From the Desk of……….. John Barker

Communications Today, March 30, 2001

The Fat Lady Has Sung

Opinion By John Barker, European Correspondent

Well, the concert certainly has ended for BT. That much-vaunted alliance between BT and AT&T was intended to extend corporate communications to the ends of the galaxy. Sadly, it is all ending in tears. It's just one of many troubles for the beleaguered British giant.

Faced with a $45 million debt burden, BT is going to have to lose either one or both of its top men as the price for being bailed out by the moneymen. It is the price that BT is going to have to pay for helping to solve Britain's balance of payments problem at a stroke - by grossly overpaying nearly $6 billion for its 3G licenses.

The European telecom sector now resembles a First World War battlefield, with walking wounded stretching to the horizon. The only survivor still standing, slightly shaken, but still on both feet, is Nokia. Global sales of mobile phones leaped 45 percent to 413 million in 2000, up from 284 million in 1999. Nokia grabbed 126 million of those sales, increasing its market share from 27 percent in 1999 to 30 percent last year.

The big losers in all this were Ericsson and Motorola. Ericsson is now bailing out of handset manufacturing, with horrendous job losses in Europe, to concentrate on marketing. The winner is Singapore-based Flextronics, and the Taiwanese manufacturers.

Motorola is in the same boat. Last month, its mobile telephone unit announced it was closing its last manufacturing plant in the United States and cutting 2,500 jobs in an attempt to stay competitive. That adds up to 12,000 job losses in its personal communications sector since December. Motorola is now worth a third of what it was in 1999. It is at the same level it was in 1997, despite massive sales growth.

The connection between BT's woes and Motorola becomes clear when you consider the delay in rolling out GPRS services. BT had promised GPRS at Christmas, but rollout will now be towards the end of the year. The reason is that Motorola is the only company with an early GPRS offering, and production of the handsets has been severely delayed.

GPRS is seen as a stepping-stone to even faster 3G services that will roll out globally starting in May in Japan. But some argue that GPRS will offer all the bandwidth consumers will need, and that operators need not have invested billions of dollars in 3G licenses. Cold comfort for the likes of BT!

The feeling is growing that the big dinosaur telcos have lost the plot. The likes of BT, Ericsson and Motorola seem prime candidates for takeover. The future belongs to fleet-of-foot companies like Sendo (http://www.sendo.com). This tiny company based in Birmingham, England has just received a government grant of around $10 million to develop its R&D facilities.

Last month, Sendo demonstrated the first prototype of its Z100 Smart phone, due for delivery this fall. This is based on the Microsoft smart phone platform, code-named "Stinger." It claims to be the smallest and lightest GPRS tri-band smart phone. It features an impressive 65,000-color TFT display, comparable in quality to a high-end laptop display. It plays MP3 and WMA audio files and a stereo headset is included in the package. In addition, it is a fully functional phone that will operate on GSM 900, 1800 and 1900 networks across Europe, Asia and the Americas. The Z100 includes USB, IrDA and RS-232 connectivity and hot-pluggable multimedia card memory.

These are the phones that will cut a wide swath at the corporate end of the market, as an extension of the executive's PC. At the bottom end we will see disposable pre-paid phones reaching out to the presently disenfranchised masses. Where the 'fat ladies' of the industry fit into all this is a mystery. The next year is going to be truly interesting.

John Barker can be reached at tossa@pobox.com.