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FEBRUARY 25, 2005
By Andy Reinhardt The Buzz Is Back in Mobile Third-generation networks and the "smart phones" that use them are creating a watershed moment for the industry
At the big mobile communications show in Cannes in mid-February, the big focus was on third-generation (3G) networks and phones, with a particular emphasis on downloadable and streaming music (see BW Online, 2/22,05, "A Telecom Show's No-Show: Gloom"). But that wasn't the only news. After several tough years, the mobile business is infused with a new sense of energy and promise. Here's where some of the action is: One of the most noteworthy trends at this year's show was the growing prominence of Asian equipment makers. Companies such as Korea's Samsung Electronics (SAMCF ) and LG Electronics (LGEAF ) are already big players in Asia and North America, and now they're pushing to boost their share in Europe, where Nokia (NOK ), Motorola (MOT ), Siemens (SI ), and London-based Sony Ericsson still hold sway. STAKING OUT POSITIONS. Japanese makers such as Sharp (SHAR ), NEC (NEC ), and Panasonic (Matsushita) (MC ), which dominate their home market but are minor actors in Europe, have scored hit products in the Old World by collaborating closely with operators like Vodafone (VOD ) on custom-built phones. And Chinese newcomers, both from Taiwan and the mainland, are racing into the market with sophisticated, cutting-edge products. All of these companies want to take advantage of what management gurus call an "inflection point" in the mobile market. The transition from second- to third-generation networks presents newcomers with a chance to stake out a market position. After all, it was just such a shift in the 1990s that famously cost Motorola its lead to Finland's Nokia: The American company waited to make the transition from analog to digital cellular systems, and though it remains a strong No. 2 worldwide, it has never regained preeminence. Asian companies hope history repeats itself with the switch to 3G. The industry already shows some signs of a repeat. Japanese companies have a head start with 3G because the technology -- albeit a nonstandard version -- has been in use in the country for more than three years. Sharp, for one, has more hands-on experience with the rigorous demands of 3G handsets, which need to handle complex data types such as streaming video. CRAMMING IN FEATURES. Korean outfits also have gotten off to an early lead in Europe. The U8120 phone from LG Electronics, for instance, was the first 3G handset chosen by France Telecom (FTE ) subsidiary Orange for its 3G rollouts in France and Britain. It's also being used by Germany's T-Mobile, Britain's O2, Spain's Telefonica, and the multicountry "3" network owned by Hong Kong-based Hutchison Wampoa. James Kim, the president and CEO of LG Europe, says the company isn't even trying to compete with the old guard in second-generation GSM phones. "We decided to focus only on UMTS [3G] phones in Europe," he says. Samsung is also putting its emphasis on 3G, rolling out handsets that support music and video-conferencing through more than two dozen European mobile operators. Analysts say Asian companies with strong roots in consumer electronics and digital media could have an edge over European counterparts whose background lies more in telecom. The thinking is that with their experience in audio, video, and miniaturization, they could do a better job of cramming multimedia capabilities into consumer-friendly devices. But don't tell that to Jorma Ollila, the CEO of Nokia.
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