Sources indicate Ericsson Inc. may be preparing to enter the cdmaOne handset business.
Ericsson, the only major vendor that has yet to license Interim Standard-95 technology from Qualcomm Inc., has been in discussions with at least one cdmaOne handset vendor in an attempt to arrange an original equipment manufacturer agreement. This sort of agreement would not require Ericsson to license the technology. However, other sources indicate the company has a working prototype, which may require a license agreement.
Ericsson did not return repeated phone calls from RCR at press time.
The company’s parent, Sweden-based L.M. Ericsson, has long decried cdmaOne technology, initially saying the technology wasn’t ready for commercial deployment and probably could not work when deployed. Now that cdmaOne systems are operating in North America, Asia and other parts of the world, Ericsson’s stated position is that wideband Code Division Multiple Access technology based on the Global System for Mobile communications platform holds better promise for delivering the next generation of digital wireless multimedia services like higher data rates.
But analysts and other industry sources indicate the vendor will lose digital handset market share in the U.S. and abroad if it doesn’t enter the cdmaOne handset market. Deployment of next-generation systems is years away, and the analog handset market is falling at a substantial rate.
“Ericsson’s market share in digital was about 41 percent in the United States last year. It will be hard pressed to keep above 30 percent this year in digital,” said Matt Hoffman, senior analyst with Dataquest in San Jose, Calif. “The 28 (percent) to 30-percent range would be the best they can do. The reason why their market share is falling so fast is because they are not competing in IS-95 … The long-term recipe for success will be in all three technologies.”
Though success in GSM communications technology is the key in determining success worldwide, said Hoffman, the difference between first-tier and second-tier vendors will be participation in the other two global standards-Time Division Multiple Access and cdmaOne technologies.
The world’s other two dominant handset vendors, Nokia Mobile Phones and Motorola Inc., make digital handsets for all three technologies. This is one reason why Nokia is having a good year and is taking market share away from its competitors, say analysts. Hoffman predicted Motorola-which has been late to market with TDMA and cdmaOne handsets-in time will emerge as a dominate digital player.
But Ericsson may be hard-pressed to find a business case to enter the market. An OEM agreement may prove costly and many players that have finally entered the cdmaOne handset market have found the process painstaking, primarily because they have developed their own complex chipsets rather than purchase them from Qualcomm. Players like long-time handset maker Oki telecom have bowed out of the cdmaOne market as handset price points fell too quickly for them to compete. An OEM agreement would get Ericsson into the market quickly, but it would have to buy the phones outright and wouldn’t be able to sell them for that much more to carriers.
“The issue is volume pricing and discounting,” said Phil Redman, senior analyst with the Yankee Group in Boston. “Without doing your own development and buying chipsets from Qualcomm, it’s very hard to make a profit off of something like that … Preparing for the next generation could be more profitable. The quicker 3G standards are passed, its seems more intelligent not to play in IS-95.”
