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Nokia Barbecues Ericsson

Nokia Corp. (NYSE: NOK) has dealt rival LM Ericsson (Nasdaq: ERICY) a major blow by securing a multimillion-dollar contract award for Vodafone Group plc's (NYSE: VOD) 3G network in Australia and New Zealand, a deal flagged by Unstrung last month (see Voodoo Hushes on Nokia Deal).

The Finnish vendor has beaten its Swedish rival -- as well as Nortel Networks Ltd. (NYSE/Toronto: NT) and NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701)/Siemens AG (NYSE: SI; Frankfurt: SIE) -- in the battle to win the sole-supplier Wideband-CDMA (W-CDMA) deals, estimated to be worth approximately $500 million (see Nokia Networks Down Under).

The W-CDMA air interface is part of the Universal Mobile Telecommunications Standard (UMTS), which has already been adopted as the European 3G standard. Used with existing Global System for Mobile Communications (GSM) core networks, the theory goes that W-CDMA-compliant handsets and base stations can increase wireless data transfer rates to a potential maximum of 2 Mbit/s.

Nokia’s success is all the more striking in light of Ericsson’s standing as the supplier of Vodafone Australia’s GSM and GPRS (General Packet Radio System) networks.

Not only has Nokia wrested the 3G W-CDMA deal from the Swedish vendor, but a statement from Nokia suggests that Vodafone could also rip out parts of Ericsson’s 2G kit and replace it with Finnish equipment.

“The agreement allows an option for Vodafone to replace key network elements of Vodafone Australia’s existing GSM and GPRS core network with Nokia switching equipment,” notes the release.

“It’s clear we could definitely do some of that,” confirms Nokia’s communications director, Thomas Jönsson.

Ericsson declines to comment on the deal.

Analysts are impressed with Nokia’s market inroads. “Most 3G contracts are built on top of existing contracts,” comments Gartner Inc.’s Jason Chapman. “Vodafone has a very strong relationship with Ericsson. For Nokia to win in Australia -- not a traditional market for the vendor -- shows that they have clearly been impressing with Vodafone in Japan.” (See Nokia Expands J-Phone.)

According to Jönsson, network deployment in both Australia and New Zealand is “imminent.” The Finnish vendor is the sole supplier of GSM and GPRS equipment to Vodafone New Zealand.

Vodafone expects to launch commercial 3G services in the region by mid 2005. According to research firm EMC, Vodafone Australia boasts a 2.442 million subscriber base, with its New Zealand subsidiary totaling 1.567 million (as of March 2004).

— Justin Springham, Senior Editor, Europe, Unstrung

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