WCA July 2007

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Telecom News
27
Wire & Cable ASIA – July/August 2007
AT&T abandons its
effort to buy into Italy’s
largest telecom
On 16th April, the US telecom giant
AT&T withdrew its offer to buy a
stake in the company that controls
Telecom Italia for about $2.7 billion.
While it gave no reason for dropping
its quest to acquire a one-third stake
in the controlling company, Olimpia,
AT&T apparently decided not to resist
the intense political pressure in Italy
against a sale to a foreign company.
Pirelli, which controls Olimpia, had
been in exclusive talks with AT&T and
America Móvil, the largest cellphone
company in Latin America, which also
was trying for one-third ownership
of Olimpia. Reuters reported on
17th April that America Móvil said it had
not yet decided whether, on its own,
to continue negotiations with Pirelli.
America Móvil is 9% owned by AT&T,
whose further intentions in the matter
are likewise unknown. When it became
known, on 1st April, that AT&T and
America Móvil had made firm offers
for Telecom Italia, lawmakers in Prime
Minister Romano Prodi’s government
objected strenuously, claiming that
the strategic importance of the largest
Italian telecommunications company
was too great to allow it to pass
out of Italian hands. While Mr Prodi
said he would not outright block the
sale, he and several of his ministers
made plain their preference for an
‘Italian solution.’
AT&T’s position in Europe is such
that its disappointment over Telecom
Italia, while sharp enough, is probably
not acute. It already sells telecom
services to some of the largest
European companies, as well as
providing services in Europe for
US-based companies. If its Italian
initiative had succeeded, a relatively
modest investment would have
gained AT&T an expanded presence
in countries where Telecom Italia has
been building broadband Internet
businesses – Germany, France, and
the Netherlands.
Barely had AT&T abandoned its
bid for a stake in Telecom Italia
than the Spanish group Telefónica
SA and a group of Italian investors
agreed to pay $5.6 billion for an
18% stake in the coveted Italian
company. As announced 28th April
in a statement to the Italian stock
exchange, Telefónica and its
Italian partners – Assicurazioni
Generali SpA, Intesa Sanpaolo
SpA, Mediobanca SpA, and the
prominent Benetton family – will
buy into Olimpia, the investment
house that controls Telecom
Italia’s board, from Pirelli & C SpA.
Telefónica, already Europe’s
second-largest phone company,
will thereby strengthen its strong
presence on the continent and also
in Latin America, especially Brazil,
where it is very active.
Motorola withdraws its
unfairness case against
India’s BSNL
The American telecom equipment
maker Motorola said on 16th April that
it would drop a court case charging the
Indian state-run company BSNL Ltd
with unfairly disqualifying it from bid-
ding on a large contract. In November,
after Motorola filed its complaint, the
Delhi High Court temporarily stopped
BSNL from awarding a contract
estimated to be worth $5 billion to
lay phone lines and supply advanced
telephone equipment.
BSNL is the only company offering
landline and mobile phone services
throughout India. Other bidders for the
valuable contract included Sweden’s
Ericsson AB, Finland’s Nokia Corp,
Germany’s Siemens AG, and the
Chinese telecom giant ZTE. Motorola
was dismissed from the bidding pro-
cess on alleged technical grounds,
whereupon Ericsson emerged as
favourite. “Withdrawal of the case
by Motorola in no way reflects any
change in Motorola’s original position
that its bid was in compliance with the
tender conditions,” the Schaumburg,
Illinois-based company said in a
statement.
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Large-scale trial of Chinese-backed
TD-SCDMA standard alerts international
vendors to its commercial significance
The Chinese companies ZTE and Datang Mobile would appear to hold an
early advantage over rivals as suppliers of equipment for wireless networks
based on the TD-SCDMA ‘third generation’ standard favoured by China
for mobile telecommunications. Promoters of TD-SCDMA (time division-
synchronous code division multiple access) proclaim its superiority, although
WCDMA, favoured in Europe, and the US-backed CDMA2000 hold a
substantial lead in terms of numbers of users.
Mure Dickie, the Beijing correspondent of the Financial Times (London), took
note of a statement made on 9th April by the industry group promoting the
Chinese-backed standard. The TD-SCDMA Forum said that ZTE and Datang
would between them supply more than 80% of 3G base station equipment to
be used by China Mobile, the country’s dominant wireless operator, for ‘trial’
TD-SCDMA networks in eight cities. (‘Chinese Telecom Suppliers Set for
3G Win,’ FT.com, 10th April).
The implications for Nokia Siemens Networks and Ericsson, among others,
are clear. Mr Dickie pointed out that the success of ZTE, which alone is
now expected to account for nearly half of initial equipment orders for the
networks, could make the international vendors struggle to maintain their
share of the world’s largest mobile market. Nor were prospective investors
slow on the uptake. Shares of ZTE climbed more than 13% in Hong Kong
on 9th April despite the company’s warning that it had yet to sign any
contracts and that investors should ‘pay attention to risk.’ Interested parties
also did without input from China Mobile. The company withheld comment
on the preliminary results of its tenders for equipment for the trial networks,
estimated at $5.2 billion.
Mr Dickie observed that, while ZTE makes equipment for all three 3G
standards, late last year it was cited by analysts at Citigroup as the
manufacturer best placed to benefit from the introduction of TD-SCDMA
networks. He wrote: “The unusually large-scale trial is widely seen as an
attempt to give TD-SCDMA’s developers more time to get it ready to compete
against WCDMA or CDMA2000.” Chen Haofei, secretary general of the
TD-SCDMA Forum, told the Financial Times that companies such as Finland’s
Nokia and Sweden’s Ericsson – both non-members of the forum – had not
focussed enough attention on TD-SCDMA. “However,” said Mr Chen, “I am
feeling that they are now changing their attitude.”