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Technology Stocks : Nokia (NOK)
NOK 5.877-2.6%Nov 20 3:59 PM EST
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To: DaveMG who wrote (1721)4/6/1999 1:40:00 PM
From: tero kuittinen  Read Replies (4) of 34857
 
According to today's Financial Times China Unicom is going to invest 3 billion dollars in expanding their GSM network. And this same company still insists it can also execute a national CDMA expansion - at the same time. Dave... the executives of this particular PLA puppet company are mad as hatters. This business plan of investing simultaneously 3 billion dollars in a GSM expansion and 2,8 billion dollars in a CDMA expansion is - to use clinical phraseology - bonkers.

And these are the people who are responsible for CDMA's success in China? I wouldn't count on the business savvy of totalitarian military despots under the best of circumstances - and the challenges CDMA faces in China would be formidable even for top US executives.

That "40 million CDMA subs in five years" is the prediction of the company that thinks it's a smart move to spend 3 billion on both GSM and CDMA expansion - in the same cities. I think it's safe to say they are not the next Sprint. Everyone who wants to believe their predictions is free to do so. Let's see how willing investors are to pour 6 billion dollars into this scheme - Chinese banks are already recoiling from China Unicom.

I'm sure you understand what achieving 10% market share in China by 2005 would mean for handset manufacturers specializing in CDMA. None of them will see one dime of profit from their Chinese sales. If you break that highly unlikely 10% between CDMA phone manufacturers, best of them would end up with 2-3% of the total Chinese handset market in 2005. Whereas the leading phone makers making *both* GSM and CDMA phones would end up with around 20% overall market share. It's not hard to figure out what this means for profit margins.

Motorola, Nokia, Ericsson and Sony are not going to buy one single chipset from Qualcomm for their future Chinese CDMA models. That's what you get when you try to compete with your customers - the mistake Intel never made.

Tero
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