CDMA 1x wireless operators are ahead of the game

At this point, CDMA 1x operators are ahead of the game Based on our analysis of the Asian market, CDMA 1x operators are in the best position thanks to lower cost for network upgrade, better capacity and speed, and affordable and attractive handsets. W-CDMA deployment is still very limited, handsets are rare and the technology is expensive. GPRS has very good scale and prices, but suffers from a limited number of color handsets, slower speeds and the risk of cannibalizing voice capacity.

• CDMA 1x: Here and now
We believe the main advantage of CDMA 1x relative to W-CDMA is
availability; more than 11 million 1x phones have been sold and many
operators have launched 1x service. Handset prices are dropping and
quality is improving. This advantage could become even bigger as we
expect more W-CDMA delays in Europe and Sprint PCS and Verizon
Wireless launch of 1x services in the U.S. this year.

• However, air-interface speed alone is no guarantee of high data ARPUs
Initial indications seem to confirm what we've learned from DoCoMo's
iMode for many years: applications, color-handsets and marketing
strength matter more than speed alone. In Korea and Japan, most of
the data ARPU still comes from narrowband applications.

• In the US, capacity advantages of 1x are more visible than data ARPU upside
In our view, Sprint PCS and Verizon Wireless benefit mostly because
1x capacity gains lead to much lower capex. We are more cautious
about the potential to lift data ARPU. We see no indication of mass
adoption of wireless data in the U.S. anytime soon, especially
broadband. We believe that success of wireless data services will
depend on cultural and other factors, and not just speed.
• Our industry view is Cautious

The wireless telecom services industry is facing low profitability and
an intensely competitive environment causing significant price
declines. To be more positive on the group we need to see more cost
cutting, especially on CPGA, price stabilization, or consolidation.

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