Nokia Mulls CDMA Move

Vendor chews over the possibility of joining CDMA network infrastructure market

November 25, 2003

3 Min Read
Nokia Mulls CDMA Move

Nokia Corp. (NYSE: NOK) is considering a move into the Code Division Multiple Access (CDMA) network infrastructure market, according to analysts attending the vendor's capital markets event in Dallas yesterday.

In a research note earlier today, Lehman Brothers analyst Stuart Jeffrey claims "Nokia acknowledged that it could consider entering the CDMA infrastructure market via acquisition."

Nokia itself isn't denying such a prospect. "Their assumption is about right," says Thomas Jönsson, communications director at its networks division. "During the Q&A session, our CEO Jorma Ollila admitted the issue was something they had looked at thoroughly but that he wanted to leave it at that for now."

Nokia is traditionally associated with the European-backed GSM (Global System for Mobile communications) and UMTS (Universal Mobile Telecommunications Service) sectors, where it is currently battling for top spot with Swedish rival Ericsson (see Nokia Preps for W-CDMA War and Nokia Claims WCDMA Lead).

UMTS is the 3G upgrade to the GSM standard, using a wideband-CDMA air interface on top of the GSM core network to increase voice capacity and boost data-transfer speeds to a potential 2 Mbit/s.

A "spread spectrum," digital cellular air interface technology mainly used in the U.S. and South Korea, CDMA operates in the 800MHz band and 1.9GHz PCS band and supports data transfer speeds between 14.4 kbit/s and about 2 Mbit/s (in its latest third-generation variants).

Any serious intent to enter the CDMA network business would certainly raise eyebrows in the infrastructure space. A recent Unstrung Insider report gives Lucent Technologies Inc. (NYSE: LU) a dominant share of 41 percent in this market, with Nortel Networks Corp. (NYSE/Toronto: NT) placing second, with twenty percent, and Motorola Inc. (NYSE: MOT) filling out the top three with 15 percent. LM Ericsson (Nasdaq: ERICY) and Samsung Corp. both boast an 8 percent share (see Ericsson's CDMA Cheer).

Such intense competition from established players leads analysts to doubt the vendor’s potential for success. “With the incumbent vendors there, it is going to be very difficult for them to penetrate the market, given the existence of players with proven CDMA experience,” comments IDC senior analyst Paolo Pescatore.

“I can’t see it happening at this point in time,” agrees Dr. Richard Windsor of Nomura Holdings Inc. “It would be too unprofitable for them.”

Current Analysis' senior wireless infrastructure analyst, Peter Jarich, views it as a long shot for several reasons. He cites the length of time it has taken Ericsson to build up steam in the CDMA market as a potential detractor to any deal.

“It’s also unlikely that Nokia would be able to acquire a market leader, so they would be left trying to grow share for a while. Consider the products they would acquire. Nokia has been vocal in its support of EV-DV -- who could they acquire that has shown support for EV-DV infrastructure?”

In Nokia's defense, Jarich does point out that the vendor has shown a focus on developing markets. “CDMA450 is proving to be a real solution, and EV-DV could be as well (a cheaper upgrade than GSM to UMTS). Plus, if Western Europe lets CDMA450 in, then Nokia might want to be in the mix.”

— Justin Springham, Senior Editor, Europe, Unstrung

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