Nokia ends Sanyo venture plan, to cut back CDMA

Espoo (Finland), Jun 22: Nokia, the world's largest mobile phone maker, said it would stop making phones using the CDMA standard and had scrapped plans to produce them with Japan's Sanyo Electric Co..

The Finnish company said on Thursday it would pull out of CDMA (Code Division Multiple Access) phone manufacturing, which it sees as a shrinking market in the longer term, though it will continue to offer to sell Nokia rebranded CDMA phones produced by contract manufacturers in the North American market, where the standard is popular.

CDMA is the less popular wireless telephony technology, used by around 25 to 30 percent of all mobile phone subscribers, and competes with the GSM standard used by around 70 percent of the world's 2 billion wireless subscribers.

Though Nokia holds the number one spot in global handset sales, built on its strength in GSM which it helped to invent, the Finnish company has trailed in CDMA. It has tried to avoid using chips by Qualcomm Inc., but could not avoid paying significant technology licencing fees to Qualcomm which holds most patents to the CDMA technology.

The two have a bitter history over technology licensing and patent infringement cases.

The Nokia/Sanyo venture, announced in February, had been intended to develop and make mobile phones using CDMA, which is dominant in the United States and popular in parts of Latin America and Asia including Japan, India and China.

''It's a purely pragmatic business decision and we part as friends,'' Kai Oistamo, head of Nokia's Mobile Phones business unit, told Reuters in a interview.

''In the longer term it's a declining market place.'' Nokia said it will take a 150 million euro (0 million) charge in its third-quarter accounts for restructuring its CDMA operations and that it expects the changes to boost its operating margins.

Nokia will end its own CDMA research and development and manufacturing by next April and said it was considering the options for its existing CDMA infrastructure and assets, after deciding against the Sanyo venture.

Shares in Nokia were up 1.5 percent at 16.14 euros by 0748 GMT, slightly outperforming a stronger market.

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Oistamo said the firm would stick to its goal of 40 percent of the global market over the long term.

''We are not revising our long-term market share target. The ambition level is exactly the same,'' he said.

Analyst Jari Honko, from eQ Bank in Helsinki, said the decision was a disappointment, since Nokia and Sanyo had appeared to be a good fit in the CDMA market.

''Even though some market participants saw Sanyo as a risky business partner, I believe it could have worked. It could have given them necessary scale in CDMA,'' he said.

''Things have gone completely upside down now, and it looks like Nokia's strategy for technology will completely change.'' He said the decision to scrap the Sanyo plan was an example of the thinking of Nokia's new chief executive, Olli-Pekka Kallasvuo, who took over the reins at the beginning of June.

Honko also pointed to the agreement earlier this week for Nokia and Siemens AG to combine their infrastructure operations in a joint venture.

''Kallasvuo is taking very strong actions ... He is now heading very aggressively in restructuring the company. It is very pragmatic thinking the company has, and they are now implementing that.''

REUTERS