Moto at 3GSM
The arrival of WiMAX is a tad overdue, but its exciting that the stories we are now hearing about involve build-outs, and not protocol infighting at the WiMAX forum. Based upon the number of firms we have heard about that are looking at building out neighbourhood level networks in the U.S., you have to wonder if a WiMAX overbuild is coming to parallel what we saw with all the fibre excitement in the late 90’s.
Here is a summary of CIBC Equity Research’s notes from Motorola’s 3GSM buzz:
• Huawei 3G collaboration – Motorola has seen its first two contract awards (MTNL and MTC) post the Huawei 3G UMTS/HSPA partnership and is hopeful of continued incremental traction. Motorola believes it still has an opportunity with half the market yet to select 3G suppliers – the focus is on tapping its existing 2G customer base in emerging markets (MEA, Latin America, with the MTNL win in India as an example) and with smaller carriers in North America. Motorola is currently rebranding Huawei equipment, but second generation equipment will be based on the joint R&D efforts.
• Ties to TD-SCDMA – Motorola and Huawei have also teamed up on 3G TDSCDMA as well, giving Motorola an entry point into this “home grown” 3G technology in China and an opportunity to leverage past relationships. Although branded Motorola, the TD-SCDMA equipment is not part of the joint R&D effort and doesn’t include Motorola IP. Motorola will act as a reseller in this area.
• WiMAX out of the starting block – Motorola is moving forward with fixed WiMAX deployments/trials, with the most visible being the Sprint Nextel (SSP) deployment in Chicago and Clearwire deployment in Portland. First commercial service should be active by the end of 2007 and gaining ground in 2008. However, the company noted that mobile WiMAX has a way to go with management setting 2009 as a goal for the start of meaningful traction. The company sees a steady progress of functionality with fixed and nomadic data focused solutions coming first, voice being layered on and then full mobility. Even with a 2009 launch, Motorola sees mobile WiMAX having a developmental headstart on eventual competing LTE (Long-Term Evolution) and UMB (Ultra Mobile Broadband) technologies.
• WiMAX IP – There will be royalties on WiMAX with the WiMAX Forum spearheading the effort to keep a reasonable cap on the cost. Motorola is one of the contributors of IP to the standard, but noted that IP for this technology is much more balanced from companies contributing. Qualcomm’s (QCOM-SO) potential impact on this process (and potential incremental costs) with its OFDM IP is yet to be seen.
• What’s 4G anyway? – With the market starting to work on specs for LTE and UMB and evaluating how mobile WiMAX fits in, Motorola touched upon the commonality of the technology direction. OFDM, MIMO, and smart antennas will play a role in the yet to be defined next generation 4G solutions. Similar to WiMAX, Motorola is one of the leading contributors (Motorola indicated highest at this point) of IP to the LTE specification/development process. With LTE being a completely new technology it suggests that a vendor’s past record in 3G wireless is not a big differentiator, which suggests Motorola will compete on a level playing field with other OEMs. Motorola indicated that it is yet to make a decision on whether it will pursue LTE alone or with Huawei or another technology partner.
• 2G – Motorola’s GSM sales fell off faster than expected in 2006, but the declines have moderated. Motorola now feels better situated to match expected ASP declines with offsetting cost reductions in 2007. CDMA trends look to be flat.
• Choices – With more and more GSM carriers upgrading their networks, Motorola highlighted that in many cases WiMAX could be an effective solution. Using rough figures, Motorola noted that 60% of carriers have spectrum (such as 2.5GHz TDD) that is a good fit with WiMAX, with the remaining 40% better suited adding 3G UMTS. While not all of the 60% will go to WiMAX, many carriers are as likely to go to WiMAX as 3G UMTS. Nothing in the Huawei contract precludes Motorola from encouraging GSM customers to deploy WiMAX.