Motorola Blows Hard on Euro 3G

CANNES, France -- 3GSM Congress -- Motorola Inc. (NYSE: MOT) swept into Cannes this week claiming it will emerge with 3G infrastructure deals from major Western European carriers within a year.

Margaret Rice-Jones, VP and general manager, global telecom solutions sector, Europe, Middle East, and Africa [ed. note: what is it with Motorola and these never-ending job titles?], tells us with an insouciant air worthy of the local ambience that Motorola will have won UMTS infrastructure deals from Tier 1 mobile operators in Western Europe "within a year." No operator names were offered as examples.

So why will the landscape look so different? Altered timetables and missed deadlines for the supply of 3G technical features and functions means carriers will renegotiate their existing 3G rollout contracts, Rice-Jones claims. She adds: "Some UMTS suppliers' contracts have already expired without them supplying a single piece of equipment."

Quite a claim. Can she provide details? "Non-disclosure agreements" prevent her from doing so, she says [ed. note: how conweeenient]. But the list of companies Rice-Jones is not talking about is not that long, and includes Alcatel SA (NYSE: ALA; Paris: CGEP:PA), LM Ericsson (Nasdaq: ERICY), Nokia Corp. (NYSE: NOK), Nortel Networks Corp. (NYSE/Toronto: NT), and Siemens AG (NYSE: SI; Frankfurt: SIE).

Rice-Jones goes on to brag that Motorola does not have the financial problems faced by some of the other vendors. "The operators want to get their networks from companies they know will be around in seven years time." However, she declined to offer the names of any companies she believed wouldn't make it to 2010.

Given that Motorola was around when the first round of UMTS network deals were awarded in 1999 and 2000, and that the company has a sizeable installed base of GSM operator customers in the EMEA region to pitch its offering, how come it hasn't won a single UMTS deal in EMEA to date?

"Our honesty made us non-compliant with the operators' requirements" during that first round of awards, says Rice-Jones [Lord knows, we have our faults...], who says Motorola didn't feel it could meet the short timescales (such as network deployment by 2002) associated with those original awards.

In addition, she adds, some operators were asking for ridiculous levels of vendor financing ("in excess of 100 percent of the value of the equipment, and up to 250 percent"), and Motorola did not want to "act like a bank."

So what are Motorola's prospects? One senior industry analyst, who (in keeping with the spirit of the day) did not want to be named, says although the vendor has an interesting proposition -- one that can include the delivery of dualmode handsets -- its lack of traction in the UMTS market to date is a major hurdle. The operators will turn to the vendors with whom they have existing relationships, he believes, and Motorola will struggle to gain any significant market share.

To date, Motorola's track record in the UMTS network infrastructure market is almost non-existent. It has one deal, as a joint supplier with LM Ericsson (Nasdaq: ERICY) to provide equipment to Hutchison Telecom Australia, which is to launch its 3G services soon. But that deal is only for radio access equipment in Sydney and Brisbane [ed. note: a.k.a. the fourth- and fifth-world, respectively].

Another industry watcher, IDC senior research analyst Paolo Pescatore [alleged motto: I caught a fish, and it was this big] is also skeptical about Motorola's potential to win contracts. "I can't see them making any inroads in Western Europe, though they may have some joy in Eastern Europe [defined as... a really first-class potato?]. Motorola is playing catchup with the likes of Ericsson, Nokia, Nortel, and Siemens, and you would have to ask, too, whether they have the capability to deliver cost-effective UMTS networks."

— Ray Le Maistre, European Editor, Unstrung

futureisbright 12/5/2012 | 12:36:08 AM
re: Motorola Blows Hard on Euro 3G Maggie likes to brag how Moto's market cap is superior to any number of her competitors. That is yesterday's argument.

As an access only vendor (it is fair to say her packet venture has failed, since her GGSN's are being removed all across Europe), she does not get visibility across the organizations she is trying to sell to. She has no field track record whatsoever. Why would any operator use her except as a price rabbit for the established vendors??

Ultimately, the question for Maggie, is how much sales does she need to bring in, to achieve a resonable return on investment? Say with reasonable = breakeven. With an ongoing development requirement which I'll guesstimate in the range of $80-$100M, she'll need a share of quite a few first tier operators.

An whatever happened to Moto selling its wireless infrastructure? Pretty hard to do without a customer.

WirelessUndertaker 12/5/2012 | 12:35:49 AM
re: Motorola Blows Hard on Euro 3G
There is some truth to the assertion that Motorola did not engage is ridiculous vendor financing deals in 2000 that Ericsson was engaged in. They walked away from at least 1 or 2 deals in Western Europe in 1999-2000 because of the financing involved. Look at the mess that the financing of the Telsim deal has turned into, for Motorola.
However, a number of other factors contributed to their lack of success in the Western Europe 3G market in the 1999-2000 timeframe.
-Moto was not a total systems provider like Ericsson and Nokia.
-Moto did not make much inroads in the GPRS core market because of various initial problems with their SGSN/GGSN. This affected their UMTS business, since UMTS R99 was primarily based on GPRS Core.
- The lack of an MSC affected some of the UMTS R99 capabilities that they could provide.
- Moto could not deliver a UMTS solution in 2002. They were simply not ready.
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