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To: Jim Willie CB who wrote (35305)	7/16/1999 2:12:00 PM
From: Ruffian	Read Replies (1) \| Respond to of 152472

Our Buddy Tero Speaks. Posted 15/07/99 12:09pm by Tero Kuittinen Euro giants poised to pounce on US mobile outfits This year the transformation of the mobile phone industry has been picking up momentum. The year began with the ground-breaking merger of Vodafone and Airtouch - fusing the complementary European GSM operators controlled by Vodafone with the partial US CDMA coverage Airtouch. Since January, the biggest merger splashes have been made by the Mannesmann acquisition of Omnitel (combining the powerhouse German and Italian GSM operators) and the Voicestream acquisition of Omnipoint (melding two US GSM operators; one with a strong presence in western states, one on the East Coast). Looking at sales growth and international growth prospects, the much high profile Olivetti take-over of Telecom Italia Mobile doesn't deliver as much sizzle as these two deals. The point of the Vodafone-Airtouch deal lay in the implications pointing to a future where five to ten global mobile operators would battle for supremacy by swallowing smaller, regional operators and offering cheap international roaming, streamlined billing and economies of scale. The recent deals are laying the groundwork for the emergence of these nascent mega-operators. The US scene My two mobile operator picks of January were Omnipoint and Western Wireless. Since then OMPT has tripled and WWCA has doubled in value. Their digital mobile networks are now bundled into Voicestream (VSTR). The GSM coverage of this new entity is what might be characterised as nearly national. New network coverage being currently built up in Chigaco and Dallas will improve the footprint; acquisition of Aerial or some other minor GSM player might plug the south-eastern hole; buying the GSM networks Sprint is dumping around Washington DC might be a bonus. Nevertheless, Voicestream's best shot at success is not competing directly with AT&T and Sprint in offering the widest possible national coverage - it's a little late in the game to go for that. The better gameplan lies in concentrating on the weaknesses of AT&T and Sprint. Since the original parts of Voicestream were initially regional operators, they tended to aim at reaching good coverage in key strategic areas - rather than attempting to blanket the entire continental USA and ending up with sub-standard coverage even in places like LA and New York, as AT&T and Sprint have done. The arguably superior coverage in many major markets is the first selling point. The second is the ability to offer sophisticated data features in the phones. That's something AT&T is having major problems with. Sprint is currently wrestling with its initiative to roll out nationwide CDMA data features. This comes half a decade after some GSM operators started offering mobile data features and the technology gap is commensurate. Motorola's new GSM tri-mode phone weighs little more than 100 grams and offers superior stand-by time compared to most current US handsets offering just a single digital band. Other next year's models do the same bundling of US/global GSM standards while simultaneously decreasing the weight of the hybrid models compared to existing handsets. Bundling TDMA with GSM is a bit harder - and bundling GSM with CDMA can only be achieved with substantial weight and performance trade-offs. What this amounts to is a considerable advantage to Voicestream in offering global roaming 12-24 months before other US operators - with a more attractive model range. What all of this does not mean is that anyone is going to mop the floor with Sprint or AT&T. There is no doubt that these companies are the big winners in the US mobile operator sweepstakes. A strong brand, synergy with long distance operations and true nationwide coverage are formidable advantages. But there are major shortcomings in the AT&T and Sprint programmes as well - especially in the quality of coverage and customer service. The point is that a third national operator concentrating on good regional coverage, superior data features and international roaming just may have a shot at succeeding in the high-end market. And that's where the operating profits can be squeezed from - the status-obsessed nouveau riche, freaked into luxury overdrive by the stock market gains and hopefully loading up mobile handsets with all the data and roaming extras that a handset can handle without losing the miniaturisation momentum. Moreover, the newly national Voicestream is a hot take-over candidate for the European giant operators, as well as to MCI Worldcom and possibly Bellsouth. None of the other US operators holds the same acquisition appeal to European operators, which are the most likely aggressors in the next round of consolidation. An elegy to a digital umbilicus Nextel just won't give up - mobile internet, new models from Motorola, the mandatory link-up with Microsoft, etc. As far as last gasps go, this one is a doozie. But none of this Silly Putty can plug the fault line running under the company. The digital standard Nextel is using is to mobile telephony what the dodo was to ornithology. I'm told that dodos were perfectly adapted to living in their island environment - but never developed the wit or wings to avert being clobbered to death by the first foreign organism to enter their closed ecosystem. Motorola's iDEN is an orphan standard, used by only one major mobile operator and shunned by other mobile manufacturers. We do not know the year and we do not know the quarter - but at some point the total absence of competition in the iDEN market and the barren isolation this orphan standard exists in will probably catch up with Nextel. The increasing pace of globalisation of mobile telephony looks set to accelerate the process. Without several major manufacturers goading each other into innovative overdrive (as is happening with other major digital standards) Nextel's product line-up is doomed to slip behind in competition. Key new features like voice-activated dialing, infrared link-up enabling cable-free data transfer with PDAs and laptops, predictive text input, Bluetooth, etc., are all debuting in other standards. Multimode handsets handling several standards and opening worldwide roaming opportunities are also accentuating the isolation of Nextel. The long-delayed plans Motorola has on iDEN/GSM dual-mode phones do not look convincing compared to the stampede to develop US/Europe mobile handsets relying on integration of GSM-900, GSM-1900, TDMA-1900 and AMPS technologies. These gadgets are already on the market or very near to being introduced by Ericsson, Siemens, Alcatel, Bosch, Nokia and Motorola itself. The strong past performance of Nextel does not give us any clues about how badly the lack of competition and comparatively low R&D expenditures will ultimately hamstring the iDEN standard used by this operator. Next week: Part 2...