Analysts these days are seeing rays of hope for Nokia Mobile Phone’s dismal market share in the CDMA handset business.
The world’s largest mobile-phone manufacturer dominates the global Time Division Multiple Access and Global System for Mobile communications handset markets, but its market share in the global Code Division Multiple Access handset market runs in the low single digits, said Brian Prohm, analyst with Dataquest. Nokia’s share of the North American handset market, the Finnish vendor’s best CDMA market, is trending toward 5 percent, he said.
The company is making moves to improve that, note analysts and Larry Paulson, vice president of Nokia’s CDMA phone business.
Nokia last month announced a partnership with Korean manufacturer Telson Electronics to manufacture and supply CDMA products for Korea and possibly other markets.
The strategy gives Nokia a quicker time to market and a way to crack the world’s fastest growing CDMA market, which is dominated by price-cutting local vendors. Nokia made a similar move to invade the Brazilian TDMA market and is today the largest market player in Brazil. Motorola Inc. has made partnerships with Korean vendors and has propelled itself to the third-largest vendor in Korea, behind Samsung Electronics and LG.
Technical issues kept Nokia from selling large volumes of CDMA handsets to Bell Atlantic Mobile since 1998. Bell Atlantic has now become the country’s largest operator, Verizon Wireless, and the carrier isn’t selling any digital Nokia handsets to customers today, said company spokeswoman Andrea Linsky.
Verizon, however, is testing Nokia’s tri-mode CDMA handset, a product that has become crucial to Verizon’s single-rate pricing strategy.
“We are very interested in trimode handsets,” said Linsky. “The single-rate pricing is so popular that we’re really concentrating on the tri-mode market.”
Nokia’s Paulson said he is confident Nokia will gain some crucial CDMA business this fall.
“Technically, what choice is there for us but to succeed?” he said. “We have worked hard on the technology side. We feel very good about what will come out in the fall. Our focus has been on the trimode handset.”
Credit Suisse First Boston analyst Marc Cabi noted from a recent tour at Nokia’s facilities that Nokia’s CDMA business could be on the verge of recovery. The vendor redesigned its 5100 and 6100 series handsets and is now testing with major CDMA carriers, Cabi noted.
“We believe Nokia’s efforts to relaunch a re-engineered handset in the U.S. and deliver a product for the burgeoning low-end in foreign markets could lead to additional upside to Nokia’s business,” said Cabi.
Technical problems plaguing Nokia’s CDMA handsets have been blamed on the chipset, which Nokia chose to develop on its own rather than purchase from Qualcomm Inc. Others have indicated that problems lie with the radio-frequency side. Nokia’s initial launch of handsets featured integrated antennas, which don’t work well with CDMA networks.
“It’s convenient to say that it’s the chipset,” said Paulson. “But in the end, if it was that simple, I don’t think we’d be taking the strategy we are taking … It’s really the implementation in the end.”
Nokia’s strategy is to continue developing its own chipset, a move most major vendors have made to reduce costs and allow for manufacturing flexibility. Nokia, however, is using Qualcomm’s chipsets in the handsets developed with Telson. Telson is the original equipment manufacturer, and Nokia is designing the form factor.
“Our core strategy of developing our own chipsets has not wavered,” said Paulson.
Still, Nokia has a long road ahead, caution analysts. The CDMA handset market, though relatively small compared with the GSM market, is the fastest growing and most competitive.
The CDMA mobile-phone market promises to become even more crowded this year, as vendors such as L.M. Ericsson and Japan’s Sanyo look to aggressively sell their products in North America. Dominant CDMA vendor Samsung shows no signs of losing market share either, and price points are falling dramatically. Soon, vendors will be offering competitive product offerings for 1XRTT technology, a 3G technology CDMA operators will deploy next year to offer high data speeds and gain more capacity.
Success in today’s generation of CDMA technology will guide handset vendors’ success into the third-generation market, which will be dominated by the CDMA air interface, say analysts. Carriers planning to deploy W-CDMA systems will look to Nokia as the dominant supplier.
“Nokia is fighting a big uphill battle,” said Dataquest’s Prohm. “Once you get a bad rap, you have to prove yourself twice as often, and the bar is set twice as high for you.”
