HELSINKI, Finland—Nokia, the Helsinki-based Finnish wireless equipment supplier, is predicting a dramatic concentration on the vendor side of global telecommunications, believing that the number of major vendors will diminish by 2006 to leave Nokia, Siemens, Ericsson and possibly an Asian supplier.
According to J.T. Bergqvist, Nokia vice president and head of its Internet Protocol (IP) mobility network division, vendors with global market shares of less than 15 percent will have little chance of survival.
Nokia’s long-term forecast is based on the upward mobility and overall sales performance in key global markets of the “Big Three,” determined on their future prospects in the GSM/W-CDMA mobile infrastructure arena.
“As the many vendors battle to increase their market share, the number of suppliers in the mobile infrastructure market will inevitably shrink over the next few years. While the question about how many vendors will survive is not yet clear, there is no doubt that consolidation will happen as the market cannot support all those that are there now,” said Bergqvist.
“A vendor needs a sizeable market share to survive in the long term. This means that they need to have a minimum 15-percent share in order to be profitable.”
In Bergqvist’s opinion, the main players in the GSM and W-CDMA markets will remain Nokia, chased by Siemens and Ericsson. Other contenders, such as Motorola, Nortel and Alcatel, could find their market shares fall to levels that render their operations unprofitable and in the long-run, “unsustainable.”
Concentration and specialization in the marketplace is already under way. Some vendors, among them Lucent, have downsized their GSM operations to invest more heavily in CDMA and cdma2000 mobile technologies.
“Nokia’s goal is to achieve a 35-percent share of the global mobile infrastructure market by around 2006 or 2007 across all technologies. At present, we have 30 percent of the W-CDMA network market and around 30 percent in the GSM market,” said Bergqvist. Nokia has set itself the target of achieving a 40-percent share of the global handset market by 2006.
From a competitive perspective, the global W-CDMA market is currently wide open, with some contracts having been renegotiated, including MmO2’s Universal Mobile Telecommunications System (UMTS) contracts. Operators in Europe and Asia have delayed final decisions about major third-generation (3G) network contracts to squeeze better terms from vendors.
Nokia’s primary focus is on multimedia messaging services (MMS) and 3G networks. The company is preparing for network rollouts in both areas in 2002 and 2003.
Nokia’s first 3G rollout will be in collaboration with Telia-bound Sonera, an event scheduled to take place in September. Ahead of this date, Nokia intends to launch its dual-mode GSM/W-CDMA handset. Nokia is bent on synchronizing its network and handset launches. This will be an accomplishment that most vendors failed to do with General Packet Radio Service (GPRS).
In the operating area of MMS, Nokia pins high hopes on the commercial viability of picture messaging services. It is due to launch its 7650 “picture phone” in July under the product label “picture messaging” or picture phone.
Nokia’s eye is also on Enhanced Data Rates for Global Evolution (EDGE) technology. Mindful that U.S. operators are moving toward rollouts of GSM/EDGE networks, the company intends to have the first EDGE-enabled handsets available in the United States by year-end.
“EDGE is being deployed in the U.S. mainly to allow operators to offer 3G-type services without the need for additional spectrum. This is also relevant to Europe where operators will install EDGE to expand their GSM networks. European operators will need both EDGE and W-CDMA. Nokia will ship EDGE hardware in Europe in the third quarter, with terminals shipped in the first quarter of 2003,” said Bergqvist.
