Telecom Companies Rethinking CDMA Strategy

| About: Spark New (SPKKY)

Telstra (TLS) recently confirmed its plans to shut down its CDMA network in Australia, in favor of its new Next G W-CDMA based network. This is bad news for Telecom NZ (NZT) customers as they will no longer be able to roam to Australia. (Unless they acquire dual mode CDMA/W-CDMA phones!)

This may not be the only bad news for Telecom however. It appears that Telstra is not alone in re-thinking its CDMA strategy. According to GigaOM, “CDMA is losing friends faster than me losing my pounds”. Some examples of this:

  • Three carriers in China (Unicom), India (Reliance), and Brazil (Vivo) are re-evaluating their CDMA strategies
  • Sprint (NYSE:S) announced last year that it will deploy mobile WiMAX as its 4G network instead of evolving its 3G CDMA network
  • Europe has, and always will be exclusively GSM/W-CDMA based
  • GSM/W-CDMA is making steady inroads into the US markets
  • Less than 18% (and declining) of the global market is based on CDMA
  • SonyEricsson has withdrawn from the CDMA handset market and Nokia (NYSE:NOK) has an extremely limited offering
  • New “sexy” phones (subjective, I know!) appears to be released first, if not exclusively, for GSM. Recent high-profile example being Apple’s (OTC:APPL) iPhone
  • This “trend” is working against Telecom’s CDMA strategy. Vodafone (NASDAQ:VOD) NZ is increasingly able to offer a wider range of handsets from a wider range of suppliers, and to offer excellent roaming capabilities compared to Telecom NZ. Without the use of messy dual-mode phone arrangements, Telecom NZ customers cannot roam to two of the prime roaming destinations: Australia and Europe. The lack of roaming will become an increasing problem as 3G mobile data use ramps up.

    The question is, will the decision to move off CDMA be the first major decision that Telecom NZ’s new CEO will make. Well, we would not bet against it!