Cell phone world calls on Nokia AT&T rate is giving Finnish firm oomph to overtake Ericsson

November 30, 1998|By DALLAS MORNING NEWS

Brand name didn't matter when John Carruth bought his latest mobile phone in early November.

Features? Also unimportant. Twenty-four hours into owning his new Nokia phone, this Dallas telecom engineer saw little or no fundamental difference from his old Ericsson. Just one thing counted, Carruth said. "It was the phone that came with the special deal."

Ahhh, that special deal.

AT&T Wireless' flagship Digital One Rate plan, which set a new standard for how mobile phone calls are priced, has also made Finland's Nokia the hottest mobile phone manufacturer in the United States. Hundreds of thousands of Americans have signed on to Digital One Rate, which offers a flat monthly price with free long-distance and roaming. And each subscriber purchased a new Nokia 6100-series phone.

As a result, industry analysts say, Nokia could surpass Ericsson's U.S. market share in the fast-growing digital mobile phone sector or even in phone sales overall. The fourth quarter, when phone companies can sign up 40 percent of their new subscribers, will be key.

"It really is a Nokia world," Dataquest analyst Matt Hoffman said. "Really, their biggest problem is they look exactly like Ericsson looked last year."

Last year, it was an Ericsson world. Before that, Motorola, which has lagged in digital sales but still dominates in older analog phones, owned the market for more than a decade.

Mobile phones have staked out a high-profile status that no home phone has ever had. Billboards. Runway-model fashion shows. James Bond movie plugs -- all for good reason. Technology's changing, competition's booming, and, whether consumers are buying their phones for safety or status, sales rise at double-digit rates every year.

Most important, the mobile phone market is up for grabs.

Widespread digital service is just over a year old.

While companies say analog will be around for years to come, digital is winning the subscriber growth race.

Three different technology standards, each having to do with how signals from phone calls are carried through the wireless networks, are fighting to dominate.

They are Time Division Multiple Access service (better known by its acronym, TDMA); Code Division Multiple Access (CDMA); and Groupe Speciale Mobile (GSM), a standard that took off years ago in Europe and dominates most of the world's digital phone systems.

In the United States -- unlike the Windows/Mac computer war -- there's no obvious winner.

Phil Redman, an analyst with the Yankee Group technology research firm, estimates that at the end of 1997 there were 2.9 million U.S. subscribers on U.S. TDMA networks, compared with 1.7 million CDMA customers and 1.3 million on GSM.

While Yankee expects CDMA to pull ahead by 2007, when it believes that more than one of every two Americans will use a mobile phone, each technology standard is expected to average more than 30 percent annual customer growth.

One reason is that new features such as Caller ID and access to e-mail make phones obsolete faster. In the analog cellular days, a phone's life cycle might be two or three years. Now major manufacturers offer redesigns about once a year, with smaller revisions as frequently as every month.

The result: Market shares can flip-flop from year to year.

"I'm not seeing anything that works that is not shipping," Hoffman said.

While the companies building phones for U.S. customers come from around the globe, the breakaway leaders come from Finland and Sweden, where as many as one out of two citizens carries a mobile phone.

Behind the numbers lie substantial differences in strategy.

Swedish Ericsson, whose phones some analysts have nicknamed "boxy Volvos," took an early lead last year largely because of its experience building GSM phones for the European market. Ericsson's TDMA development lagged behind Nokia, however, and the company does not offer any CDMA phones.

"Even big companies have to make some prioritization," said Jan Ahrendring, Ericsson's vice president of marketing for mobile phones.

AT&T agreed this year to buy at least 1 million Digital One Rate phones from Ericsson, ending Nokia's exclusive deal.

And, Redman says Ericsson, whose U.S. headquarters is in Richardson, Texas, could eventually come out ahead because the company is investing heavily in next-generation, data-rich technology expected to come on the market in a few years.

Nokia, on the other hand, stands alone in building phones for virtually every U.S. mobile phone system.

Nokia builds its U.S. phones near Fort Worth, Texas, at one of the largest handset factories in the world. The company's Texas employment has grown to 4,000 from near zero at the beginning of the decade. As soon as Nokia moved into its U.S. headquarters building in Irving, Texas, in May, it announced a second building and then a third.

The factory had trouble meeting its production goals when the AT&T plan was introduced, causing delays in phone shipments. But both companies say the shortage has passed.

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