over wireless networks have flopped because consumers found the services difficult to install and unreliable.
The theme of the 3GSM World Congress this year is ``delivering the promise.'' Sony Ericsson unveiled its first third- generation phone, the Z1010, here, while Nokia said it's on track to sell its 6650 model in the first half of this year.
``The handsets exist, which is a huge step from last year'' at this industry fair, said John Beale, a vice president for marketing at San Diego-based Qualcomm Inc. ``The next step is interoperability, and then being able to get it out to users.''
Hutchison 3G U.K. Holdings Ltd., a unit of Hutchison Whampoa Ltd., aims to be the first European provider of third-generation mobile services when it introduces them in the U.K. and Italy by April. Top executives at the company, controlled by Li Ka-shing, were too busy preparing the start to attend the Cannes conference this week.
Other operators are taking steps to make their networks compatible for picture messages. MMO2 Plc, Britain's fourth- largest mobile-phone company, recently signed agreements with France's Orange SA and Germany's T-Mobile International AG, a unit of Deutsche Telekom, allowing subscribers to exchange photos and other services across their U.K. networks.
``Network interoperability has to be worked out,'' said David Shepard, general manager of Texas Instruments Inc.'s wireless networks unit. ``The different networks have to be able to talk to one another.''
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