Cingular Wireless deal worth almost $4 bn

HELSINKI: US carrier Cingular Wireless has placed orders with leading

European telecoms equipment makers worth almost $4 billion to build its

high-speed mobile phone network across the United States.

Cingular, the second-largest US wireless operator, announced in late October

it would upgrade its entire network to a European-based system that delivers

Internet data on handsets faster than standard mobile networks.

The upgrade will enable Cingular, a joint venture between BellSouth and SBC

Communications, to compete with other US rivals and bring its services into line

with those built in Asia and Europe, currently more advanced mobile phone

markets.

Announcements on Monday that Ericsson's share was likely to be over $2

billion, Nokia's "well over" $1 billion and Siemens' worth $600

million, indicated the upgrade that Cingular initially said was worth $3 billion

was closer to $4 billion.

It was unclear if more telecoms manufacturers were included.

This would make it one of the biggest deals ever to build a US mobile network

based on GSM (Global System for Mobile Communications), the world's leading

digital wireless technology. GSM is dominant in Europe but used by less than 10

percent of mobile subscribers in the United States.

"The way the contracts were divided up was pretty much as expected,

although the overall figure was a bit higher," said Nordea Securities

senior analyst Mika Paloranta. "Don't expect to see any positive EBIT

(earnings before interest and tax) in the first couple of years as the selling

price is close to cost price. It may even burden EBIT margins."

Paloranta said EBIT margins for these equipment makers would at best be at

five percent, similar to deals struck with AT&T Wireless to build GSM in the

United States. Ericsson shares traded 1.7 per cent lower at 58 crowns, Nokia was

off 2.2 per cent at 25.54 euros and Siemens eased 1.7 per cent at 64.87 euros in

negative European markets at 0930 GMT.

Brokers and analysts said these stocks were falling along with European

markets amid worries about a global economic slowdown and jitters ahead of US

economic data due later.

3G services coming to US



Cingular is moving to a so-called EDGE (Enhanced Data Rates for Global
Evolution) system, which will deliver mobile users data at rates of up to

470,000 bits a second -- fast enough to watch video clips over phones.

Moving to EDGE will enable Cingular to offer third generation (3G) services,

such as picture, audio and text messaging over phones that work with networks in

Europe and Asia. Cingular's backing for EDGE technology pushes the company down

the path of embracing international standards used in more than 110 countries,

instead of relying on alternative technology from US equipment supplier Qualcomm

Inc.

"This is good for GSM and for GSM vendors as it will lead to more

upgrades of networks in the future," Paloranta said. The move comes at a

time of great uncertainty for the wireless industry, struggling with a US-led

economic slowdown, saturated markets in Europe, and consumer skepticism about

new data services that have already been delayed in Europe.

As part of the upgrade to EDGE, Cingular will be installing GSM voice

technology on its existing networks. The upgrade is also aimed at allowing

Cingular to offer services on GPRS (General Packet Radio Service) and future 3G

technologies, which enable consumers to download data quickly.

Phones powered with GPRS technology are currently being sold in Europe while

faster 3G devices are on sale in Japan, the world's most advanced mobile

Internet market.

"We feel strongly this deployment will demonstrate to the industry at

large the strengths of the GPRS/EDGE path to 3G," said Nokia Networks

Senior Vice President Timothy Eckersley. Nokia -- the world's largest maker of

mobile phones -- said deliveries and a nationwide rollout of the GSM/EDGE

network would start in 2002. Cingular said in late October the upgrade would

take place over the next 12-18 months.

Nokia said phones were not included in its contract, while Siemens and

Ericsson said phones were included in their deals. Ericsson said it would

provide 60 per cent of core network infrastructure and 40 per cent of radio

network equipment.

Nokia, which is trying hard to challenge Ericsson as the top supplier of

mobile networks, said it would deliver both core network and radio-access

network systems, including base stations and GPRS network technology. Nokia

Networks spokeswoman Arja Suominen said no vendor financing was involved in

Nokia's deal with Cingular.