from BTAB's Jeff Hines and Bo Fifer: CDMA Handsets/Accelerated 3G Deployment Stand To Benefit
HIGHLIGHTS:
-- Ericsson and Qualcomm announced a wide-reaching agreement this morning
(25-Mar) that settles the manufacturers' long-standing battle over
"CDMA" technology patents and opens the door for more rapid
development/deployment of third generation wireless (3G) services
(e.g., high speed data). Nearer term we expect to see additional
cdmaOne handset competition. Under terms of the deal, which ends all
legal engagements between the companies, Ericsson will acquire
Qualcomm's infrastructure business, and Qualcomm will attain rights to
sublicense Ericsson patents on ASICs technology.
-- POSITIVE NEW NEWS: While today's agreement carries many implications
for the wireless industry, we would focus on the following two key
points regarding implications for service providers:
1. 3G IS NOW A STEP CLOSER. The deal should streamline the process of
developing a third generation (3G) wireless platform which incorporates
high-speed data into the mobile voice platform. Before today, Ericsson
(backing something called W-CDMA technology as a 3G platform) and Qualcomm
(backing something called CDMA2000) were on opposing sides of the
technology fence. Today's agreement should facilitate the move toward
(more or less) a single platform, which in turn should speed the time to
market for wireless carriers introducing new higher speed wireless services
(still likely a 2001/2002 event). Advances through 3G technology are
likely to result in greater penetration and higher usage for the wireless
service providers.
2. cdmaOne HANDSETS LIKELY TO SEE MORE COMPETITION. Ericsson indicated
intentions to supply cdmaOne handsets beginning in 2000. To date, cdmaOne
carriers (e.g., AirTouch (U.S.), Clearnet, Bell Atlantic Mobile, Sprint
PCS, etc.) have been disadvantaged relative to carriers who have deployed
GSM and TDMA based digital wireless networks due to both the higher prices
and lack of choices associated with cdmaOne phones. While we look for both
Motorola and Nokia to become a bigger force in 2H 1999, certainly the
addition of global handset titan Ericsson to the field of cdmaOne handset
manufacturers can only be bullish for more choices and accelerating price
declines in the arena.
-- NEGATIVE NEW NEWS: None, for the service providers.
-- NET-NET: cdmaOne carriers are likely cheering Ericsson's planned entry
into the cdmaOne handset arena. One carrier that certainly is taking
note is likely Clearnet. Clearnet PCS disappointed in 1998 partly due
to lack of a compelling cdmaOne handset product. Without an
economical handset, the Clearnet PCS is effectively precluded from
offering prepaid services because of the necessary subsidies. We
believe that smaller, lighter, cheaper phones will be introduced over
the next several quarters, culminating in Ericsson's first-ever CDMA
phone in 2000, and that this will drive down equipment costs for
Clearnet and other cdmaOne carriers. |
