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Skepticism grow on WCDMA technology

June 18, 2003

Analysts from Deutsche Bank are casting further doubt on the timing of 3G, predicting that there will be no further "meaningful" launches of the high-speed mobile-phone networks this year.

The US based analysts said telecom equipment makers are still struggling to master the WCDMA technology while operators remain dissatisfied with the 3G phones that are on the market.

Nokia, in particular, seems to have struggled with the network technology, said the analysts, who attended a conference on 3G last week in Amsterdam that featured representatives of the major manufacturers and operators.

The analysts said they had at the meeting "confirmed from multiple sources across the wireless food chain" that Nokia has been having problems with its 3G base stations, which it said have been crashing frequently due to a software problem. The problem extended across at least five networks from the Nordic region to southern Europe, the analysts said.

The analysts said Nokia's radio network controllers have been dropping voice calls at high rates.

Two weeks ago that a telephone operator Hutchison 3G HK forced Nokia to remove 3G base stations in Hong Kong after it experienced problems. Siemens and NEC are supplying replacement equipment.

At a company meeting with analysts last week, Sari Baldauf, the head of Nokia's networks unit, acknowledged that the Finnish company had experienced problems with some network equipment.

The Deutsche Bank analysts said the network issues, as well as a shortage of acceptable 3G handsets, are likely to delay further significant commercial network launches until some time in the first half of 2004. Among other things, the analysts said operators are still having trouble handing-over calls between their current networks and the new 3G networks without disconnecting them.

"'Commercial' launches, if they do take place this year, will stretch the definition of the word 'commercial' and most likely consist of limited launches in a few cities with friendly users and pre-existing subscribers that are provided free phones and/or free service as part of a pre-market trial," the analysts wrote.

The Deutsche Bank analysts said unresolved issues over royalty payments for 3G technology could slow its spread. Nokia, Ericsson and Siemens are pushing to cap WCMDA royalties at 5%, but the analysts said Qualcomm is unlikely to agree to a limit. The uncertainty could limit how aggressively suppliers discount their equipment, the analysts say.

 


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