3G Network

3G Networks
Licences are on the horizon, trials and tests are being conducted and more spectrum for capacity is needed. 3G systems can potentially increase the data rate up to 2Mbps if an end-user is stationary or up to 384kbps in a mobile environment. At these speeds end-users will be able to download pages and e-mails from corporate websites much more quickly than with their current 2G or evolutionary 2.5G systems.

Chapter Summary
At this stage though, even after the resolution of patent disputes between Ericsson and Qualcomm, we believe that the promise of a 3 rd Generation technology that unifies all mobile technologies into one standard is technologically difficult and costly. In our view, we will be in a world with a multiplicity of standards at the 3 rd Generation level and where multimode/band terminal devices still exist. From our discussions with operators and manufacturers, it appears to us that the migration path towards 3G is far from clear-cut. We have heard differing views as to the best technical solution as well as very diverse opinions about the likely demand for services. Depending on the path taken, the cost of building a 3G network varies significantly and since demand for services is difficult to predict, this could make operators cautious about committing to capital spend and bidding for licences at the new frequencies. For the operators, there are many uncertainties in 3G in terms of what the major applications will be, who they will be aimed at, what will subscribers pay, how will the services be billed. On the supply side, the method of migration to 3G in terms of infrastructure and terminal requirements are still uncertain. To confuse the issue further, licences are going to be issued in the next 12 months in many markets. Mobile operators will bid for these not for the promise of mobile data and Internet services but to alleviate capacity issues in their respective networks. In the worst case scenario, mobile operators will initially deploy lower data rate 2.5G solutions and if they win a 3G licence also procure 3G gear for additional voice capacity.

Standard or no Standard; That is the Question?

We believe that there are still many technology issues at stake before we move to 3 rd Generation systems. Interfaces between the different network types GSM, TDMA and CDMA will need harmonisation. This process has historically been very difficult due to the battles between different parties and regions, which seem to be pushing their own specific view on where the market should head. However, with the resolution of the litigation dispute between Qualcomm and Ericsson, we believe that closer co-operation will be the order of the day with a potential for 3 rd Generation systems being able to communicate with each other and allow for better roaming capabilities.

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3G Network We believe the recently announced agreement between Ericsson and Qualcomm is positive for the whole industry and for 3G as these disagreements about intellectual property were absorbing much of the energy needed to advance further towards 3G. The end to this battle should ease the path for the 3G auctions and effectively means that the 3G solutions for the air interface CDMA2000 and WCDMA and a third proposal based on TDMA are likely to be combined in a tri-mode solution. All three have already received a preliminary endorsement earlier this year from the International Telecommunication Union (ITU).

Third Generation was originally focused on a single global radio interface for 3G networks based on the two major core network standards: GSM MAP and TIA IS-41. This single global air interface has now proven to be unlikely. In February 1999, Qualcomm and Ericsson settled their IPR disputes and this led to the single CDMA standard with three optional air interface modes. These air interface modes are: WCDMA -Frequency Division Duplex (FDD) direct spread which has a chip rate of 4.096/3.84Mcps. What this means is that two bands of frequency (two separate lanes on a motorway) have been allocated. Each band (lane) will have a certain capacity associated with it. Traffic in one band (lane) will go from the mobile terminal to the server to collect information and traffic in the other band (lane) will come from the server to the mobile terminal. This technique is called symmetric. Probably going to be deployed in Europe and Japan. Multicarrier CDMA2000 is backward compatible to CDMA IS-95 (CDMAOne). Multicarrier means that many lanes are being used on the motorway for information being sent to and from mobile terminal. Currently, this is split into 1XRTT and 3XRTT which are spectrum migration technologies for the existing IS95 bands and systems. Probably going to be deployed in the US. Time Division Duplex (TDD) (in China it is harmonised with Chinas TD-SCDMA). With TDD there is only one band or lane with traffic moving up and down in this lane. It is configured such that more traffic is coming from a server to the mobile station and hence is also called an asymmetric technique. Probably going to be deployed in China. On another front the GSM and TDMA standards bodies have also been working intensely on bridging their network architecture differences. The UWCC and GSM alliance in North America also agreed a common core network for packet based data. This will aim to bridge the difference between TIA IS-41 and GSM MAP core technologies. Network intelligence features such as calling line Identification and call barring are related to these core technologies. Currently there is not much interoperability between the two and hence the move by the two respective standards bodies to bridge differences is very important.

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3G Network

W-CDMA (FDD)
W-CDMA will require bandwidth of between 5MHz and 10Mhz allowing it to be a suitable platform for higher capacity applications. It can be overlaid onto existing GSM, TDMA (IS-136) and IS95 networks. Subscribers are likely to access 3G services initially via dual band terminal devices. A possible scenario could be that they select the W-CDMA network for high capacity applications and 2G digital systems for voice calls. In addition to new terminal devices, W-CDMA requires completely new radio access methods and systems architectures in the core of the network. We believe that Europe and most of Asia including Japan will opt for the W-CDMA 3 rd Generation standard.

The US Environment and 3G

In the migration to 3G, the US situation plays an important role. We believe that the US may be slower than Asia and Europe to invest in 3G systems. PCS operators are using spectrum that was originally allocated for 3G licences. This can be resolved through re-allocating or refarming the spectrum, at a cost. Moreover, the US market already suffers from a multiplicity of standards at 2G level and this diversity will probably continue as decisions are made on how to migrate to 3G. TDMA and CDMA operators are therefore quite likely to deploy faster data rate technologies (IS136 (EDGE) for TDMA and CDMA2000 1XRTT for IS95) in their existing spectrum bands.

CDMA2000
CDMA2000 is the 3 rd Generation system that is backward compatible to the 2 nd Generation CDMA IS-95 standard predominantly used in the US and a handful of other markets internationally. We believe that existing CDMA IS-95 operators will adopt CDMA2000 systems due to this migration path and their familiarity with systems planning tools, billing systems and other network elements. The CDMA Development Group (CDG) is currently providing a forum to define 3 rd Generation capabilities and applications. In our opinion, the development of CDMA2000 is further behind that of WCDMA.

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3G Network

UWC-136 (EDGE/IS136HS)
Currently TDMA operators in North and South America are targeting to roll out 2.5G systems. These TDMA operators can migrate to any 3G air interface as all three have stated goals of backward compatibility. We believe that for TDMA vendors, the migration will be via Higher Data Rate 2.5G (IS136HS/EDGE) especially in the US as regulator pressure to adopt 3G licences will be less marked here than in other international markets.

Infrastructure Changes for 3G

3G networks will require new elements: A new air interface will be needed which means investments in new base stations. Moreover more 3G base stations will be required than 2G for the same coverage area. The core network will be based on packet technologies and should be an evolution from the GPRS (or its equivalent) core network. There is one standard process for the radio network and another, in parallel, for the core network. The core network of the future is promised to be an evolution of todays 2G core. It has transport pipes for information flow, nodes that route the traffic and nodes where services are located. The Radio Access network will be connected to this core network allowing a wideband interconnection to subscribers.

Base Station System will be changed to accommodate new air interfaces.

Radio Node Controller will need to replace the Base Station Controller. The 3G Radio access network will comprise a RNC (Radio Network Controller) and Node B. The RNC will include support for connection to legacy systems and provide efficient packet connection with the core network packet devices (SGSN or equivalent). Node B is equivalent to the Base Stations in the 2G network today but support the 3G air interfaces. The new frequency and radio interface will also require new cell planning methodology. There will also be a possibility to re-use 2G sites in terms of masts, buildings and transmission, however an upgrade is probably required. In fact for higher frequency 2G GSM networks such as DCS1800 and PCS1900, the cost will be less than GSM800 and 900 networks due to the fact that more of these sites have been acquired due to the shorter frequency range. These higher frequency 2G operators have cell sizes that are approximately similar to 3G and hence 3G operators will be able to re-use existing cell sites. This is however not the case with lower 800/900MHz operators which will need to install new sites to obtain 3G coverage they require adding significantly more cost. It must be noted that 3G is more capacity intensive and will require a microcell type approach implying a larger number of cells than existing 2G systems to gain the same coverage area.

Core Network Requires More Packet Based Architecture

This comprises the switching equipment (mobile and transit), transmission links and network management systems. Upgrades will be necessary to many of these elements for 3G deployment. The GPRS core for example should be able to be upgraded to 3G system architecture in an evolutionary manner.

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3G Network The Service nodes that comprise the Intelligent Network elements, Billing and call centres will also need to be upgraded to cope with value added data and Internet services and applications.

Deployment Cost of 3G
There is much uncertainty regarding infrastructure spend focused on mobile data upgrades. At the beginning economies of scale will not be there from the network infrastructure vendor, hence the initial capital outlay will be disproportionately high. Mobile operators will also be deciding where to roll out systems first and how to link these systems to 2G architectures. This is crucial as initially most of the revenue will still be coming from voice based services. For this reason we believe that there will be this market education function occurring rather than a technology leapfrog. As we have iterated, operators will take different approaches on roll-out of data enabled mobile networks. These approaches will depend on: 1. Is the mobile operator incumbent or a new entrant? 2. What 2 nd Generation standard (GSM, TDMA or CDMA) is the network based on? 3. What, if any investments have been made for 2.5G systems (lower or higher data rate)? 4. What is the licencing policy of regulator? How many 3G licences? Is national coverage required? 5. What are the capacity constraints on existing network? 6. For an incumbent, what is the existing frequency range? 7. What demand has been experienced for mobile data and Internet services? 8. What is the intensity of competition in the market? Infrastructure costs have historically grown as the networks look to increase deployment of smaller cells in order to maximise capacity. The unit costs of these devices will fall over time (BTSs, transponders). Deploying the mobile data 3G systems will also in our opinion be very expensive in its original format, which will mean that the mobile operator will possibly cut back on national coverage to reduce the capital spend.

Issues with 3G
Need for Services Creation Environment Leads to Scepticism on 3G
It will take a few years before we get to 3G. We believe that the market needs to be educated on what type of applications and services are available for mobile data. In our opinion the service creation environment is not ripe yet. It is still in an embryonic stage. We do believe that over the next 12-18 months there will be an increased amount of useful mobile data applications and services developed and deployed leading to the build out of customer bases, creation of new value chains and birth of mobile portals.

Will there be Nation-wide Deployment?

We believe that the heavy investment required to roll out nation-wide 3G networks will prompt operators to deploy an Islands of coverage strategy whereby they roll out 3G services in major urban areas in first deployment phase. Subsequent to this they will link these big urban areas together and provide for 3G services along transport routes to airports and train stations. In our opinion these 3G services will be coupled with 2.5G services in other areas. This will require mobile data terminals to be multi-mode reverting back to lower or higher data rate services.

Will Global Roaming Really be Possible?

For 3G networks, there are key issues regarding interfaces that affect global roaming. The three areas of contention that will need to be resolved before 3G gives full interoperability are: 1. Network to Network Interface for inter-working between different core networks. As we described above some networks operate on GSM MAP and others on ANSI-41. The inter-working between these two core network standards will be critical to enable smooth access to billing, customer care, network management and Intelligent Network (service creation) functions. 2. User Identity Module (UIM) this is like the current GSM SIM card. The UIM could be removable or fixed in the terminal, which would enable over the air programming of services and applications. 3. Radio (Air) Interface: This is a critical issue and requires some form of global harmonisation for roaming to really take shape. With the resolution of patent disputes, harmonisation looks more likely. However, there will be three optional modes so full interoperability will not be possible. This means that provision of global roaming will be possible between the three optional modes. Mobile data terminals will need to be multi-band/multimode adding complexity to the devices.

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3G Network Global roaming will also depend whether the allocated 3G spectrum in different regions bridges the same frequency bands. In the US for example some of this spectrum is occupied with current 2G licences. In our opinion, roaming will be possible as it is today with some improvements but we will still be in a multimode world.

In summary, with Japan expected to launch 3G in 2001/02, followed closely by Europe, the US is looking more and more likely to be trailing the rest of the world by rather a long way, similar to the situation in second generation digital cellular today. This means that it may not be possible to travel from continent to continent with your 3G device, as there may be two, possibly three different standards, again rather like the situation today.

Software Radio Could Resolve Different Air Interface Mode Issues?

The promise of SDR is to enable seamless integration of wireless communications across diverse networks in an environment of multiple standards. In fact SDR is a collection of technologies that enable programmable systems architecture for wireless networks. This will mean that both the radio element in the base station system and in the mobile terminal device will become more software enabled. In theory this is the solution for standardisation amongst air interfaces (TDMA, CDMA, GSM), however in practice there are issues that need to be ironed out and in our opinion, SDR will not readily be available for another 5 to 7 years. It is a technology still in the early stages of development. Currently radio equipment, terminals and base stations are built on proprietary architectures. A manufacturer will build the hardware and install the software for its product and will be solely responsible for ensuring that it functions correctly and meets appropriate specifications. With SDR, the promise is that a number of manufacturers will supply the basic radio equipment with its initial software load. Subsequent to this the equipment could be modified by the inclusion of software from a number of 3 rd party software suppliers. This will open up the market to a whole variety of new players and for end-users this could prove beneficial in terms of services and applications creation.

How Quickly will 3G Networks be Rolled Out?

We believe that this will vary region to region, country to country and operator to operator. In some markets especially in US, Asia and Latin America, 2G networks have just started to roll out and these operators have invested heavily in capital infrastructure. In Japan due to the major capacity issues confronting mobile operators, it seems as if roll-out will be quicker than elsewhere. Other roll out options are in some non-saturated markets where new spectrum allocated for 3G can be acquired by operators who were locked out of 2G and by megacarriers seeking to establish a global footprint. In other markets it depends on when the licences are issued and what is stipulated in these licences in terms of roll-out timescales.

Will the Mobile Industry also move to IP (Internet Protocol)?

As in fixed networks, using Internet Protocol (IP) should cut the cost of installing, running and developing applications for wireless networks. In a fixed line environment IP addresses are static

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3G Network because end-users are stationary. However mobile users are not static and specialised IP address systems will be needed. Moreover, IP packet headers are too bulky for the bandwidth limited wireless environment and will need to be stripped. Other issues for IP on cellular include quality of service, accounting and billing systems, interoperability and service portability within and across network boundaries. We envisage that GPRS and other lower data rate 2.5G packet technologies will be the lever required to drive greater packet based architectures into the wireless world. As Internet and data services account for an increasing proportion of overall mobile network traffic, network architectures will need to accommodate data rather than traditional voice traffic. For an end-user sending a file, the cost will be much lower over a GPRS enabled network versus a circuit switched mobile network as the connection will not be open all the time. Eventually we expect this to be reflected in the billings systems, with pricing based on number of packets sent initially and, once the system becomes sufficiently intelligent, on prioritisation schemes i.e. third, second, first class or FedEx stamps. There have been certain moves made by operators and vendors to set up groups to discuss the impact of IP on mobile. These are all in early stages of development. One such move occurred in June 1999, ATT and BT announced that they would plan to align their disparate mobile networks to offer corporate users global access to mobile voice and data applications. The embryonic plan which to date has not given much detail targets the creation of a new IP centric mobile network. On another front, BT, AT&T as well as Ericsson, Nokia, Lucent and Nortel have also formed the 3G.IP (Third Generation Internet Protocol) to drive standards needed for the creation of a 3G based Internet Protocol wireless network. We believe that IP on mobile is still 24-36 months away in terms of volume deployment.

Where is the 3G Licencing Process?

Third Generation (3G) technology, products and services will complement and be added to, current cellular networks. Therefore roaming between WCDMA and GSM in Europe (for example) will need to be supported on so-called 3G handsets and the situation is further complicated when moving out of the WCDMA world where other technologies will have to be considered. On the most aggressive estimates, rollout of 3G networks could start as early as Q1 2001 in Japan. We believe the licensing process for 3G will make considerable progress over the next 12 months in many other markets, particularly in Europe. Decisions about how to price the data services, cost of deployment, nationwide or selected coverage and how the various 2G, 2.5G and 3G networks tie in will have to be evaluated. However, it is our opinion that many mobile operators will target capturing mobile data and Internet mindshare, before these business decisions are even made.

We believe that some operators may deploy 3G services only in urban areas (if regulation allows) and roll out the 2.5G services nationwide. In a typical mobile operator network there are some portions of the network that experience greater capacity problems due to heavy usage and demand. We anticipate that many operators will aim to deploy 3G solutions in these areas to alleviate congestion and drive usage of data and Internet based services that require faster data rates. However in areas of a network where there is sufficient capacity, mobile operators may choose to deploy the 2.5G solutions. Some mobile data applications will require faster data rates than others. This is likely to be another major factor in deployment of these various systems for mobile operators. Other operators may deploy the 3G network nationwide either as a competitive advantage posture or due to regulation on coverage. The cost of build out here from a capital spend perspective would be steeper than the selective approach above. Mobile operators that do not receive 3G licences will probably choose to adopt the higher data rate 2.5G systems such as EDGE utilising the existing spectrum range. In our opinion, the most mature mobile markets will start to license 3G spectrum from early 2000.

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3G Network Finland has already awarded four 3G licences. Three of these went to the existing operators (Sonera, Radiolinja and Telia) and one to a group of regional companies called Kolmegee. The procedure utilised was administrative licencing, ie. The licences have been allocated rather than auctioned. The UK will auction five licences in early 2000. Non-cellular operators who have expressed an interest in bidding in the auction include Energis, United News and Media, cable operator NTL and Virgin. Existing UK operators will need to agree to an amendment to their Telecoms Act Licences to incorporate a roaming capability as a precondition of being able to bid in the auction for a 3G licence. This modification (which is being contested) states that 2G operators who do not win a 3G licence will not have to offer roaming. The UK government will make available 2x60MHz in the 2GHz section of spectrum. The UK may adopt a minimal coverage obligation of 80% within 6 years. More detail on the UK auctions will be available in a consultative document to be published in September 1999. Switzerland is expected to announce terms for its 3G auctions later this year and the actual auction process is expected to take place next year with service launch in 2002. Austrian operators are contesting the planned 3G auctions. Mobilkom totally rejects the idea of fees for 3G licences, while Max.Mobil says an auction would only be viable if there was another operator. The existing mobile frequencies in Austria can only support four operators, and these four are already investing heavily to expand and upgrade their GSM networks. They therefore feel that existing investments, and the estimated cost of building a 3G, must not be jeopardised by further licence fee. Italy has just awarded its fourth GSM licence to Bluetel. There has been significant disagreement over Italys auction process for 3G due to the Governments apparent intention to give one to each existing operator automatically. It is thought that Italy is planning to auction five 3G licences, which will be operational by 2002. In Norway, Telenor and Teletopia have won UMTS test licences which run until August next year. Limited installations will test the technology and investigate the possibilities of the new mobile phone system. NetCom, Norway's second largest cellular phone company after Telenor, has also filed an application for a trial UMTS licence. Germany is expected to auction its remaining GSM-1800 spectrum this year for 2G services. Existing operators are interested in the spectrum for capacity and to handle new services such as data. The frequency bands are being broken down into small units of 1Mhz each which will then be auctioned individually. The Netherlands and Germany will probably hold auctions of spectrum to occur in late 1999 early 2000 although no details have yet been announced. France, Denmark, Norway and Portugal have issued consultative documents. In Japan, three licences will be issued and this will probably be the first country in the world to adopt the systems. New Zealand is also expected to see an auction of part of the spectrum later in 1999. In the US, the new PCS licensed operators have unfortunately used the upper band frequency ranges that were allocated to 3rd Generation technology by the IMT2000 programme. This will mean that in the US, mobile operators do not have enough spectrum to deploy CDMA2000 systems, unless it is refarmed. Refarming is when a specific licence is awarded for a specific technology at a specific frequency range, then is refarmed to cope with another technology and licence. It is difficult to assess how much this would cost in the US situation outlined above. We believe that as a result of this and the fact that the operators do not have to go through a licensing process to deploy 3G, existing spectrum can be used. This would also be of interest to global carriers. Some operators such as ATT Wireless will initially evolve their TDMA networks utilising existing spectrum in the US to EDGE. The IS95 operators would probably deploy CDMA 2000 (1XRTT and 3XRTT) as ways of utilising existing spectrum for faster data rates.

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3G Network

Companies
Companies in the mobile data game will be faced with many challenges. These will be across the value chain ranging from component supply to the necessary critical mass in applications and services and their successful adoption to drive the market. We anticipate that business models will change and that there will be moves into new areas.

Nokia
Nokia views that there is a clear separation between air interface technology and the services layer. The air interface will provide bandwidth, quality of service and capacity. It believes that there will be three different usage scenarios: 1. Mobile devices will access a wide area network (WAN) and information and services on the Internet. This will be enabled by WAP. 2. Connectivity in short range mode between phones, Laptops and desktop PCs enabled by Bluetooth. This will allow handset users to play games with other handset users or act as a universal remote control. 3. Standalone applications such as games, applications and word processing enabled by Symbian.

Handsets
Nokia remains the undisputed leader in the wireless handset market, with a market share of over 30% anticipated this year, and has always been a strong supporter of mobile data. Nokia believes that 10-15% of units sold next year will be smart devices. In its view, most of the information, however, will not be mere text-based messages, but a combination of video, audio, and computer graphics. Nokia launched its WAP server and WAP phone at the beginning of 1999. The server platform will host content, standalone applications and will communicate with other information systems via its API (Application Programming Interface). Nokias forays into mobile data terminals started with the Communicator product. It is releasing the media phone 7110, a voice plus device which is WAP enabled and HSCSD based in 3Q99. To date, Nokia has won a number of contracts for smartphones including: a deal to supply Sprint with dual band phones capable of accessing the Internet. Nokia is working closely with Orange on its launch of WAP enabled HSCSD devices in October 1999.

Infrastructure
In infrastructure equipment, Nokia focuses only on GSM technology and its upgrade path. It has HSCSD and GPRS capabilities from its Ipsilon Networks acquisition. We believe that Nokia is

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3G Network also developing core network ATM and IP expertise. However, in this area the leaders are the North American players. We believe that the timeframe for adoption of these wireless core network technologies will be when 3G takes shape which we anticipate to be in late 2001/early 02. For this reason we feel that there is adequate time for Nokia to develop and grow its IP and ATM expertise. Nokia feel that the 3G standards (wideband CDMA, UWC 136 which is based on TDMA, and CDMA 2000) are close enough to allow something close to global roaming. The company claims that variations between these technology specifications are so small that making phones to service all 3G networks will not be a problem. Nokia possesses the technology for 3G phones and infrastructure for the two main standards, WCDMA and UWC 136, although most of its efforts are in WCDMA. The company is also is working with many operators on the infrastructure side. For example: Nokia chosen by France Telecom in its GSM Internet services trials. Nokia is to supply GPRS equipment to Polkomtel in Poland. The installation is scheduled to take place this year and the commercial launch is expected in 2000. Polkomtel is an existing Nokia GSM customer. Nokia has an order to deliver a GPRS system to Singapore's M1. The order is for GPRS, network solutions and WAP platforms and includes a partnership for developing wireless data applications in Singapore. Deliveries will start in October and M1's users are expected to start using the GPRS next year. Nokia has signed an agreement with Sonofon in Denmark to supply GPRS equipment. Commercial launch is expected in 1H 2000. Nokia is leveraging the solid position it has at 2G in the GSM infrastructure segment. It has won HSCSD and GPRS contracts, predominantly from its existing customer base. In terms of higher data rate technologies such as EDGE and 3G, we believe that this is under development at Nokia and it should maintain share as its existing customers move to adopt these technologies in their networks.

Enabling Technologies
Early this year Nokia made its WAP Toolkit available free of charge from the Internet (Ericsson are charging for their equivalent product which includes some hardware). The Nokia WAP Server API Specification includes 3 main interface categories: Standard Java Servlet API for general application development. WAP Service API for accessing advanced information and services in the Nokia WAP Server. Server Extension API for customising the functionality of the Nokia WAP Server to meet specific needs. With this toolkit, Nokia will be able to establish license and revenues from other terminal manufacturers, systems integrators and content providers. The software development kit includes browser, authoring and debugging tools and a simulator to render the content as an end-user would see it. This will enable developers to develop WAP compatible content independent of wireless infrastructure. Short Message Service (SMS) based on GSM has been the first application in the mobile data space. We have seen these services prove particularly successful amongst the teenage communities. Nokia has been developing SMS servers that enabled by WAP can act as text-only web browsers.

Applications
Nokia has invested heavily in building its brand and distribution channels. The company is now moving into partnerships and alliances with content oriented services such as business information services and ISPs. It could also put them in partnerships with entertainment companies, computer gaming and television and video content providers. Companies are developing off the shelf service packages to sell to mobile operators. Some of these developments are: CNN together with Nokia have developed such a package to be sent via WAP and the Nokia 7110 mediaphone. IBM, Nokia and Sabre Group developing WAP based travel booking system for mobile operators.

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3G Network

Nokia is also piloting a project for wireless payment which aims to develop secure payment systems over the Internet via mobile phones. Nokia and Deutsche Bank developing Banking Services. Alliance with Hewlett Packard to optimise Nokia WAP server software on Hewlett Packard server platforms for mobile Internet services.

Nokia also has recently formed a new unit to exploit the wireless corporate market: Nokia Internet Communications. This will bring together wireless, LAN, routing and secure access through Internet as well as technology for accessing the web through mobile phones. We believe that this is a move to go beyond the traditional consumer space. We also believe that Nokia through its Ventures program and own R&D has paid a lot of attention to transaction based services, necessary to drive mobile commerce market forward. This is not about browsing the Internet to buy a specific product, this is about information coming to a subscriber that it wants leading to a transaction occurring.

Outlook
We believe that Nokia will adopt two main strategies in the handset arena as we move towards adoption of data enabled devices: It will focus on voice, voice+ and smartphone segments leveraging brand power, marketing clout and channel expertise. And it will move towards making the mobile device more intelligent by incorporating 3 rd party or Nokia specific applications such as Personal Information Management (PIM) and games. As we iterated, the hardware manufacture game is probably not where the value will be in the future applications will drive the mobile data terminal space. In our opinion, Nokia will invest increasingly in this application layer with 3 rd parties or internally. We could envisage Nokia portals on Nokia phones with access to specific Nokia applications. A model will however have to be designed whereby service providers also obtain access to the additional revenue stream. Moreover, voice is not going to die tomorrow on these networks or handsets, this market in our opinion will still grow over the next 24 months and Nokia is the leader in the voice terminal space. Voice will also be a very important application for these devices as they move to mobile data. Increased intelligence and applications in voice space will be added to create greater voice service packages in the short term. In the infrastructure arena, we believe that it will be able to leverage the strong position in GSM (specifically DCS1800) to obtain HSCSD and GPRS implementations. Increasing emphasis in R&D will be placed on EDGE and 3G and the service creation layer (IN).

Ericsson
Infrastructure
In terms of GPRS infrastructure solutions, we believe that Ericsson has built up a lead, in the development and deployment of this 2.5G technology. In the GSM infrastructure world, Ericsson has a 35% market share averaged over both frequency ranges. As these GSM operators move to faster data rate solutions such as GPRS, we believe that Ericsson will be able to at least maintain this market share. This is due to the fact that it already has the technology and that a mobile operator would probably not want to introduce another vendor into its network (cost of ownership). In the TDMA world, Ericsson has a leading position with Lucent Technologies. We believe that most TDMA (IS136) operators will aim to utilise their existing spectrum for faster data rate solutions. Once again in this space we believe that Ericsson will at least maintain share, and in the EDGE technology arena probably take it. Ericsson recently acquired the CDMA infrastructure business of Qualcomm. This enables Ericsson to tactically sit at the table for IS95 2G potential business, but also strategically position itself as a vendor that offers all backward compatibility solutions. We do not anticipate much business at the 2G level in the US, however in international markets where new operators adopt CDMA technology, Ericsson will certainly be aggressive competition. We could envisage it trying to break into the US market with 1XRTT implementation as this would require completely new radio modules.

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3G Network

Some infrastructure announcements:

Ericsson has an order for GPRS equipment from Sonera. The order is for a complete system including the IP-based core network infrastructure, packet switching products and upgrading of existing radio products. The new GPRS-based services are expected to be available from Sonera from 2000 onwards. Ericsson and Vodafone are also working together on 3G systems. Ericsson in GPRS trials with Omnipoint in the US. Ericsson also supplied WCDMA system to SmarTone in Hong Kong. Ericsson is to deliver GPRS equipment to German operator T-Mobil.

Handsets
Ericsson MC218 is the companys first PDA type product and supports EPOC and WAP. In fact the hardware is manufactured by Psion but to Ericssons specifications. It incorporates the latest version of WAP specification 1.1. We believe that this modular device will be one of the many flavours of mobile data terminals devices. In its first release the MC218 will be equipped with a infrared modem that will speak to an Ericsson Mobile handset. However we believe that in future releases Bluetooth chips will be incorporated on to these devices offering greater flexibility. The mobile handset device will act as the dial-up connector to mobile data services. The R380 (an integrated device like the Nokia Communicator but smaller) can surf the Internet using WAP and is based on EPOC. It has a built in PDA, which includes a calendar, and an address book based on EPOC software and a touch sensitive panel is used instead of a keyboard. The product will be available in 1Q2000. Ericsson is aiming to build platforms that can be altered late in the product development cycle to incorporate new applications and features such as WAP. This is critical in a market as it aids in defining price points as well as how to deliver at the right time. The company also believes that certain phones will use a WAP stack with set of applications and higher end devices would use Symbian and its 3 rd party applications. Voice will be an important application that these devices will need to support.

Internet Related Products and Solutions

Wireless Internet Solution (WISE) encompasses a wide range of products including Internet access servers, routers and e-mail gateways. This offers an array of end to end solutions aimed at the carrier and enterprise space. Ericsson WEBon Air proxy server compresses data from web pages and potentially could speed up Internet access. GSM on the NET solution uses small radio base stations to add LAN mobile coverage to an IP based LAN. It basically integrates GSM and IP capability in the corporate office environment providing mobile operator/ISPs with the possibility of increasing revenue generating opportunities. This solution could allow corporations to run their own mini GSM network as an extension to their Intranet.

Applications and Services

Ericsson and Oz.com (in which it has an equity stake) are developing intelligent IP communication products to put e-mail, voicemail, wireless information into a communication portal (iPulse). The iPulse connects users by mobile phone, pager, PDA, home phone or computer using a point-andclick contact menu. Users can customise communications with individual profiles indicating when, by whom and how they want to be reached. Once activated, iPulse connects users via an Internet framework. All users who are interested and have proper permission can observe the on-line status of the given user. Ericsson has made various strategic investments, such as Saraide.Com where it provides an array of Internet based services to wireless devices over any air interface. E-mail, e-commerce type transactions, weather, sports stock quotes are current offerings. Nortel Networks has also invested in Saraide.com. Ericsson has a licensing agreement with Communication Intelligence Corp (CIC) to bundle CICs Jot handwriting recognition system, and QuickNotes electronic notetaking solutions in to the

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3G Network R380. This strategic relationship calls for the integration of CICs key input and security technologies with Symbians EPOC platform. The company is working with Reuters to deliver news and data to both financial professionals and individual investors via mobile terminals using wireless Internet technology. The trials will involve the R380, an integrated device and the MC218, a modular device. The company has signed a commercial WAP service deal with TELENOR. Ericsson are to use Tibcos TIB/Rendezvous messaging software in its products and solutions. Tibco Software provides real-time infrastructure software for the enterprise and the Internet. This will be used by Ericsson to integrate information from multiple sources eg: news, quotes and weather into packaged solutions. Future TIB-based solutions will allow wireless operators to pull together content and personalisation features for push and pull-based information services, to be delivered to mobile devices using SMS and WAP. Ericsson and Virgin Radio (UK) in trials for radio to mobile phones.

Enabling Technologies
Ericsson Components has been testing a Bluetooth data transceiver module which is expected to be launched commercially in November 1999. A complete Bluetooth radio, incorporating a VLSI technology-based baseband processor, will be launched in Q1 2000. Integration into devices will probably happen in 2H2000. Ericsson has also launched the Bluetooth Development Kit, aimed at early adopters. Described as a toolbox' of equipment, it provides a flexible design environment for engineers to integrate Bluetooth technology into a range of electronic devices. We believe that Ericssons interest in Bluetooth is to grow the market place in general and also to gain additional revenues from Bluetooth products.

Outlook
It is our view that Ericsson has the broadest product infrastructure portfolio in this space and the widest installed base to leverage. Short term, we expect it to be very successful in the addition of voice capacity to existing 2G networks. Most of the advanced mobile operators will be procuring lower data rate 2.5G solutions such as GPRS over the next 12 months, we believe that Ericsson will at least maintain its market share in this space and probably better it. In certain markets that deploy higher data rate 2.5G and 3G systems over the next 24 months, Ericsson will also be placed in a very strong position. It has invested a lot in R&D and it also has a critical mass of radio engineers to leverage which is a very important asset. In fact the latest generation of Ericsson base stations are ready for EDGE deployment when it happens. All that will be needed is a software download to get the faster access speeds. Long term, we expect that there will be consolidation amongst operators in this industry. We believe that Ericsson will be able to consolidate on its strong position with many of the largest and most successful cellular operators world-wide. On the handset front, it will continue to be a solid player in the voice terminal business. It will also aim to push its integrated and modular devices in 2000 to prompt the market. We believe in this segment, it will aim to move further up the value chain towards integration of applications on devices. Ericsson will probably focus on voice applications on the handset such as profiles and incoming call identification.

Alcatel
Infrastructure
Alcatels mobile infrastructure business has been growing significantly in revenue terms over the past two years. However it has come off a low base due to its late entry into the market versus the Scandinavian leaders in this market segment. It has pumped in a lot of R&D and SG&A as a consequence of this. Alcatel management expects that 1999 will be the year that this division reaches profitability. In our view, whether Alcatel reaches profitability or not this year is not as important as how it is positioned for the next growth phase in the mobile infrastructure business ie. the impact of the Internet on wireless. We believe that this transition from a voice on cellular to voice and data on cellular world will also require major R&D and SG&A investment as existing suppliers will not want to lose their prized accounts to new supplier entrants.

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3G Network Alcatel has teamed up with Cisco Systems for GPRS and it has also joint R&D developments with Motorola for UMTS (3G). Alcatels alliance with Motorola in UMTS focuses on packetizing classical mobile circuit switching architectures and not the peer to peer packet architectures. Motorola is depending on its alliance with Cisco to address the peer to peer packet architectures. In our opinion, as Alcatel itself becomes more involved in mobile packet based architectures leveraging its Internet Protocol technology acquisitions, this Motorola UMTS alliance could potentially become increasingly strained. Alcatel also supplies Motorola with CDMA switches. This alliance is spread over four years and Motorola will potentially procure up to $1 billion of CDMA switches in this time frame. In our opinion there will be upgrade opportunities in North America and potential new market opportunities internationally in China, Korea, Japan and some Latin American countries. We do believe that competition in this area will get tougher over the next 18 months due to Ericssons likely entry into this market. Recently there have been some contract wins by Alcatel in the mobile infrastructure arena, for example a 300 million Euro contract with Cegetel in France and another 400 million Euro contract with Telering in Austria. However compared to the leaders in this industry and the investments that those players are placing in the transition from voice to voice and data on mobile, Alcatel will need to gain more economies of scale and be aware of potential problems with the Cisco alliance as Cisco also has an alliance with Motorola based on Wireless Internet infrastructure. Alcatels contracts to date in GPRS infrastructure are: A contract to supply Telecomunicacoes Moveis Nacionais (TMN), a subsidiary of Portugal Telecom with advanced data services such as WAP and high-speed data services with GPRS from its Evolium range of solutions and products. Alcatel and France Telecom (FT) are jointly testing Alcatels GPRS solution in the Itineris GSM network. The end-to-end solution comprises the necessary infrastructure elements for the radio, switching and routing functions as well as terminals and dedicated software releases allowing FT to experiment with GPRS, data and IP services in real-network conditions. Alcatel has also won contracts with Cegetel (France), T-Mobil (Germany) and Tele Ring (Austria). We expect the mobile infrastructure business of Alcatel to continue to grow at above industry average rates of 15% per annum from a revenue perspective driven predominantly by contracts in China and other Asian markets towards the end of 1999, however we believe that there will continue to be margin pressure due to Alcatels 2nd tier position in this arena.

Handsets
Alcatel has focused mainly on mobile terminals aimed at the consumer end (predominantly pre-paid) of the market. In 1998, it shipped 7 million units and we expect it to ship over 10 million units this year. Nokia shipped 40 million units in 1998 and we expect above 75 million units in 1999. Ericsson shipped 24 million units in 1998 and we are expecting above 35 million units in 1999. Alcatel entered the GSM handset business late. Moreover it has had to build brand equity and consumer marketing capabilities quickly in this dynamic and innovative space. For these reasons, we believe that the GSM handsets business of Alcatel will continue to demonstrate low single digit margins due to its market position versus the leaders in the area. Another reason for margin pressure is that as Alcatel is a second tier player in this space, it will not get access to the top tier customer list of component suppliers. This is an issue when there are component shortages. We believe that an exit strategy from the GSM terminals business is possible. In terms of adding data functionality onto its handset devices, Alcatel introduced WAP capabilities on its terminal with Cegetel as well as a WAP gateway to filter the content. It is also in an agreement with 3Com to combine its handsets with 3Coms organisers to create a two part communications device and has stated that it will not support the Symbian alliance.

Outlook
We believe that Alcatel will remain a 2nd tier player in both the infrastructure and handset arena as we shift to mobile data. Large investments are required in this space and this in our opinion is the reason that the company has opted to share R&D and reduce costs for mobile data developments. Examples are the 3Com, Motorola and Cisco alliances. We expect the company to exit the handset business over the next 12 months and also expect further developments in the infrastructure arena probably on the radio side.

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3G Network

Siemens
Infrastructure
Siemens has announced four contracts to date in the GPRS arena: Mannesmann Mobilfunk for its D2 network in Germany. BanVerket (Sweden). PTC/EIRA (Poland). MaxMobil (Austria). We believe that these systems will be commercial by 2Q2000. However most GPRS terminals will not be available until the 2H2000. Siemens is also aiming to leverage the technology expertise of Unisphere Solutions, its IP based company in Boston, US. In our opinion, it will initially aim to provide IP interfaces on various switches in order that there is some interoperability between the two worlds. In parallel, we believe that Siemens will invest in development of Core ATM technology for the MSC environment. (In fact, the NEC alliance is potentially targeting this space as well). It is also backing the TDD 3G mode of operation as it is asymmetric and hence utilises bandwidth much more efficiently. In fact, NTT DoCoMo of Japan announced a trial of Siemens TDD mobile infrastructure system. The system comprises base stations, switching systems and terminal devices for a mobile phone network. This co-operation will begin next year and run for at least one year. We believe that the TDD mode will be a niche for certain types of indoor usage. NEC and Siemens have a Joint Venture to develop and sell WCDMA equipment. The partnership will pool together the know-how of the two groups in this space. In our view, the main benefit will be savings on R&D spend and lower development costs, as neither are leading players in 2G. The agreement does not extend to joint manufacturing.

Handsets
We estimate that Siemens achieved unit sales of 3.5 to 4.0 million in 1998, and we expect this to exceed 10 million in the current year, following the success of the recently launched S25 model. Siemens have indicated a target of 20 million units 2000, which we believe is achievable if their success in the current year can be maintained. We view it as a leader among the second tier players and believe its seventh place ranking globally in 1999 (fourth in Europe) could improve. In Germany, it is no longer the market leader, having lost this position to Nokia over the last year, but hopes to regain the top spot in 2000. In our view, a critical factor in their recent success has been the vigorous marketing initiative. Siemens has recruited from outside the group in areas strong in marketing as it recognises importance of branding and advertising in this very competitive market. The S25 phone has been aimed specifically at the business user market. As a result of the products success and increase in volume, it has been possible to reduce production costs and we believe there has been a marked improvement in profitability. Longer term, the groups goal of becoming the global number three seems a much tougher objective. We estimate that Asia currently accounts for around 40% of Siemens handset sales, (most of which is in China) and Germany accounts for at least 10% of total units. The C25 phone is aimed at the fashion conscious younger generation and is aggressively priced. Its latest phone/companion device expected to launch at Telecom Geneva in October 1999, has the potential to combine WAP browsing, SMS, e-mail with a built-in modem for sending and receiving faxes and data. This latest phone/companion will however be based on a proprietary operating system. In our opinion, this could prove challenging especially with respect to capturing a critical mass of applications developers. In order to counteract this challenge, Siemens is promoting a cost-free software developers kit. Siemens intends to improve its position in the mobile data arena. The company is believed to have received orders from Germanys D2, from Finland and from Sweden for GPRS handsets which will be available in the market in 2H2000. In terms of moving up the handset value chain from pure hardware to applications development, in our discussions with the company, it iterated that it wanted to be in the volume shipment business and would rely on 3 rd parties for applications. We also believe that it will try to leverage smart card technology development being conducted by Infineon to enable a vast array of content and security services.

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3G Network

Outlook
We believe that Siemens handset business has had success in the market for various reasons: It has designed to cost. It has improved supply chain management. Faster time to market. It has found the right time to bring new products to market. Success has also in our opinion been due to the weakening of the competitive environment over the last 18 months (with the exception of Nokia). Currently, Siemens is focusing on GSM terminals only, it is our opinion, that over the next 12 months we will see the company branch into other technologies. Looking forward, we believe that the company will remain a second tier vendor in both the handset and in the infrastructure space. This position will lead to lower operating margins than the leading pack in both segments as Siemens aims to catch up in R&D and SG&A cycles. In the infrastructure arena, Intelligent Networking (IN) will become increasingly important as more applications are introduced. Charging and tariff options as well as new data and Internet capabilities will lead to a need for flexible IN platforms. Concepts in this area could be mobile office applications using Siemens PBX applications in a mobile environment. We believe that the reduction in margins on hardware due to the 2 nd tier infrastructure position could be balanced out by sale of IN technology.

Philips
With its PCC division, Philips focus in this area is very much in the terminals business and is developing products based on the Symbian operating system, for which it is a licensee. As well as cellular handsets, the company has also invested in the palm top organiser / computing area with its Windows CE products. It aims to bring these competences, together with its long established knowhow in display technology and semiconductor capabiliity in order to bring next generation voice centric and non-voice centric products to market. This development effort, together with the Philips brand name and distribution network could enable it to carve a niche in the evolving device market. Philips hostile bid for computer chip maker VLSI puts it in a good position as a supplier of cellular components to major handset producers, despite its position as a competitor in this market. Earlier this year, Ericsson signed a deal with VLSI (now part of Philips), for the supply of Bluetooth chips, which will enable Ericssons phones to communicate with computers, personal digital assistants and headsets using Bluetooth technology. VLSI expects at least one million Bluetooth chips to be manufactured this year. It has also stated that it believes 90 million computers with Bluetooth will be sold in 2001 and 155 million portable phones using the standard will be sold in 2002 (making a total of 250 million chips in 2002). Of course VLSI do not own the technology but are believed to be first with a product on the market. We believe that Philips position in the handset market is aimed at positioning for the technology discontinuity as it moves to mobile data terminal devices. In this space, Philips could potentially leverage its components capabilities as well as its consumer electronics heritage.

Motorola
Motorolas strategy in the wireless data arena is focused on: Smooth migration from 2G to 3G systems: Motorolas GPRS architecture is based on GSM base stations that have been uploaded with software. Leveraging its experience in CDMA technology.

Implementation of a client/server type architecture with IP to provide the end to end solution. Motorola is pushing open standard interfaces on its solutions to enable the deployment of applications developed by 3 rd parties. Motorolas strategy in the mobile data arena leverages alliances with industry vendors of applications and devices and value added service providers. A major component of this strategy is the alliance with Cisco Systems.

Handsets

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3G Network Motorola unveiled its first WAP enabled handset using Phone.com's technology at the GSM World Congress in February 1999. The product has not yet been commercially launched but the demonstration showed that the phone can access e-mail and select Internet based information. This browser meets the WAP 1.1 specification and the phone is expected to be available in Q4 1999. Although it is currently only GSM phones which are being WAP enabled, Motorola and other industry players intend to roll it out across all technologies, including CDMA, GSM and TDMA. The Motorola i1000 plus is a voice+ device with built-in microbrowser and access to a plethora of services such as White and Yellow Pages, Directions and Stock quotes. This device only works on iDEN networks.

Infrastructure
Motorola in 3G trials with Vodafone. Working with Cellnet (UK) on GPRS. Motorola has a contract with RadioMobil in the Czech Republic for GPRS on RadioMobil's 'Paegas' GSM network. The initial GPRS network will cover the major cities of Prague and Brnom and uses key elements from Cisco. Motorola has an order from T-Mobil to upgrade and enhance its network which we believe may include GPRS deployment. Motorola will supply its M-Cell base transceiver station, its Horizon series of GSM infrastructure solutions and its Enhanced Full Rate (EFR) speech coding solution. Motorolas new Horizon Systems and its installed M Cell system solutions are all compatible with GPRS and require only a software upload, minimising the need for additional network deployment costs.

Alliances and Co-operations

Motorola and Cisco have set up a joint company to focus on offering wireless Internet infrastructure. This agreement encompasses systems integration services, including systems design, network management software integration, billing software and end-user applications. It will be funded from the USD1 billion set aside by the two companies for investment in Wireless Internet development (IP based applications) over the next four to five years. The companies aim to cross license technology and develop complimentary products in this area. Motorolas GPRS solution includes Ciscos routers that act as the SGSN, GGSN and the PCU. In February 1999 Motorola and Alcatel reached an agreement to jointly develop and sell mobile infrastructure gear. Motorola will utilise Alcatel DSC CDMA and S12 switches in its turnkey offering and the two companies will jointly work on 3G systems (WCDMA) solutions through joint R&D effort. Motorola has also a $1 billion dollar 10 year agreement with Sun Microsystems to develop Internet protocol based wireless networks. Sun will provide the software for the IP infrastructure and Motorola will focus on the network hardware.

Software Applications and Solutions

Motorolas AirMobile software is a client server solution that provides wireless web access. TrueSync, developed by Starfish, is a technology that enables optimal synchronisation of wireless calendars, address books, action lists and memoranda. It allows users to enter information once anywhere and synchronise it everywhere. Short Message Service (SMS) based on GSM has been the first application in the mobile data space. We have seen these services prove particularly successful amongst the teenage communities. Motorola has been developing SMS servers that enabled by WAP can act as textonly web browsers.

Qualcomm
Qualcomm has announced intentions to divest the handset business. The pdQ Smartphone bridges communications and PDA capabilities by incorporating Palm Pilot features into the device. Qualcomm is also the only vendor that is currently supplying IS95version B chipsets to enable higher data speeds over the 1.25Mhz channel. Its Higher Data Rate (HDR) initiative is underway with trials at US West.

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3G Network Qualcomms infrastructure business has already been sold to Ericsson as it was loss making and Qualcomm did not have the financial resources, nor the critical mass in human terms from a radio and sales support perspective, nor the necessary channels to market to make this a volume business.

Lucent Technologies
Lucents strategy is to leverage its broad product portfolio in the data networking, optical, unified messaging, billing and customer care, communications software and network operations arena. It believes that the value will come from the core network and the management and application layers and less so from the radio air interface space. Lucent has been very successful in TDMA and CDMA technologies. However in the GSM market it was late into the game and hence has not been able to penetrate the market in any volume. Recently it announced Packet GSM which is a GPRS technology that not only carries data but also voice. In the TDMA arena, Lucent recently won a $1 Billion order from ATT Wireless. We believe that as part of this deal there was some collaborative development on evolution towards 3G including EDGE technology.

Some Announcements
The company recently won a deal with Omnitel Pronto Italia (OPI) valued at $50 million covering the supply of products that will move OPI from circuit switched MSCs to packet switched using the 7 R/E platform. In fact this platform is Lucents next generation core network architecture that will be used not only in mobile but also in fixed line implementations. This is also currently in trials for either mobile or fixed applications with NTT Commware, ICG, US LEC, E.spire, KMC (Korea), ATT and Time Warner. Lucent is working with NTTDoCoMo on 3G with a number of other suppliers. It is expected to supply Base Stations as well as Radio Network Controllers. It is also in trials with Bell Atlantic, Sprint PCS and Vodafone Airtouch. It is also working with Telstra on WCDMA.

Some Alliances
Lucents Full Circle program brings together key industry players such as content providers, valued added applications providers and service providers to help operators better enable and manage new services that will stimulate usage in UMTS. Companies that are involved include Spyglass and Phone.Com that make possible new wireless Internet-based services. Others in the alliance program offer location-sensitive services for customised information delivery and emergency and law enforcement -mandated services like Enhanced 999 and billing and customer care companies such as Veramark Technologies, Inc., Sema Group and Stonehouse Technologies. The latter three each have applications that will help Operators streamline its billing and customer care processes for faster service and greater flexibility. Lucent also has licensed custom Netcenter from Netscape to develop a custom portal designed to serve as the Internet start page for UMTS subscribers. The portal is called Zingo and will serve as a virtual laboratory for operators to test Lucent and 3 rd party developed wireless applications.

Nortel Networks
Nortel focuses solely on infrastructure gear and uses alliances in the handset market. Nortels mobile data initiative is part of its Unified Networks approach that leverages a packet switched backbone. Nortel anticipates leveraging its strength in CDMA, GSM, TDMA and IP expertise. The wireless webtone philosophy focuses on reliable access to mobile data applications utilising the IP protocol. In this potential end to end open IP network, service development and creation will potentially be easier with third parties being able to develop service logic outside the core network. Nortel strategy is to leverage its: CDMA technology position.

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3G Network

GSM technology position. And IP technology expertise acquired through Bay Networks. Provide for a migrationary solution to protect existing investments.

Alliances
Nortel and Matsushita are co-operating on WCDMA development and plan to deploy a series of experimental network systems, services and terminals. Matushita (Panasonic) has been chosen by NTTDoCoMo as a supplier of Base station and RNC gear for its WCDMA network. The relationship between Nortel and Matsushita covers joint development in the radio portion to leverage Matsushitas learning in NTTDoCoMo network as well as leveraging Nortels core backbone technology expertise based on packet technology. Matsushita will supply the terminals in this relationship as Nortel has pulled out of this segment of the market. Matsuhita in the communications infrastructure space has few distribution beachheads outside of Japan and some Asian countries. The two companies believe that they can leverage Nortels channel in to mobile operator accounts. Nortel and Samsung are collaborating to evolve networks to enable delivery of mobile data services. They are initially developing solutions for 1XRTT (the first phase of proposed CDMA2000) using Nortel infrastructure and Samsung terminal technology.

Some Announcements
Nortel is teaming with Telstra to upgrade its new CDMA IS95 network to faster data rates over the next few years. Nortel also has a deal with Telstras main competitor, Optus to upgrade its digital network, its intelligent network and core platform. The deal also covers implementation of GPRS and WAP. GPRS trials will be held in Q1 2000 (commercial launch in Q3). WAP trials will be in June 2000 in co-operation with HK Telecom and MobileOne with commercial launch in Sept 2000. Nortel and France Telecom are working on 3G trials with Panasonic terminals and Nortel network infrastructure. Hong Kong operator Sunday has a memorandum of understanding with Nortel Networks to cooperate on deployment of GPRS. The memorandum also covers joint development of 3G wireless multimedia applications. Nortel are deploying a GPRS trial in selected areas of Paris for Bouygues Telecom, which plans to offer GPRS services at the beginning of next year. Omnipoint and the North American GSM alliance are trialling Nortel/Matsushita 3G gear.

Nortel is putting a lot of emphasis on mobile IP networks with the core network being based on IP infrastructure and web farms and servers hanging off this core enabling subscribers to log on to an abundance of IP services and applications. It believes that in the longer term IP will be everywhere and hence the need for WAP and other filtering mechanisms will not be required. Moreover it believes that there are a plethora of HTML and Windows developers in the market that can be leveraged for future opportunities in applications.

The Japanese Players

The Japanese industry in our view is aiming to become a major global player in mobile data by adopting 3G. The Japanese market will be the first to adopt 3G services. The recent role out of I-mode services has been a major success with more than 1 million subscribers signed up in less than 6 months and ARPU increasing by 13% per subscriber. Matsushita is the global number four in mobile handsets and has recently joined the Symbian alliance. It has also an alliance with Nortel Networks to jointly develop 3G end to end systems. It has been selected by NTTDoCoMo as a supplier of radio network gear and aims to leverage this as a reference account internationally in other WCDMA implementations. NEC has entered into an alliance with Siemens for co-development (not manufacturing) of 3G systems. NEC has traditionally been strong in the Japanese environment with TDM switching gear and has over the last 10 years invested heavily in ATM technology. It intends to exploit this investment as mobile networks become more packet in orientation.

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3G Network Fujitsu has also been strong in the Japanese TDM switching market and has also developed ATM technology. We believe that it will aim to leverage this competence into the core of future mobile networks. Our view on the Japanese threat in infrastructure is that even in the Japanese market there is a shortage of expertise in the radio engineering space. This is a dilemma that all players including the leaders have faced over the last ten years as the market has exploded. We anticipate this to be true as we move towards mobile data. Hence players such as the above will find it very difficult to meet the demand to service new mobile data oriented networks. Another reason for our position on these players is that historically they have not had the necessary channels to market internationally nor the support structure base. On the terminal side we do envisage greater presence from the Japanese players in the mobile data terminal game. However we believe that in the Voice and Voice+ segments, players with a fine understanding of consumerisation and micro-segmentation of lifestyles as well as brand will lead. Nokia (especially) and Ericsson will not be deposed here. Moreover the trend will be to move towards value and that is an area where in our opinion the Japanese will face challenges.

3Com
Recently 3Com announced plans to spin off the Palm division that incorporates its PDA and OS businesses. The 3Com Palm Pilot is the most successful PDA in the market with sales increasing on a daily basis. Recently, it has designed the Palm VII that is not just a PDA but also a wireless data terminal. It incorporates 3Coms proprietary Palm.Net wireless web access architecture which allows end-users to pre-load content from each content provider minimising web traffic. The Palm VII uses a wireless connection to let users get information from the Internet conduct e-commerce type transactions and send and receive messages. 3Com also acquired Smartcode Technologie of France in February this year to expand its Palm.net Web content platform. The Palm.net platform allows the Palm VII platform to be a wireless organiser and not just a PDA. With this acquisition 3Com is filling out its wireless data portfolio to include Web browsing components on mobile devices, the Palm OS which will be upgraded to support wireless voice functions, microbrowser capability, as well as technology to redirect and reformat Web content to small screen devices. NTT DoCoMo has an agreement with 3Com of the US to develop new products and services for wireless data communications. The two companies will combine NTT DoCoMo's wireless data communications technology and 3Com's handheld palm computer technology, and will jointly develop wireless communications and solution services. Effectively, Palm users will be able to access e-mail and the Internet with a wireless connection. As we write this article the company has also announced the intention to IPO its Palm division.

Some Companies to Watch Out for

Trio (Sweden) Call handling software developer that also incorporates WAP. Infocast (Sweden) Development of WAP technology for mobile users. NoCom (Sweden) WAP services developer. Relationship with Nokia. Apion Limited (UK) WAP gateway enabling carriers to deliver Internet access via mobile phones. Argo Interactive Group (UK) Server software that allows mobiles and PDAs to link to the Internet. Iobox (Finland) Free service that routes e-mail to cell phones. Data Protect (Germany) Authentication server allowing electronic payments to be made from mobile phones. More Magic Software E-commerce server providing common interface to different authentication and billing schemes.

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3G Network

Aironet Wireless LAN technology NWN Wireless LAN technology Olympic WorldLink Developed various technologies that stores data in a compressed format. It also has an in-built encryption system and browser based presentation. It provides solutions in a wireless format for real time prices, news and mobile office amongst other. Research In Motion Wireless and handheld products company based in Waterloo, Canada. The company makes the RIM pager, a device the size of a traditional pager that permits users to receive and send email messages anytime from virtually anyplace. RIMs Blackberry is an example of an information appliance marrying Internet connectivity with products designed to perform specific tasks. Aether Wireless data software that allows users to receive email and Internet data with the use of a wireless modem. Saraide.com Delivers Internet-based datacom services to wireless network operators, including e-mail, e-commerce, stock quotes and travel information. It can deliver information to any mobile device, including cell phones, pagers, personal digital assistants (PDAs), notebook computers and fax machines - over any air interface, including GSM, CDMA, and TDMA. Breezecom Wireless LAN technology. Yellow Computing (Germany) Hardware and software for palmtops, PDAs and organisers. Satama (Finland) Internet consultancy and software developer recently acquired Seiren (WAP software). Netcall (UK) E-mails read to user over regular mobile. Text to speech conversion software. Apica (France) A consulting company specialising in wireless communications systems design, consulting, and development. It uses standards such as WAP, GPRS, UMTS and MexE. Pactive (UK) Internet news aggregator to make WAP ready websites. WAP IT Develops specialised content and services for WAP platform. Boxman (Sweden) Online music retailer to make WAP ready web sites. Working with Ericsson. Fantastic Corporation (Switzerland) Develops end to end multimedia software solutions. Dialogue Comms (UK) Mobile software developer. Software allows users to access their regular e-mail server using WAP enabled mobile phone. Users can read, forward, compose and delete messages using their phones. Infinite Technologies (US) Transmission of e-mail to WAP enabled phones. The service is currently available free on the Internet. Infoware Software (Canada) Developing software that connects mobile phones to corporate networks via SMS. Concurrent Data Dynamics (Sweden) Internet portal based on WAP including search engine. Psion It has teamed up with ISP LineOne to offer Internet access through its hand held devices. It has also a planet.psion portal and is involved in the Symbian Joint Venture. Cambridge Silicon Radio (CSR) CSR is a private UK based fabless semiconductor company that has developed a Bluetooth CMOS chip that will ship in volume at $5. This single chip solution combines radio, baseband, microcontroller and software on a single device and is likely to attract strong interest from OEMs wanting to Bluetoothenable their products when CSR start shipping silicon later this year. CSR has built up a very strong silicon design, software and RF engineering capability that may well place it several years ahead of its

Ex-patrioT
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3G Network competitors in the short range radio field. The company intends to ship its BlueCore TM 01 product, which requires external flash memory, by the end of this year with a fully integrated BlueCore TM 02 chip in 2.5um CMOS by mid 2000. ASSP versions including customer-specific software will follow in 2001.

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