3g networks

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3G Networks

Licences are on the horizon, trials and tests are being conducted and more spectrum forcapacity is needed. 3G systems can potentially increase the data rate up to 2Mbps if an end-user isstationary 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 orevolutionary 2.5G systems.

Chapter SummaryAt 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 worldwith a multiplicity of standards at the 3 rd Generation level and where multimode/band terminal devicesstill exist.

From our discussions with operators and manufacturers, it appears to us that the migrationpath towards 3G is far from clear-cut. We have heard differing views as to the best technical solution aswell as very diverse opinions about the likely demand for services. Depending on the path taken, thecost 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 thenew frequencies.

For the operators, there are many uncertainties in 3G in terms of what the major applicationswill be, who they will be aimed at, what will subscribers pay, how will the services be billed. On thesupply side, the method of migration to 3G in terms of infrastructure and terminal requirements are stilluncertain. 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 servicesbut to alleviate capacity issues in their respective networks. In the worst case scenario, mobileoperators will initially deploy lower data rate 2.5G solutions and if they win a 3G licence also procure3G 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 willneed harmonisation. This process has historically been very difficult due to the battles betweendifferent parties and regions, which seem to be pushing their own specific view on where the marketshould 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 Generationsystems being able to communicate with each other and allow for better roaming capabilities.

Ex-patrioTThis file use for Alumni-Satelindo only ([email protected])


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We believe the recently announced agreement between Ericsson and Qualcomm is positive forthe whole industry and for 3G as these disagreements about intellectual property were absorbing muchof the energy needed to advance further towards 3G. The end to this battle should ease the path for the3G auctions and effectively means that the 3G solutions for the air interface CDMA2000 and WCDMAand a third proposal based on TDMA are likely to be combined in a tri-mode solution. All three havealready 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 networksbased on the two major core network standards: GSM MAP and TIA IS-41. This single global airinterface has now proven to be unlikely. In February 1999, Qualcomm and Ericsson settled their IPRdisputes 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 amotorway) 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 andtraffic in the other band (lane) will come from the server to the mobile terminal. This technique iscalled 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 frommobile terminal. Currently, this is split into 1XRTT and 3XRTT which are spectrum migrationtechnologies 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 suchthat more traffic is coming from a server to the mobile station and hence is also called anasymmetric 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 alsoagreed a common core networkfor packet based data. This will aim to bridge the difference betweenTIA IS-41 and GSM MAP core technologies. Network intelligence features such as calling lineIdentification and call barring are related to these core technologies. Currently there is not muchinteroperability between the two and hence the move by the two respective standards bodies to bridgedifferences is very important.



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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) andIS95 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 and2G digital systems for voice calls. In addition to new terminal devices, W-CDMA requires completelynew radio access methods and systems architectures in the core of the network. We believe that Europeand most of Asia including Japan will opt for the W-CDMA 3 rd Generation standard.

The US Environment and 3GIn 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 wasoriginally allocated for 3G licences. This can be resolved through re-allocating or refarming thespectrum, at a cost. Moreover, the US market already suffers from a multiplicity of standards at 2Glevel and this diversity will probably continue as decisions are made on how to migrate to 3G. TDMAand 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.

CDMA2000CDMA2000 is the 3 rd Generation system that is backward compatible to the 2 nd Generation CDMAIS-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 pathand their familiarity with systems planning tools, billing systems and other network elements. TheCDMA Development Group (CDG) is currently providing a forum to define 3 rd Generation capabilitiesand applications. In our opinion, the development of CDMA2000 is further behind that of WCDMA.



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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 ofbackward compatibility. We believe that for TDMA vendors, the migration will be via Higher DataRate 2.5G (IS136HS/EDGE) especially in the US as regulator pressure to adopt 3G licences will beless 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 hastransport 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 widebandinterconnection 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 includesupport for connection to legacy systems and provide efficient packet connection with the corenetwork packet devices (SGSN or equivalent). Node B is equivalent to the Base Stations in the 2Gnetwork 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 asDCS1800 and PCS1900, the cost will be less than GSM800 and 900 networks due to the fact thatmore of these sites have been acquired due to the shorter frequency range. These higher frequency2G operators have cell sizes that are approximately similar to 3G and hence 3G operators will beable to re-use existing cell sites. This is however not the case with lower 800/900MHz operatorswhich will need to install new sites to obtain 3G coverage they require adding significantly morecost. It must be noted that 3G is more capacity intensive and will require a microcell type approachimplying a larger number of cells than existing 2G systems to gain the same coverage area.

Core Network Requires More Packet Based ArchitectureThis 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. TheGPRS core for example should be able to be upgraded to 3G system architecture in an evolutionary

manner.



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

Deployment Cost of 3GThere 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 toroll out systems first and how to link these systems to 2G architectures. This is crucial as initially mostof 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 itsoriginal format, which will mean that the mobile operator will possibly cut back on national coverageto reduce the capital spend.

Issues with 3GNeed 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 educatedon what type of applications and services are available for mobile data. In our opinion the servicecreation 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 servicesdeveloped 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 inmajor urban areas in first deployment phase. Subsequent to this they will link these big urban areastogether and provide for 3G services along transport routes to airports and train stations. In our opinionthese 3G services will be coupled with 2.5G services in other areas. This will require mobile dataterminals 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-workingbetween 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 beremovable or fixed in the terminal, which would enable over the air programming of services andapplications.

3. Radio (Air) Interface: This is a critical issue and requires some form of global harmonisation forroaming to really take shape. With the resolution of patent disputes, harmonisation looks morelikely. 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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Global roaming will also depend whether the allocated 3G spectrum in different regionsbridges the same frequency bands. In the US for example some of this spectrum is occupied withcurrent 2G licences. In our opinion, roaming will be possible as it is today with some improvements butwe will still be in a multimode world.

In summary, with Japan expected to launch 3G in 2001/02, followed closely by Europe, theUS is looking more and more likely to be trailing the rest of the world by rather a long way, similar tothe situation in second generation digital cellular today. This means that it may not be possible to travelfrom continent to continent with your 3G device, as there may be two, possibly three differentstandards, 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 technologiesthat enable programmable systems architecture for wireless networks. This will mean that both theradio element in the base station system and in the mobile terminal device will become more softwareenabled. 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 notreadily 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 solelyresponsible 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 initialsoftware load.

Subsequent to this the equipment could be modified by the inclusion of software from anumber of 3 rdparty software suppliers. This will open up the market to a whole variety of new playersand 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. Insome markets especially in US, Asia and Latin America, 2G networks have just started to roll out andthese operators have invested heavily in capital infrastructure.

In Japan due to the major capacity issues confronting mobile operators, it seems as if roll-outwill be quicker than elsewhere. Other roll out options are in some non-saturated markets where newspectrum allocated for 3G can be acquired by operators who were locked out of 2G and by mega-carriers seeking to establish a global footprint.In other markets it depends on when the licences are issued and what is stipulatedin 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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because end-users are stationary. However mobile users are not static and specialised IP addresssystems will be needed.

Moreover, IP packet headers are too bulky for the bandwidth limited wireless environmentand 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 dataservices account for an increasing proportion of overall mobile network traffic, network architectureswill need to accommodate data rather than traditional voice traffic. For an end-user sending a file, thecost will be much lower over a GPRS enabled network versus a circuit switched mobile network as theconnection will not be open all the time. Eventually we expect this to be reflected in the billingssystems, with pricing based on number of packets sent initially and, once the system becomessufficiently 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 theimpact of IP on mobile. These are all in early stages of development. One such move occurred in June1999, ATT and BT announced that they would plan to align their disparate mobile networks to offercorporate users global access to mobile voice and data applications. The embryonic plan which to datehas 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 Protocolwireless network. We believe that IP on mobile is still 24-36 months away in terms of volumedeployment.

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 whenmoving 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 inJapan. We believe the licensing process for 3G will make considerable progress over the next 12months 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 networkstie in will have to be evaluated. However, it is our opinion that many mobile operators will targetcapturing 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 regulationallows) 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. Weanticipate that many operators will aim to deploy 3G solutions in these areas to alleviate congestionand 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 maychoose to deploy the 2.5G solutions. Some mobile data applications will require faster data rates thanothers. This is likely to be another major factor in deployment of these various systems for mobileoperators. 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 perspectivewould be steeper than the selective approach above.

Mobile operators that do not receive 3G licences will probably choose to adopt the higher datarate 2.5G systems such as EDGE utilising the existing spectrum range. In our opinion, the most maturemobile markets will start to license 3G spectrum from early 2000.



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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 thanauctioned.

The UKwill auction five licences in early 2000. Non-cellular operators who have expressedan 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 toincorporate 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 willnot have to offer roaming. The UK government will make available 2x60MHz in the 2GHz section ofspectrum. The UK may adopt a minimal coverage obligation of 80% within 6 years. More detail on theUK 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 actualauction 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 ideaof fees for 3G licences, while Max.Mobil says an auction would only be viable if there was anotheroperator. The existing mobile frequencies in Austria can only support four operators, and these four arealready investing heavily to expand and upgrade their GSM networks. They therefore feel that existinginvestments, 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 significantdisagreement over Italys auction process for 3G due to the Governments apparent intention to giveone to each existing operator automatically. It is thought that Italy is planning to auction five 3Glicences, which will be operational by 2002.

In Norway, Telenor and Teletopia have won UMTS test licences which run until Augustnext year. Limited installations will test the technology and investigate the possibilities of the newmobile phone system. NetCom, Norway's second largest cellular phone company after Telenor, hasalso 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 beauctioned 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 probablybe 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 meanthat in the US, mobile operators do not have enough spectrum to deploy CDMA2000 systems, unless itis refarmed. Refarming is when a specific licence is awarded for a specific technology at a specificfrequency range, then is refarmed to cope with another technology and licence. It is difficult to assesshow 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 alicensing 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 utilisingexisting 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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CompaniesCompanies 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 serviceslayer. The air interface will provide bandwidth, quality of service and capacity. It believes that therewill 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 auniversal remote control.

3. Standalone applications such as games, applications and word processing enabled bySymbian.

HandsetsNokia 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 believesthat 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 computergraphics.

Nokia launched its WAP server and WAP phone at the beginning of 1999. The serverplatform will host content, standalone applications and will communicate with other informationsystems via its API (Application Programming Interface). Nokias forays into mobile data terminalsstarted with the Communicator product. It is releasing the media phone 7110, a voice plus devicewhich 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.

InfrastructureIn 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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also developing core network ATM and IP expertise. However, in this area the leaders are the NorthAmerican players. We believe that the timeframe for adoption of these wireless core networktechnologies will be when 3G takes shape which we anticipate to be in late 2001/early 02. For thisreason 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, andCDMA 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 3Gnetworks will not be a problem. Nokia possesses the technology for 3G phones and infrastructure forthe 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 existingNokia 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 dataapplications in Singapore. Deliveries will start in October and M1's users are expected to startusing 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 haswon HSCSD and GPRS contracts, predominantly from its existing customer base. In terms of higherdata rate technologies such as EDGE and 3G, we believe that this is under development at Nokia and itshould maintain share as its existing customers move to adopt these technologies in their networks.

Enabling TechnologiesEarly 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 WAPServer 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 terminalmanufacturers, 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 seeit. This will enable developers to develop WAP compatible content independent of wirelessinfrastructure.

Short Message Service (SMS) based on GSM has been the first application in the mobiledata space. We have seen these services prove particularly successful amongst the teenagecommunities. Nokia has been developing SMS servers that enabled by WAP can act as text-only web

browsers.

ApplicationsNokia 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 informationservices and ISPs. It could also put them in partnerships with entertainment companies, computergaming 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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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: NokiaInternet Communications. This will bring together wireless, LAN, routing and secure access throughInternet as well as technology for accessing the web through mobile phones. We believe that this is amove 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 attentionto 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 itwants leading to a transaction occurring.

OutlookWe 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, marketingclout 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) andgames.

As we iterated, the hardware manufacture game is probably not where the value will be in thefuture applications will drive the mobile data terminal space. In our opinion, Nokia will investincreasingly in this application layer with 3 rdparties or internally. We could envisage Nokia portals on

Nokia phones with access to specific Nokia applications. A model will however have to be designedwhereby service providers also obtain access to the additional revenue stream. Moreover, voice is notgoing to die tomorrow on these networks or handsets, this market in our opinion will still grow over thenext 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 thestrong 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

InfrastructureIn 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 a35% 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 marketshare. 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 ratesolutions. Once again in this space we believe that Ericsson will at least maintain share, and in theEDGE technology arena probably take it.

Ericsson recently acquired the CDMA infrastructure business of Qualcomm. This enablesEricsson to tactically sit at the table for IS95 2G potential business, but also strategically position itselfas a vendor that offers all backward compatibility solutions. We do not anticipate much business at the2G 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 USmarket with 1XRTT implementation as this would require completely new radio modules.



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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 ofexisting radio products. The new GPRS-based services are expected to be available from Sonerafrom 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.

HandsetsEricsson 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 latestversion of WAP specification 1.1. We believe that this modular device will be one of the many flavoursof mobile data terminals devices. In its first release the MC218 will be equipped with a infrared modemthat will speak to an Ericsson Mobile handset. However we believe that in future releases Bluetoothchips will be incorporated on to these devices offering greater flexibility. The mobile handset devicewill act as the dial-up connector to mobile data services.

The R380 (an integrated device like the Nokia Communicator but smaller) can surf theInternet using WAP and is based on EPOC. It has a built in PDA, which includes a calendar, and anaddress 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 indefining 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 applicationsand higher end devices would use Symbian and its 3 rdparty applications. Voice will be an importantapplication that these devices will need to support.

Internet Related Products and Solutions

Wireless Internet Solution (WISE) encompasses a wide range of products including Internetaccess servers, routers and e-mail gateways. This offers an array of end to end solutions aimedat 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 environmentproviding mobile operator/ISPs with the possibility of increasing revenue generatingopportunities. This solution could allow corporations to run their own mini GSM network asan 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). TheiPulse connects users by mobile phone, pager, PDA, home phone or computer using a point-and-click 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 Internetframework. All users who are interested and have proper permission can observe the on-line statusof 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 typetransactions, weather, sports stock quotes are current offerings. Nortel Networks has also investedin 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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R380. This strategic relationship calls for the integration of CICs key input and securitytechnologies 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 willinvolve 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. Thiswill be used by Ericsson to integrate information from multiple sources eg: news, quotes andweather into packaged solutions. Future TIB-based solutions will allow wireless operators to pulltogether content and personalisation features for push and pull-based information services, to bedelivered to mobile devices using SMS and WAP.

Ericsson and Virgin Radio (UK) in trials for radio to mobile phones.

Enabling TechnologiesEricsson 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 VLSItechnology-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 earlyadopters. Described as a toolbox' of equipment, it provides a flexible design environment for engineersto integrate Bluetooth technology into a range of electronic devices.

We believe that Ericssons interest in Bluetooth is to grow the market place in general andalso to gain additional revenues from Bluetooth products.

OutlookIt 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 ofvoice capacity to existing 2G networks. Most of the advanced mobile operators will be procuring lowerdata rate 2.5G solutions such as GPRS over the next 12 months, we believe that Ericsson will at leastmaintain 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 acritical mass of radio engineers to leverage which is a very important asset. In fact the latest generationof Ericsson base stations are ready for EDGE deployment when it happens. All that will be needed is asoftware download to get the faster access speeds.

Long term, we expect that there will be consolidation amongst operators in this industry. Webelieve that Ericsson will be able to consolidate on its strong position with many of the largest andmost successful cellular operators world-wide. On the handset front, it will continue to be a solid playerin 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 towardsintegration of applications on devices. Ericsson will probably focus on voice applications on thehandset such as profiles and incoming call identification.

Alcatel

InfrastructureAlcatels 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 theScandinavian leaders in this market segment. It has pumped in a lot of R&D and SG&A as aconsequence 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 theInternet on wireless. We believe that this transition from a voice on cellular to voice and data oncellular world will also require major R&D and SG&A investment as existing suppliers will not wantto lose their prized accounts to new supplier entrants.



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Alcatel has teamed up with Cisco Systems for GPRS and it has also joint R&D developmentswith Motorola for UMTS (3G). Alcatels alliance with Motorola in UMTS focuses on packetizingclassical mobile circuit switching architectures and not the peer to peer packet architectures. Motorolais 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 InternetProtocol 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 ouropinion there will be upgrade opportunities in North America and potential new market opportunitiesinternationally in China, Korea, Japan and some Latin American countries. We do believe thatcompetition in this area will get tougher over the next 18 months due to Ericssons likely entry into thismarket.

Recently there have been some contract wins by Alcatel in the mobile infrastructure arena, forexample a 300 million Euro contract with Cegetel in France and another 400 million Euro contract withTelering 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 gainmore economies of scale and be aware of potential problems with the Cisco alliance as Cisco also hasan 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 fromits 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 FTto 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 aboveindustry average rates of 15% per annum from a revenue perspective driven predominantly bycontracts in China and other Asian markets towards the end of 1999, however we believe that there willcontinue to be margin pressure due to Alcatels 2nd tier position in this arena.

HandsetsAlcatel 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 millionunits 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. Alcatelentered the GSM handset business late. Moreover it has had to build brand equity and consumermarketing capabilities quickly in this dynamic and innovative space. For these reasons, we believe thatthe GSM handsets business of Alcatel will continue to demonstrate low single digit margins due to itsmarket 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 thereare 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 WAPcapabilities on its terminal with Cegetel as well as a WAP gateway to filter the content. It is also in anagreement with 3Com to combine its handsets with 3Coms organisers to create a two partcommunications device and has stated that it will not support the Symbian alliance.

OutlookWe 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 isthe 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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Siemens

InfrastructureSiemens 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 terminalswill not be available until the 2H2000. Siemens is also aiming to leverage the technology expertise ofUnisphere 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 twoworlds. In parallel, we believe that Siemens will invest in development of Core ATM technology forthe 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 utilisesbandwidth 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 terminaldevices for a mobile phone network. This co-operation will begin next year and run for at least oneyear. 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. Thepartnership will pool together the know-how of the two groups in this space. In our view, the mainbenefit will be savings on R&D spend and lower development costs, as neither are leading players in2G. The agreement does not extend to joint manufacturing.

HandsetsWe 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 andbelieve its seventh place ranking globally in 1999 (fourth in Europe) could improve. In Germany, it isno longer the market leader, having lost this position to Nokia over the last year, but hopes to regain thetop spot in 2000. In our view, a critical factor in their recent success has been the vigorous marketinginitiative. Siemens has recruited from outside the group in areas strong in marketing as it recognisesimportance 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 theproducts success and increase in volume, it has been possible to reduce production costs and we believethere has been a marked improvement in profitability. Longer term, the groups goal of becoming theglobal number three seems a much tougher objective. We estimate that Asia currently accounts foraround 40% of Siemens handset sales, (most of which is in China) and Germany accounts for at least10% of total units. The C25 phone is aimed at the fashion conscious younger generation and isaggressively 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 andreceiving faxes and data. This latest phone/companion will however be based on a proprietaryoperating system. In our opinion, this could prove challenging especially with respect to capturing acritical mass of applications developers. In order to counteract this challenge, Siemens is promoting acost-free software developers kit.

Siemens intends to improve its position in the mobile data arena. The company is believed tohave received orders from Germanys D2, from Finland and from Sweden for GPRS handsets whichwill be available in the market in 2H2000. In terms of moving up the handset value chain from purehardware 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 rdparties 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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OutlookWe 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 environmentover the last 18 months (with the exception of Nokia). Currently, Siemens is focusing on GSMterminals only, it is our opinion, that over the next 12 months we will see the company branch intoother technologies.

Looking forward, we believe that the company will remain a second tier vendor in both thehandset and in the infrastructure space. This position will lead to lower operating margins than theleading 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 asmore applications are introduced. Charging and tariff options as well as new data and Internetcapabilities will lead to a need for flexible IN platforms. Concepts in this area could be mobile officeapplications using Siemens PBX applications in a mobile environment. We believe that the reductionin 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 isdeveloping products based on the Symbian operating system, for which it is a licensee. As well ascellular handsets, the company has also invested in the palm top organiser / computing area with itsWindows CE products. It aims to bring these competences, together with its long established know-how in display technology and semiconductor capabiliity in order to bring next generation voice centricand non-voice centric products to market. This development effort, together with the Philips brandname 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 ofcellular 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 ofBluetooth chips, which will enable Ericssons phones to communicate with computers, personaldigital assistants and headsets using Bluetooth technology. VLSI expects at least one million Bluetoothchips to be manufactured this year. It has also stated that it believes 90 million computers withBluetooth 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 couldpotentially 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 ofapplications developed by 3 rdparties.

Motorolas strategy in the mobile data arena leverages alliances with industry vendors ofapplications and devices and value added service providers. A major component of this strategy is thealliance with Cisco Systems.

Handsets



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Motorola unveiled its first WAP enabled handset using Phone.com's technology at the GSMWorld Congress in February 1999. The product has not yet been commercially launched but thedemonstration 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 otherindustry 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 aplethora of services such as White and Yellow Pages, Directions and Stock quotes. This device onlyworks 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 Brnomand 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 deploymentcosts.

Alliances and Co-operationsMotorola 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 fundedfrom 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 technologyand develop complimentary products in this area. Motorolas GPRS solution includes Ciscos routersthat act as the SGSN, GGSN and the PCU.

In February 1999 Motorola and Alcatel reached an agreement to jointly develop and sellmobile infrastructure gear. Motorola will utilise Alcatel DSC CDMA and S12 switches in its turnkeyoffering and the two companies will jointly work on 3G systems (WCDMA) solutions through jointR&D effort.

Motorola has also a $1 billion dollar 10 year agreement with Sun Microsystems to developInternet protocol based wireless networks. Sun will provide the software for the IP infrastructure andMotorola 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 teenagecommunities. Motorola has been developing SMS servers that enabled by WAP can act as text-only web browsers.

Qualcomm

Qualcomm has announced intentions to divest the handset business. The pdQ Smartphonebridges 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 enablehigher data speeds over the 1.25Mhz channel. Its Higher Data Rate (HDR) initiative is underway with

trials at US West.



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Qualcomms infrastructure business has already been sold to Ericsson as it was loss makingand Qualcomm did not have the financial resources, nor the critical mass in human terms from a radioand 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 layersand less so from the radio air interface space.

Lucent has been very successful in TDMA and CDMA technologies. However in the GSMmarket 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 alsovoice.

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 includingEDGE 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 usingthe 7 R/E platform. In fact this platform is Lucents next generation core network architecture thatwill be used not only in mobile but also in fixed line implementations. This is also currently intrials 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 AlliancesLucents 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 managenew services that will stimulate usage in UMTS. Companies that are involved include Spyglass andPhone.Com that make possible new wireless Internet-based services. Others in the alliance programoffer location-sensitive services for customised information delivery and emergency and lawenforcement -mandated services like Enhanced 999 and billing and customer care companies such asVeramark Technologies, Inc., Sema Group and Stonehouse Technologies. The latter three each haveapplications that will help Operators streamline its billing and customer care processes for fasterservice and greater flexibility.

Lucent also has licensed custom Netcenter from Netscape to develop a custom portal designedto serve as the Internet start page for UMTS subscribers. The portal is called Zingo and will serve as avirtual laboratory for operators to test Lucent and 3 rdparty developed wireless applications.

Nortel Networks

Nortel focuses solely on infrastructure gear and uses alliances in the handset market. Nortelsmobile 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. Thewireless 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 willpotentially 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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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 seriesof experimental network systems, services and terminals. Matushita (Panasonic) has been chosen byNTTDoCoMo as a supplier of Base station and RNC gear for its WCDMA network. The relationshipbetween Nortel and Matsushita covers joint development in the radio portion to leverage Matsushitaslearning 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 haspulled out of this segment of the market.

Matsuhita in the communications infrastructure space has few distribution beachheads outsideof Japan and some Asian countries. The two companies believe that they can leverage Nortels channelin to mobile operator accounts. Nortel and Samsung are collaborating to evolve networks to enabledelivery 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 co-

operate 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 IPinfrastructure and web farms and servers hanging off this core enabling subscribers to log on to anabundance of IP services and applications. It believes that in the longer term IP will be everywhere andhence the need for WAP and other filtering mechanisms will not be required. Moreover it believes thatthere are a plethora of HTML and Windows developers in the market that can be leveraged for futureopportunities in applications.

The Japanese PlayersThe 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 hasbeen selected by NTTDoCoMo as a supplier of radio network gear and aims to leverage this as areference account internationally in other WCDMA implementations.

NEC has entered into an alliance with Siemens for co-development (not manufacturing) of 3Gsystems. NEC has traditionally been strong in the Japanese environment with TDM switching gear andhas 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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Fujitsu has also been strong in the Japanese TDM switching market and has also developedATM technology. We believe that it will aim to leverage this competence into the core of future mobilenetworks.

Our view on the Japanese threat in infrastructure is that even in the Japanese market there is ashortage of expertise in the radio engineering space. This is a dilemma that all players including theleaders 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 thedemand to service new mobile data oriented networks. Another reason for our position on these playersis that historically they have not had the necessary channels to market internationally nor the supportstructure base.

On the terminal side we do envisage greater presence from the Japanese players in the mobiledata terminal game. However we believe that in the Voice and Voice+ segments, players with a fineunderstanding 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 towardsvalue 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 andOS businesses. The 3Com Palm Pilot is the most successful PDA in the market with sales increasing ona daily basis. Recently, it has designed the Palm VII that is not just a PDA but also a wireless dataterminal. It incorporates 3Coms proprietary Palm.Net wireless web access architecture which allowsend-users to pre-load content from each content provider minimising web traffic. The Palm VII uses awireless connection to let users get information from the Internet conduct e-commerce typetransactions and send and receive messages.

3Com also acquired Smartcode Technologie of France in February this year to expand itsPalm.net Web content platform. The Palm.net platform allows the Palm VII platform to be a wirelessorganiser and not just a PDA. With this acquisition 3Com is filling out its wireless data portfolio toinclude Web browsing components on mobile devices, the Palm OS which will be upgraded to supportwireless voice functions, microbrowser capability, as well as technology to redirect and reformat Webcontent to small screen devices.

NTT DoCoMo has an agreement with 3Com of the US to develop new products and servicesfor wireless data communications. The two companies will combine NTT DoCoMo's wireless datacommunications technology and 3Com's handheld palm computer technology, and will jointly developwireless communications and solution services. Effectively, Palm users will be able to access e-mailand the Internet with a wireless connection.

As we write this article the company has also announced the intention to IPO its Palmdivision.

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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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 02chip in 2.5um CMOS by mid 2000. ASSP versions including customer-specific software will follow in2001.

3g networks

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