InterDigital Inc (IDCC)

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WSJ -- Nokia Falls Behind in Rollout Of 3G Mobile-Phone Services.
April 28, 2003

My Comment: The story we have been told was that Nokia hired IDCC to put them in the forefront of WCDMA. Now we see that didn't work. See the bolded part below.

Nokia Falls Behind in Rollout Of 3G Mobile-Phone Services

By DAVID PRINGLE, ALMAR LATOUR and KIMBERLY SONG
Staff Reporters of THE WALL STREET JOURNAL

Nokia Corp. has slipped behind rivals in rolling out equipment to support commercial third-generation mobile-phone services.

The Finnish company has bet heavily on a 3G technology called WCDMA, or wideband code division multiple access. The mobile-phone industry hopes that 3G technology -- designed to let people use their mobile phones for such things as downloading video and music files as well as for voice calls -- will give revenue a big boost. World-wide, seven major operators sell WCDMA handsets, but none offers one from Nokia.

Moreover, Nokia has supplied only a modest proportion of the base stations being used in the first commercial WCDMA networks. Base stations relay calls from an operator's network to consumers' handsets. Some operators say Nokia has missed deadlines to supply the equipment.

Although sales of WCDMA handsets amount to a tiny portion of the world mobile-phone market, analysts say Nokia needs to keep up with other suppliers -- such as Telefon AB L.M. Ericsson of Sweden, Siemens AG of Germany and NEC Corp. of Japan -- in rolling out commercial WCDMA networks.

Jason Chapman, a London-based analyst with U.S. research firm Gartner Inc., says involvement in commercial launches provides valuable experience and credibility. "Equipment makers that aren't in there will find it difficult when it comes up for the second round of contracts," he adds.

To be sure, other suppliers have had problems with WCDMA technology; some of the commercial networks drop calls and suffer other glitches. And Nokia's networks division is outperforming its rivals by some measures. Though its sales in the first quarter were down 15% from a year earlier, sales of mobile networks at Siemens were down an even steeper 22%.

But Nokia's networks division made an operating loss of €127 million, compared with €22 million for the Siemens unit. Nokia said the loss was partly from "the continuing high costs related to the first-phase implementation of 3G technologies."

Nokia, the world's largest maker of mobile-phone handsets, last year positioned itself as a leader in WCDMA, expected to be the dominant 3G technology. In September, it teamed up with Finnish operator Sonera Corp. to host an event at the Museum of Contemporary Art in Helsinki highlighting what they said was their frontrunner position in 3G. But Sonera, now part of TeliaSonera AB, doesn't expect to launch commercial WCDMA services until this year's second half.

A spokesman for TeliaSonera said his company won't launch until Nokia makes WCDMA handsets available to consumers in Finland and delivers software that will allow calls to be transferred between the operator's 3G and 2G networks.

Other operators relying heavily on Nokia equipment are hanging on. Neil Montefiore, chief executive officer of MobileOne (Asia) Pte. Ltd. in Singapore, said this month that MobileOne hopes to begins testing commercial network software from Nokia in mid-2003. It had hoped to launch a 3G service in the second half, but Nokia missed a delivery deadline last year and the operator has now postponed the launch to 2004.

While WCDMA handsets from makers including NEC and Motorola Inc. are on sale to consumers, Nokia's first still hasn't appeared in shops. J-Phone, a unit of Vodafone Group PLC, had been planning to sell the Nokia phone in Japan starting last December. A Nokia spokesman said his company has delivered more than 10,000 handsets to operators for testing, that the phone will go on sale to consumers "shortly" and that Nokia still regards itself as a frontrunner in WCDMA.

Another spokesman said that Nokia has supplied 17,000 WCDMA base stations to operators, including a "major part" of the live J-Phone network in Japan, and that "commercial [WCDMA network] software is available" from Nokia, but typically needs to be customized for each operator. Nokia said this month that its WCDMA network equipment "is well on track to support commercial launches in the coming quarters."

Jorma Ollila, chief executive officer of Nokia, said Nokia is being "realistic in terms of the time it takes to get the networks to be stable" and he dismissed the notion that Nokia's competitive position could be damaged by the cautious rollout.

But there are signs that some Nokia customers may be getting impatient. In Hong Kong, operator Hutchison 3G HK is dismantling parts of its WCDMA network after Nokia failed to make the technology work properly, according to a person familiar with the situation. Hutchison 3G HK, controlled by conglomerate Hutchison Whampoa Ltd., is replacing Nokia base stations with equipment from an alliance between Siemens and NEC, this person said.

Hutchison 3G HK, which has been aiming to launch 3G services in Hong Kong by June, declined to comment. Nokia did likewise, citing a confidentiality agreement with Hutchison. In October, NEC acquired a 5% stake in Hutchison 3G HK.

Write to David Pringle at [e-mail], Almar Latour at [e-mail] and Kimberly Song at [e-mail]

Updated April 28, 2003

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