Subject: [NEXTEL-1] No short cuts

From: [email-masked]
Date: Mon, 16 Feb 2004 20:42:27 -0500

No short cuts
Clement Teo, 2-Feb-2004

The pall that 2003 cast over the telecoms industry hasn’t yet lifted, but the
wireless sector looks poised to bust the gloom this year. We speak to Motorola’s
newly appointed general manager for Personal Communications Sector in Southeast
Asia, Scott Durcshlag, to get a feel of what the new year holds for the company,
and we also gauge the sentiments of other handset makers as they go into a year
where next-generation services become more prominent.

Motorola
Scott Durchslag, corporate vice-president of Strategy and Business Development,
for Motorola’s Personal Communications Sector (PCS), recently took the helm at
PCS’s operations in Southeast Asia as general manager.

What are your goals for the handset unit?
We’ve a lot of work to do in the region. We’ve fallen behind, especially in
Southeast Asia. There are a few things I want to achieve: to earn back the trust
in customer relationship with operators, and to be there for them again in the
same way that we used to be.
In all turnarounds, we’ve got to make tough choices and the focus went into
China. But we’re coming out of that now, and the opportunity to rebuild it with
the rest of Asia is there. We want to be there to make our customers’ successes
in line with our own. If we’re doing this well, everything [else] takes care of
itself. We’d like to see a significant increase or a doubling of our market
share in Southeast Asia.

We’re going to increase our investment in our branding, in our growth, in our
engineering staff, but it’ll be a multi-year journey. Bur first, we’ve got to
earn back the trust of operators. We really want to provide choices in a market
that is dominated by Nokia. I’m excited about our ability to achieve this when
we’re focused. For example, we took back market share in the US. Europe is still
a challenge, but we showed that we could do it in China as well.

While tracking market share, margins, products are all important, at the end of
the day, the thing we want to focus on is the real quality of the relationships
with operators.

On those relationships, the old Motorola was about technology; the new Motorola
needs to be about a consumer-experience driven company in partnership with
operators. For example, our software architecture called JUIX (Java user
interface experience) is coming more into our portfolio and is great for
customisation.  Also, we’re careful that we don’t have our brand compete with
the operators’; we should make the experience work for the operator. For
instance, we could come up with regional ‘looks’, optimised designs for Vietnam,
Thailand, or Singapore. So we can offer the right hardware architecture and be
close to the consumer, but it means we bring a breath of choice for operators.

A lot of it is about listening—having the ability to know what creates high
ARPU, and how we manage the product lifecycle. You’d be surprised at how much
you can get out of listening. The key is simplicity and flexibility.

What is your view about 3G in the region you cover?

In 2004, you’re looking largely at Singapore and Australia.  Globally, 3G will
take off in 2005. Technical issues for handsets are power management, the
handoff between 2G and 3G networks, talk and standby times, and the intelligent
use of backlight. We’re not at the point where the power management for 3G
phones is better than 2G phones.

In the market, nobody is quite there yet, especially when dealing with handoff
issues between 2G and 3G networks. It’s also very clear now we can’t make enough
of these handsets, but 2005 is the hockey curve uptake of 3G.
In the region, EDGE will still be very important, except for Singapore and
Australia. Operators do intend to have full-blown EDGE deployments in Southeast
Asia, depending on their capital investment.

In a 3G environment, call quality, network congestion, video delivery—all
present first mover advantage.  Operators will have a window of opportunity, but
they face unique technical challenges. These things aren’t easy to resolve, but
it becomes a key execution game.

The lessons we’ve learnt from the field is that there’re very hard technical
problems. Most handsets are still single band, not dual-band. Also, the ability
to supply 3G handsets is a challenge.

How well-equipped is Motorola to supply cellular operators with 3G phones in
large quantities, and with features that they want?
We can do it now, with the A835. In fact, the output that we’re creating with
this is going up exponentially. Most of the backlog issues will by resolved by
Q1’04. Issues such as component shortage, and product lead times will be
resolved by H1’04. It’s like turning a very large ship around; once we’ve turned
it past the critical point, it’s full steam ahead.

A lot of Motorola people are dealing with it right now.  There is a cost to not
getting the handsets out on time—it impacts synchronisation between vendors and
operators. The lead times on 3G development is longer than 2G, but we still can
cut it in half to go to market. We had phones that were developed in dozens of
sites around the world.

A reshuffle for the group saw a change in the organisation, a reduction in
sites, and this resulted in a customer-facing group that combined the product
development and engineering teams. That’s necessary to achieve the improvement,
but not sufficient. However, the gap for product development is much less now
than a year ago. Proof of that is in our product portfolio.  Compare 2003 in
products to the first half of 2004—it’s an increase by an order of magnitude.

What do you consider as challenges for Motorola in 2004, and how do you intend
to tackle these?  We are looking at customer partnering and at taking it to the
new level. See us become more country-focused. A lot of stuff will be
decentralised. More customer-facing people. Fewer back office people. We will be
a more market-driven organisation. We’ll also explore the real capabilities we
have in the region, e.g. regional engineering, where we put a few engineers with
operators to get the handset working well with the network (we didn’t control
that in the past).

For code development and marketing, we work closely with operators with an eye
on ARPU. Take it in-house and develop the codes for the operator. We go to
market with full marketing partnership, especially for smaller customers.
We want to be out there more visibly this year. It’s both a global and regional
issue. We want to invest in the brand, to support the higher-tier products that
we’re bringing to the market. We haven’t been fully in the game in Southeast
Asia, and we intend to stay and do as well as the rest of our regions.

Should you be concerned that some Asian manufacturers are finally getting their
acts together, and are aggressively stealing market and mind share?  Yes. As
they say, only the paranoid survive. If you take anything for granted, I think
that’s extremely arrogant.
However, there are so many new entrants and you’d have to question their ability
to build a brand, provide frontline customer care, account management, field
services, and have appropriate distribution channels and know how to manage
inventory lifecycles. Nokia, Samsung, and Motorola do this very well, but the
other groups may not.

Can they cherry pick, grow and sustain their customer base? It won’t be easy. I
see about one or two emerging from that group, but not all will make it.

Technical expertise matters in times of transition, and not many of them can do
it. Their investments must be on the scale of the major manufacturers, so you’ve
got to ask: are theirs are on the same scale, and can they get the same ROIs?
Simply throwing money into technology is not a solution. It also takes time to
develop.

Siemens
Clemens Jargon, senior vice-president and general manager, global product
management, Information & Communication Mobile, Mobile Phones, Siemens, shares
his thoughts following a recent announcement of their 3G phone for the European
market.

What’s your strategy for 2004?

Our main focus is always on the customer. We need to deliver a broad range of
technology, and offer end-to-end solutions. That means on one hand, you need a
very high performance network, high performance devices, and as well you need to
offer solutions to the customers.

Constantly focusing on customers’ need, that is exactly our strategy and our
vision. For example, we need to find out what the real benefit for the customer
is, and what do the mass market require? What we’re seeing currently is that
markets are getting more and more segmented.  The needs and requirements from
customers in Europe are completely different to the Asian markets. For Asian
market, it is very important that the fun and fashion factor is part of the
phone design. That’s what we learnt—personalisation, customisation, design, and
fashion leadership are trends and vision that we have to fulfill in our mobile
business. And that’s exactly what we’re doing.

Also, you will see us delivering phones of different form factors for each
market. For example, the very small clamshell phones were developed for the
Asian needs.  Very soon, you will see newer clamshells coming in every quarter.
To fulfill Asian demand quickly, we built a development centre in Beijing, and
we will increase the number of developers there. We can’t do everything in US or
Europe and bring these to Asia, because the customers’ needs are very different.
Currently there are over 150 developers working at the Beijing centre, and we
will increase that number.

Design is another important aspect of our selling point, and we believe design
will be a key differentiator for us.

Sony Ericsson

Kazuo Nakai, corporate vice-president, head of Asia-Pacific region, Sony
Ericsson, is realistic about the group’s short-term ambitions, but long-term
goals will be about market dominance.

How is the revamped unit doing?

Our longer term objective is to be number one in this industry. In the next
12–18 months, there are still other dominant players. [But] we’re on the right
track, and increasing volume and market share quite substantially, better than
2002.

The region is diversified, and we want to cater for every segment, from voice to
high-end smart phone. We want to introduce value-added product in each market.
For example, the T610 camera phone is doing well. This is a core product that we
want to expand in the future. In the short term, I’m looking at being a leader
in imaging and connectivity.

I hope to be in the top three in two years and to do better worldwide, because
we have a strong foundation in products such as clam shell phones, and in strong
emerging markets such as India.

There is a strong brand image coming out of Sony and we’d want to capitalise on
that. We have a stronger channel network and dedicated employees.

I see [greater] collaboration with Sony Music/Pictures in the next 12 months.
The design of new phones has a stronger Sony influence. We’ll also be adopting
games made popular by Sony. Lots more games will be introduced, as well as
accessories like the game pad.

As for 3G, we’re at the test stage with SingTel and at least a dozen other
operators globally. We’ve got no plans to introduce CDMA phones into the rest of
Asia, except in Japan, for the time being.

Nokia

Soren Petersen, senior vice-president and general manager, CDMA Business unit,
Nokia Mobile Phones, notes the challenges of breaking into the CDMA handset
market.

How much of a change is it to play in the CDMA field?  In 2000, we put a large
investment into CDMA to build a global presence. We hired a lot of people in the
past three years to tap the demand of CDMA market. We used our own chipset and
built our own handset.
It takes one to one-and-a-half years to make a handset, and in 2003, they’ve all
begun to come online. We launched 7–8 terminals, depending on different bands.
We more than doubled market share in Q4’03, at a run rate of very close to 20%.
The full rate would be about the mid-teens.

Our long term strategic target is to capture 25% of the global CDMA market, and
by the end of 2005, we hope to achieve the number one position for handsets. No
one is a real global player. In my view, the CDMA handset distribution model is
not sustainable.

The No.1 and 2 players will make money, but it will be difficult for the rest.
However, the trend is very good right now for Nokia CDMA phones. The challenge
for Nokia is that the CDMA industry is very poorly specified.

Roaming is a problem, and excessive testing is done [for new entrants]—which
makes the system more expensive even if you work with a Qualcomm chipset.

You’ll see 10–20 CDMA models in total for 2004, with 5–7 new models. There’s
good pace in launching of products.  By the end of 2004, we’ll see a full broad
competitive portfolio from Nokia. Our market share is growing and we’re selling
higher-end phones now.Samsung

Chung Ihnchul, vice-president, sales & marketing group—Asia/Middle East, Mobile
Communications Division, Samsung, shares its plan to grow market share.

How do you plan to set Samsung’s mobile phones apart?  The average price of a
Samsung phone is 50% higher than others, for two reasons. First, we are
focussing on the medium- to high-end market, not the mass market, and secondly,
while we may offer similar phone features as the rest, we put a premium on
design.
The niche premium market was created by Samsung, with design superiority in
mind. Emotional benefits are valuable, where sometimes, design is more important
than the features, so we intend to maintain the “fashion creator” image.

That’s the difference between Samsung and, say, Nokia.  Nokia uses one platform
and makes slight variations to its software modules and design, such as in the 7
series. At Samsung, we innovate in design and killer apps. Even operators find
lower churn rate and high output, and the phones keep their value.

ZTE

Xie Daxiong, vice-president and general manager, CDMA Division, ZTE, believes
customising applications will propel its handset business.

What can we expect from your mobile phone unit?  For high-end CDMA phones,
you’ll see more features incorporated into these handsets, such as colour
screens, cameras, bigger memory chips. We’ll keep the low-end CDMA simple, with
a basic SMS functionality.

We attach great importance to applications and services, and for different
customer groups, we divide handsets and applications according to their needs.
For example, we can develop digital trunking system (push to talk) on CDMA
handsets. This is our advantage—we have the infrastructure and the experience
with network systems.  In the next 2–3 years, operators will attach more
importance to industry applications.

Our strategy is the same for CDMA and GSM. In China, our CDMA handsets account
for about 10–15% of the market, but we’re not like Samsung as we’re also in the
low-end segment. For 2004, you will see a commercial launch our CDMA IP-based 3G
system. We will focus on applications based on CDMA. For GSM, we’re ready to
commercialise our WCDMA system and provide similar service as we do for CDMA.

http://www.asiatele.com/ViewArt.cfm?Magid=4&Artid=22761&Catid=2&subcat=48

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