Korea Picks Nokia, DoCoMo Mobile System Over Qualcomm (Update5)
By Ian King
Seoul, July 7 (Bloomberg) -- Korea's biggest mobile phone service operators said they'll use a system allowing high-speed Internet access developed by Nokia Oyj, Ericsson AB and NTT DoCoMo Inc., turning their backs on a Qualcomm Inc. version.
SK Telecom Co., Korea Telecom Corp. and LG Telecom Co., set to corner Asia's third-largest cellular market after a series of acquisitions are completed in the coming months, are seen by most analysts as the most likely to win three licenses to start offering the services next year.
Their decision is blow to San Diego-based Qualcomm because all 26 million of Korea's mobile users are now hooked up via cellular phones using Qualcomm technology. The new networks will allow data to be transmitted much faster than at present, allowing users to surf Web sites, send photographs and even hold video conference calls.
``This is bad news indeed for Qualcomm, as Korea has been one of the primary users of its technology,'' said Jeremy Brest, head of technology for North Asia at Nomura International Hong Kong Ltd.
Qualcomm's global depositary receipts fell as much as 7.1 percent to 58.5 euros in early trading in Europe.
The standard the three companies said they'll adopt is wideband code division multiple access, known as W-CDMA, which was designed by European phone makers Nokia Oyj and Ericsson AB. It is now under test with Japan's NTT DoCoMo Inc. The system is derived from the European global standard for mobile telecommunications, or GSM, which is used by more than 60 percent of the world's mobile phone market.
Qualcomm's code division multiple access 2000 technology is evolved from its current technology, which accounts for about 20 percent of the world cell phone market, with about 60 million users worldwide.
Compatibility
Korean companies said they couldn't afford to ignore the success of European companies in developing globally accepted mobile telephone standards.
``We looked at all of the trends and judged that both China and major Japanese mobile companies will choose W-CDMA,'' said Lee Hang Soo, a spokesman for SK Telecom, Korea's largest cellular service provider. ``When you look at the Korean market you cannot avoid considering what's going on in China and Japan.''
Choosing a system compatible with other countries' networks allows phone users to take advantage of what's called roaming, the ability to use the same handset on other networks in other countries. And for the first time, Korean service providers will be able to collect charges for this kind of service.
The choice of W-CDMA is ``good for service providers for two reasons. First, they will have a wider range of network equipment and handsets to choose from, effectively lowering their costs,'' said Nomura's Brest. ``Second, ultra-high margin roaming revenue will meaningfully be available to Korean operators for the first time.''
Second Blow
A government ruling that stopped service providers from offering discount handsets starting June 1 has already hurt Qualcomm's Korean sales. The end of so-called handset subsidies has doubled the price of a mobile phone for users and caused some analysts to halve their forecasts for this year's mobile phone sales in the country.
In June, 389,000 mobile phones were sold, down 77 percent from May's total and down from an average of 1.7 million units per month over the first five months of this year, according to the Digital Times newspaper.
The Korean government will announce next week how it will choose the companies who will provide the new services. It will take applications for licenses in September and will make a decision by the end of the year.
In a plan presented at a public hearing yesterday, the Ministry of Information and Communication said it wants to award three licenses to companies chosen according to the quality of their business plans. It will charge each licensee between 1 trillion won ($890 million) and 1.3 trillion won.
The policy document also said the government will allow the companies themselves to choose which technology they will use.
Equipment Makers
``For domestic network equipment and handset manufacturers, it is a blessing in disguise,'' said Nomura's Brest. ``They will immediately have to focus development efforts on W-CDMA, which will provide them access to the major 3G equipment market worldwide, rather than play catch-up later.''
Samsung Electronics Co., Korea's largest electronics company, has focused its mobile phone system equipment product development on cdma2000 technology.
Analysts estimate the division, which accounts for about 7 percent of the company's sales, may take up to six months to switch production to the alternative standard.
LG, Korea's third-largest business group, said it partly
decided to choose W-CDMA because its equipment maker, LG Information and Communication Ltd., has been preparing to build network equipment based on that technology.
Still, LGIC until now has sold only CDMA phones while Samsung has successfully pushed into the GSM market, last year selling more GSM phones than CDMA, even though it's the world's largest producer of the latter.
``If it's W-CDMA then the market will be open to foreign suppliers as well because Samsung and LGIC don't have the ability at this point,'' said Keon Han, an electronics analyst at Bear Stearns Asia Ltd. ``There has got to be a six to eight months delay and I'm pretty sure that if the roll out comes in the first quarter next year, these companies won't be ready.'' |
