Weekly Wrap: The Devaluing of 3G
By Carlo Longino, Fri May 23 12:31:14 GMT 2003
mmO2 takes a huge paper loss on their 3G "assets", Qualcomm fires back, and more...
Undoubtedly the biggest news this week was European carrier mmO2's gargantuan GBP 10.2 billion annual loss after the company marked down the book values of its 3G licenses. The move was sparked after mmO2 sold its Dutch operations last month for a paltry GBP 25 million, and while CEO Peter Erskine admitted the company overpaid for the licenses, they're still valued at 40 percent of their purchase price in mmO2's books. It should be stressed that the loss is an accounting move, not an actual cash loss, but it does highlight the possibility that some reality is eking its way back into the sector, and puts more pressure on rival Vodafone to announce a similar write-down of its 3G licenses when it announces its results next week. Incidentally, the mmO2 loss is the second-biggest in UK corporate history, surpassed only by - you guessed it - Vodafone, who lost GBP 13.5 billion last year thanks to cuts in the value of companies it acquired.
We've been following moves in the CDMA chip market for a little while now, the latest development coming last week when Nokia, Texas Instruments and STMicroelectronics said they'd work together to try to knock Qualcomm off its perch. Qualcomm fired back this week by reaffirming their earnings guidance for the current quarter, shaking off analyst worries that its string of strong quarters might be coming to an end thanks to slowdowns in emerging CDMA areas like India and China, and of course because of the increased competition. The company also announced a number of new high-end chipsets, though of course Qualcomm says the timing of the announcement had nothing to do with recent market developments.
Sony Ericsson said this week it would begin leveraging Sony's entertainment and video-game assets in its latest effort to find favor with mobile consumers. The company is developing mobile games that tie in to Playstation counterparts, like Tony Hawk's Pro Skater, as well as using Sony's entertainment assets to offer free ringtones or MMS clips of upcoming movies.
NTT DoCoMo this week announced a new international roaming service for users of its FOMA 3G service. The "World Wing" service allows FOMA users to take their UIM card (the UMTS equivalent of a SIM card) and insert it into a standard GSM phone and receive calls on their usual number. This goes part of the way in answering one of the most frequently cited shortcomings of Japanese mobile networks - their incompatibility with foreign carriers. No word yet on foreign GSM roaming into the country, though.
SARS continues to hit Asia, and is impacting the mobile community as well. After claiming CommunicAsia 2003 a few weeks ago, the virus has forced China Unicom to halt its trail of the standard-crossing GSM 1x network in the eastern city of Suzhou, as its now impossible to send anyone there. The 3G World Congress trade show, due to be held in Hong Kong next month, was also delayed until November and moved to Bangkok on SARS concerns.
Finally, following up a story we first reported back in March, MCI was awarded a $45 million contract by the US government to build a stop-gap mobile network in Iraq. Much to the chagrin of Qualcomm, the network will use GSM technology, like the rest of the Middle East.