BANGKOK, Thailand-Like many high-tech firms in the United States, Motorola Inc. caught a cold from its exposure to the Asian flu and is working to recover. While no one can say for sure when Motorola will get back on the road to health, it pays to take the temperature of its business in Thailand-where the regional meltdown began in July 1997-for an indication of how soon the telecom giant can return to its former, robust self.
Following a sharp drop in sales worldwide, Motorola has ended a long-time relationship with one of the two largest Thai telecom service and equipment distributors here as part of its global corporate restructuring efforts.
United Communication Industry PCL announced its 30-year special commitment deal, which allowed it to solely handle sales and service of Motorola products in Thailand, was dropped after Motorola sold its stake of 12.6 percent in Ucom in September.
Sounding philosophical about the breakup, Ucom senior executive director Vichai Bencharongkul said in a press conference that it was time for a change and that a separation would be good for both parties. The Bencharongkul family has close ties with the founding family of Motorola, the Galvins, which introduced Motorola products to Thailand.
Motorola could not be reached for comment.
Ucom no longer may be the right partner in this time of economic crisis. With hefty U.S. dollar-denominated debts piled up from the devaluation of the Thai baht, Ucom is at the top of many analysts’ alert list. Vichai said that without Motorola as a shareholder, Ucom and its creditors would find it easier to secure deals for loan-payment rollovers.
“When there is no third party, negotiations can be done faster,” he said.
From all accounts, it wasn’t a bitter divorce. There’s no bad blood between Motorola and Ucom; the breakup is strictly about business prospects-or the lack of them. Motorola came to realize two years ago that teaming up tightly with Ucom was doing more harm than good in protecting and increasing Motorola’s market share in Thailand.
Once having the most popular brand in Thailand, Motorola has watched its brand reputation and market share drop far below those of Nokia Oy and L.M. Ericsson. Apart from having a wider range of products, especially in digital networks, the two Scandinavian suppliers have another major advantage: open distribution channels.
By giving Ucom sole distribution rights, Thailand’s other major cell phone service distributor, Advanced Info Service (AIS), a unit of the influential Shinawatra Group, refused to support Motorola in co-promotion of products and-more importantly-after-sales service.
Executives at AIS, which operates GSM and NMT 900 networks, have denied blocking sales of Motorola equipment. Despite their denials, however, it’s widely known in the Thai industry that AIS does not have any technical support program for customers who walk in with a Motorola handset.
According to AIS’s market report, as of the middle of this year Nokia had 44 percent of the market for NMT (Nordic Mobile Telephone) handsets, which total 736,500 units, and 42 percent of the GSM (Global System for Mobile communications) handset market. Motorola had less than 1 percent of the GSM market, which serves 282,500 customers.
Still, breaking up is hard to do. Though Motorola is now open for business to other distributors, it continues to keep Ucom as a major local trade link. And meanwhile, it has been looking for new partners. A new company, M-LinK International, was appointed as a new distributor of Motorola handsets, accordingly.
Cellular marketers noted the U.S. giant would need time to recover lost ground as Nokia and Ericsson have a tight grip on the Thai market. Recapturing the lead would be hard enough against these two tough competitors, but with the Thai market reeling from the economic turmoil, Motorola faces a daunting challenge.
“As cellular operators put new promotions on hold, it will be very hard for Motorola to bounce back quickly. However, Motorola is already a well-known brand in Thailand,” said Kuldit Samutakochorn, terminal products senior marketing manager at Shinawatra Wireless.
Motorola announced in October its sales fell 3 percent to US$7.2 billion in the first nine months from US$7.4 billion a year earlier. The drop reflects the continuing impact of adverse business conditions in Asia.
Robert L. Growney, Motorola president and chief operating officer, said the restructuring program, generating some US$40 million in savings so far, will help the company stage a recovery by mid-1999, when the firm expects to reach its goal of an annualized savings rate of at least US$750 million.
