Prospects of 3G is Not Good Until 2004

date: March 11, 2002

Merrill Lynch is taking down prospects of 3G for the whole 2002 and even 2003 with 2004 begin the turn around point, cites four main reasons for its change in forecast.

First, it thinks investments in 3G network equipment will be pushed further out due to a lack of exciting applications and services, as well as technical issues relating to roaming, interoperability and billing. As 2G will become over-capacity near late 2003, operators will be forced to proceed to 3G technology to accommodate more customers. This will not be expected until early 2004 by telecom analysts.

It has also heard that phones that can handle the 3G WCDMA technology as well as GPRS and GSM will not be available in volume until late 2003 or early 2004. This is mainly due to technical problems surrounding the "hand-off" as users move between GSM and WCDMA services.

Merrill believes in addition that some operators will deploy lower cost 3G standard technologies that improve quality and capacity such as EDGE, rather than WCDMA systems in the near term.

Finally, it sees pricing pressure accelerating, "given the current overcapacity in the industry, with 10 global players now fighting for what looks to be a smaller pie."

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