As all things GSM were talked about last week during the 3GSM World Congress trade show, the wireless industry was put on notice that Cingular Wireless L.L.C. is getting down to business with its national UMTS network buildout plans.
The carrier announced contract expansions with LM. Ericsson, Lucent Technologies Inc. and Nortel Networks Ltd.
Nortel’s three-year contract for network services and equipment is a shot of confidence as the company works to recover from a tumultuous couple of years plagued by accounting scandals. Cingular said Nortel’s GSM and UMTS technologies would support the carrier’s network expansion and subscriber growth, and will allow it to reduce costs, increase network reliability and improve the quality of its service. Nortel estimates that its equipment would help provide an increase in capacity of up to 300 percent.
Nortel said it plans to supply its 2G/3G 3GPP Release 4-compliant Mobile Switching Center Server and Media Gateway products. The vendor noted that it has already deployed more than two million ports of its MSC solutions to support Cingular’s GSM network. Nortel has been a Cingular supplier since 1995.
Cingular’s contract extensions with Ericsson and Lucent are similar to its deal with Nortel, though Cingular did not provide details about the length of its contract with either Ericsson or Lucent. Cingular also did not disclose financial terms for any of the contracts.
Interestingly, Cingular made no mention of its other 3G equipment supplier, Siemens AG. In December, UBS Investment Research said it suspected that Siemens was not part of Cingular’s initial 16-city UMTS launch even though the vendor had received a 3G infrastructure contract from the carrier. UBS questioned Siemens’ long-term positioning at Cingular and suggested that Ericsson and Lucent were vying for Siemens’ 20- to 30-percent share. Cingular originally awarded contracts for its 3G launch to all three vendors, with Ericsson and Lucent each holding 35 to 40 percent of the pot.
Cingular insists Siemens is still part of its network expansion plans, though the carrier declined to elaborate on its relationship with Siemens. Siemens declined to comment on the situation.
Siemens may be focusing its energies on securing contracts with Chinese carriers as 3G equipment contracts get doled out. Siemens has already boasted of its solid strategic position in the world’s largest wireless market, noting that it said it expects to begin shipping TD-SCDMA equipment to Chinese carriers by the middle of this year.
“We are pursuing a dual strategy in China,” stated Christoph Caselitz, head of Mobile Networks at Siemens Communications. “First, we have outstanding W-CDMA know-how and the sales successes to match. Second, we assumed a pioneering role for TD-SCDMA in China at the right time.”
Siemens noted that although the Chinese government has not yet awarded 3G licenses, the company has been working with Chinese partners since TD-SCDMA’s inception and has invested more than $202.8 million developing the technology. The company said it has been working with Huawei Technologies Co. Ltd. and the Chinese Ministry of Information and Industry to test TD-SCDMA products, including base stations and their control hardware. Siemens said handset vendors have been testing TD-SCDMA gadgets with its equipment since the middle of last year.
“We can deliver the infrastructure as soon as the Chinese government has awarded the licenses to carriers,” said Caselitz.
In January, the Chinese government declared TD-SCDMA the country’s official 3G technology. Currently, China Mobile and China Unicom offer services based on GSM technology, but most industry watchers expect the carriers to migrate to both W-CDMA and TD-SCDMA in the country’s densely populated areas. However, it’s not clear how W-CDMA technology will figure into the country’s 3G plans now that the Chinese government has backed the country’s homegrown technology, TD-SCDMA.
Billions of dollars are riding on the situation; with more than 400 million wireless subscribers already, China’s market is expected to grow 65 percent by the end of 2010, according to Informa Telecoms & Media.
Developed by Datang Mobile and other Chinese equipment vendors, TD-SCDMA is expected to protect Chinese firms from royalty payments to the likes of Qualcomm Inc. and others. Qualcomm holds most of the essential patents to CDMA2000 1x EV-DO technology as well as patents covering W-CDMA.
Industry analysts have said that China is stalling on issuing third-generation licenses so TD-SCDMA can fully mature, but pressure has been building for China to make a move. The Chinese government has made no secret of its plans to wow the world with its 3G networks during the 2008 Beijing Olympics. Now that the government feels TD-SCDMA is ready for prime time, 3G licenses are expected to be awarded swiftly.
Pyramid Research says infrastructure vendors in China are poised to battle it out for market control as 3G is deployed.
“The winner of the Chinese 3G game will be the one who is best able to retain the high spender,” said a recent report by Pyramid Research. “TD-SCDMA, being an untested technology, will initially face constraints. Its 3G market share expected in 2006 at 10 percent should expand to nearly a quarter by 2010.”
At last week’s 3GSM World Congress, Siemens rolled out a new product family that it says lowers the cost of building new W-CDMA networks and makes enhancing GSM networks with W-CDMA less complicated. The company said its offerings allow the radio head and the server to be installed at separate locations, which Siemens said saves space, power and installation labor-all of which saves money. In traditional mobile networks, the radio sits in the base station and is connected to an antenna via cable. This scenario demands that the base station be located close to the antenna, where real estate is generally expensive. With Siemens’ product, the radio head and the antenna must still be located near each other, but the server can be located in a facility up to 30 miles away-ideally where costs are lower. Siemens said its server can support up to 12 radio heads, a system that could add up to substantial savings for network operators.
“We want to grow significantly faster than the market. To do that, we are aligning our innovative products to reflect market trends: New data services are boosting operator revenues-meaning that their networks will have to offer corresponding capacity and coverage coupled with high cost-efficiency,” stated Thomas Ganswindt, chief executive officer of Siemens’ Communications business unit.
Siemens estimates that by 2008 there will be some three billion wireless users, and the market in Western Europe is clearly trending toward strong revenue growth in data services.
“The winners will be those mobile operators who upgrade their networks to keep pace with the high volumes of data traffic and can offer attractive services,” said Ganswindt.
Siemens’ goal, stressed Ganswindt, is to advance to the number two position in the market for wireless networks.
“Last year, we won one new 3G W-CDMA customer a month, and that’s what we have our sights set on for 2006 as well.”
Siemens called data services the “revenue turbo of the future” and said it intends to play a major role in driving the market, using mobile TV as a “major engine” to do so.
