Nokia defies pessimists and predicts 3G success

date: 26th February 2001, source by: FT

Nokia, the world's leading maker of mobile telephones, has hit back at telecom industry pessimism, saying that whatever the short-term uncertainties, third generation will make a significant breakthrough by next year.

While acknowledging a sharp deterioration in market sentiment, executives insist that neither the business case for 3G nor the timing of its introduction has been affected.

The Finnish group, which makes one in every three mobile phones, has not changed its forecast that more than 500m phones will be sold globally this year, up about 25 per cent on last year's 405m.

The group's upbeat comments fly in the face of the pessimism that has swept over the industry in the past week.

Motorola, the second biggest handsets maker, warned on Friday that it could make a first-quarter loss; a senior Intel executive has said the whole telecoms industry could be bankrupted by 3G; and Qualcomm has warned that the W-CDMA phone standard could be up to two years late.

Nokia'a critics argue that the company is in denial, and believe the slowdown the group has predicted for the first quarter is likely to last much longer, not least because of the economic deterioration in the US. Nokia's shares fell 7.2 per cent to E23.58 on Friday, a 16-month low.

In a series of interviews with the FT in Helsinki, Nokia executives expressed exasperation at the darkening mood. "People seem to be forgetting that this is still a strong growth industry," said one.

Olli-Pekka Kallasvuo, Nokia's chief financial officer, said Nokia expected the third generation market to be commercially viable next year.

Responding to Qualcomm's comments, he said: "Our view is drastically different. We know the technology is there. We know calls have been made in the lab in W-CDMA technology. We know we can ramp up the networks of our customers."

He added: "I don't understand the comment of someone who is not even in the business in terms of selling systems. We will be selling W-CDMA handsets in volumes in the second half of 2002."

His comments were echoed by other Nokia executives. "There's nothing that would say that the 3G business case is worse than it was five months ago," said Rene Svendsen-Tune, senior vice-president in Nokia Networks.

Pekka Rantala, a vice-president in Nokia Mobile Phones, said 3G would initially take off around four main areas: multimedia messaging - such as sending electronic postcards; mobile e-commerce; location-based services; and entertainment.

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