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Vodafone RFP Fuels Femtocells

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan
7/5/2007
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Vodafone Group plc (NYSE: VOD) has issued a femtocell request for proposals (RFP) that is considered to be the most significant undertaking for the emerging low-power home base station market.

While many operators say they are considering femtocells, Vodafone, along with Orange (NYSE: FTE) and Sprint Corp. (NYSE: S), are the few major operators known to have actually issued RFPs for the technology. (See FT Preps Femtocell RFP, Sprint Goes Femto With WiMax, and Sprint Taking WiMax Indoors.)

Vodafone's RFP process is believed to have been going on for at least the past six months.

"This is the first big sizeable [RFP] that people are paying attention to," says Stuart Carlaw, research director at ABI Research , speaking on the sidelines of the International Conference on Home Access Points and Femtocells in London.

Vodafone is understood to be evaluating eight or nine different vendors' products. Carlaw says there are four companies that "look to be in a good position." Those are ip.access Ltd. , Ubiquisys Ltd. , Nokia Networks , and Motorola Inc. (NYSE: MOT), "in various combinations." (See ABI Rates UbiquiSys.)

Ubiquisys and Motorola responded to the RFP together, according to one industry source.

Other vendors in the femtocell space include Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. , NEC Corp. (Tokyo: 6701), and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). (See NEC, Ubiquisys Team, NEC Teams With Tatara, Ericsson Unveils Femtocell, ZTE, Samsung Build Femtocell, and Sonus Targets Femtocells.)

Based on the amount of RFP activity, ABI Research estimates that there will be 50,000 femtocell units shipped this year and 1 million units next year.

Vodafone's femtocell activity is driven at a group level within the operator, but this does not mean that every one of its markets will have the same approach. According to Carlaw, Vodafone's strategy is aligned in Germany and the U.K., but smaller markets such as the Netherlands have some autonomy to do their own thing.

"Initially, [Vodafone] will have some different approaches," says Carlaw. "But it will have to align [strategies] to get economies of scale."

A Vodafone spokesman could not provide any information about this RFP or the operator's femtocell strategy. [Ed note: That's because the person who deals with femtocells in the press office was on holiday.]

The list of operators looking at femtocells is long, but the operators most aggressively pushing the technology, according to Carlaw, are Vodafone, Sprint, French mobile operator SFR , and SoftBank Mobile Corp.

Carlaw says SFR's development efforts are as advanced as Vodafone's initiative, but that the operator has not yet issued a formal RFP. Vodafone holds a 43.9 percent stake in SFR. (See SFR, NSN Team on 3G.)

Earlier this week, Softbank held a proof-of-concept demonstration in Japan with several vendors. (See Softbank Trials Femtocell, Softbank Demos Moto Femtocell, Sonus Joins Softbank Demo, Netgear, Ubiquisys Team, and Ubiquisys, Softbank Demo .)

T-Mobile International AG is also evaluating femtocells, and the operator sees them as a more cost-effective way to provide home zone services. For these services, operators charge a lower tariff when customers are within the range of a specified cell site, usually near their home. With femtocells, the range where the lower tariff applies will be greatly reduced.

"With a femtocell, you buy it and you will have the new home zone tariff," says Jiri Valek, RAN systems expert at T-Mobile International. "We would like to invest a lot in [the] femtocell business, but there is not 100 percent proof that femtocells will work."

Telefónica Europe plc (O2) also confirmed its interest in the home base stations and, like T-Mobile, sees home zone services as the potential application. "Femtos show a lot of promise," says Mike Short, vice president of research and development at O2. "[They're] the logical successor to some of the home services we have today."

— Michelle Donegan, European Editor, Unstrung

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