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February 14, 1988

NOKIA IS BETTING THE SHOP ON DIGITAL MOBILE CELLULAR TECHNOLOGY

By CBR Staff Writer

Of all the acquisitions and investments Oy Nokia AB of Helsinki, Finland over the past few months – the agreement to buy Ericsson’s computer business, the acquisition of the ITT television and consumer electronics business from Standard Elektrik Lorenz – now part of Alcatel NV – in West Germany, and the formation of a consortium to develop digital cellular mobile telephone equipment with AEG AG and Alcatel again, Kari Kairamo has no doubt which is the most important. TV and video? Computers? If you view the digital cellular consortium as a company by itself, Nokia board member Timo Koski told the International Herald Tribune, then you have entered something that is new for the world, a new generation of mobile telecommunications infrastructure. His view is echoed by Nokia chairman and chief executive Kari Kairamo. The consortium with Alcatel and AEG is at least as important and these other acquisitions. When the digital age comes, this gadget – the Nokia Mobira cellular handset – will be a true consumer product like television. Nokia has only 35% of the new consortium, Alcatel has 50% and AEG the remaining 15% – but that is because it is dedicated to making the switching and transmission equipment – radio base stations – but not the telephones that will be used on the new radio network. Nokia, through its wholly-owned Mobira unit, intends being one of the main suppliers of the mass-market telephones that will be used with the system. Mobira claims a 13% to 15% share of the world market for the current generation of analogue cellular phones, putting it in the top three; the other major players are Motorola Inc, NEC Corp and Matsushita Electric Industrial Co. The consortium is of course a marker for the future: digital cellular services will not start in Europe until about 1990 – although they could well start in Europe before they do in the US. But Nokia reports that the West German Bundespost has already issued a request to tender for the base station and transmission equipment – which doesn’t even exist yet. This consortium looks like being the main competitor for the one coalescing around the UK Orbitel Ltd joint venture between Racal Electronics Plc and Plessey Co Plc. But the market for which the companies are pitching is huge: digital cellular communications Europe-wide – most services likely being operated by monopoly PTTs on the continent – is forecast to reach $3,200m a year in the early 1990s, with aggregate investment in capital equipment reaching $4,000m to $4,500m by 1995. Nokia’s sudden arrival on the European stage is a little disconcerting, given that seven years ago it was seen as a timber and timber products company that was big only by Finnish standards. But it spent the 1970s honing its skills in the computer and electronics sector, representing Honeywell Bull in Finland, and is now a $3,400m a year conglomerate operating on a pan-European scale.

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