Nokia, Orange, Rivals Lack the Phones to Market Faster Services
By Philip Lagerkranser
Cannes, France, Feb. 17 (Bloomberg) -- Executives from Nokia Oyj, Orange SA and Vodafone Group Plc will tout the prospects for faster cellular services at the telecommunications industry's annual meeting in Cannes this week. What will be in short supply are the phones themselves.
Nokia, the world's biggest mobile-phone maker, hasn't begun selling its first so-called third-generation handset yet. Sony Ericsson Mobile Communications Ltd., ranked No. 5, hasn't even unveiled such a product. The few phones that have been announced so far leave much to be desired, executives said.
``They're huge as bricks, battery life is appalling and the price for the handsets is too high,'' said Richard Brennan, executive vice president at Orange, in an interview. ``Until we get those problems sorted, we won't market 3G.''
After spending $100 billion on permits to build new networks, Orange and European rivals need the phones to be able to offer services such as watching music videos and holding video conferences. Nokia and Motorola Inc., which also sell network equipment, are counting on the phones to entice consumers to buy new handsets as markets near saturation and prices fall.
Cannes
For operators and phone makers, introducing attractive 3G handsets ``is probably the biggest challenge they all collectively face,'' said Ben Wood, an analyst at market researcher Gartner Inc.
Both Brennan and Wood are attending the 3GSM conference, which starts today in this French Riviera town and lasts all week. Other participants include Ericsson AB Chief Executive Kurt Hellstroem and Motorola President Mike Zafirovski.
In Europe, the new networks use Wideband Code-Division Multiple Access technology that's powerful enough to handle moving images with sound, something existing systems based on the Global System for Mobile Communications can't do.
More than 55 million WCDMA phones will be sold in Western Europe in 2006, up from 1.3 million this year, according to market researcher Yankee Group. Worldwide about a third of the 462 million phones sold in 2006 will be based on WCDMA, Yankee predicts.
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.
Plug and Play
``Most people want things that are just plug and play,'' said Stuart O'Gorman, who helps manage $700 million including Nokia shares at Henderson Global Investors. ``They need to make the phones very, very easy to use and try them out on people who are stupid.''
Ericsson, Nokia and Motorola have lost a combined $408 billion in market value since May 2000.
Nokia, which sells almost two of every five handsets sold, plans to start shipping the 6650, which operates on both WCDMA and GSM networks, in the first half, depending on how well the phones work both for making calls and for using high-speed data services.
The 6650 is the first Nokia phone that can record video simultaneously with sound in video clips of up to 20 seconds. At 141 grams, it's almost twice as heavy as Nokia's other high-end phones. And it has an external antenna, diminishing its allure to Nokia users who've gotten used to built-in antennas.
``Believe me, there will be takers for this device,'' said Anssi Vanjoki, who's in charge of 3G phones at Nokia, at a September press conference announcing the 6650.
Shortage
Motorola's A830 handset weighs 157 grams, compared with 83 grams for its V70 phone, which allows users to surf the Web.
Phone company executives cite the shortage of compatible phones as one reason for delaying investments in faster networks. Tele2 AB, Sweden's No. 2 phone company, won't start marketing high- speed cellular services before larger handset volumes are in place.
``There have to be volumes to motivate starting a campaign,'' Tele2 CEO Lars-Johan Jarnheimer said in an interview. ``We're far away from that.''
Because WCDMA networks are being rolled out gradually, high- speed handsets have to support both standards to ensure users don't get disconnected when moving outside areas covered by third- generation base stations, analysts and executives said.
Both Standards
Integrating both technologies in one handset is complex. Makers of mobile phones and networks still haven't solved the problem of switching between networks, meaning users may get bumped off calls when using the devices, Jarnheimer said.
According to Orange's Brennan, mobile phones that work on both networks without glitches won't be available until 2004.
Some analysts said Orange and other phone companies are using the shortage of high-speed phones as an excuse for delaying investments in faster networks, allowing them to free up more money for repaying debt and bolster their existing networks.
``Most prefer to sit back and wait for demand to materialize,'' said Farid Yunus, a senior analyst at Yankee Group. ``They're happy to let the vendors be the scapegoats.''
Phone companies started delaying network rollouts after borrowing a record $330 billion in 2000 to pay for licenses, acquisitions and equipment. Back then, Orange and other phone companies expected users to flock to such services as reading newspapers on their phones.
Delays
Orange once planned to open its network in 2002; it now plans to make services widely available in 2004. MMO2 Plc, the U.K.'s fourth-largest mobile-phone company, also has pushed back plans for the new services by at least two years.
Nokia and Motorola may soon come under more pressure to introduce additional 3G phones. Asian rivals such as NEC Corp., Samsung Electronics Co. and Toshiba Corp. are targeting the market to challenge them, said Yunus.
Those companies have more experience in making phones based on the Code-Division Multiple Access technology, upon which WCDMA is built. They also have more experience making picture phones with color-screen handsets, features that have been available longer in such markets as Japan.
Some are already making inroads. Hutchison 3G U.K. Holdings Ltd., which will introduce 3G services in the U.K. by the end of March, has selected NEC to supply it with handsets.
On those phones, Hutchison's subscribers will be able to watch video news, goals and match highlights from England's Premiership soccer league, and content from Emap Plc magazines including FHM and Smash Hits.
The NEC phones from Hutchison will cost as much as 449 pounds ($724). Commercials for them feature users watching football goals on the handsets.
``Nokia will be attacked from all sides,'' said Yunus. |
