AT&T Wireless Sees No Demand for WCDMA Service

[Kenny]

By Lucas van Grinsven, European Technology Correspondent

PARIS (Reuters) - AT&T Wireless Services Inc.AWE.N , the No. 3 U.S. wireless telephone company, said on Thursday it was seeing no demand for the long anticipated high-speed wireless service based on the WCDMA format.

"We don't see anything in the market driving demand for Wideband CDMA," said Leo Nikkari, AT&T Wireless' director of 3G industry relations.

"I don't see anything pushing us to an early WCDMA launch," he said at the fringes of the UMTS and Mobile Internet conference in Paris.

WCDMA, or Wideband Code Division Multiple Access, promises faster data speeds than AT&T Wireless's current high-speed network that allows customers to easily check e-mail, surf the Web, and download applications.

The technology standard, also known in Europe as UMTS (Universal Mobile Communications System), is supposed to allow users to perform many computer functions via mobile devices as well as send and view video, but has been slow to take off.

AT&T's Nikkari told financial analysts and Reuters that "AT&T Wireless has four to five years to look at WCDMA," while it installs an intermediate technology known as EDGE. It would only launch it earlier if "data takes off," something he saw not happening any time soon.

"We're not going to bring it before we see a business case for it," he added.

AT&T Wireless Chief Executive John Zeglis told Reuters in the United States that AT&T would not rush to market, but declined comment on the time frame of four to five years.

"We've said all along that we're going to roll it out when the customers, the devices and the applications all come together. We're really not going to talk now about our future capital expenditure and rollout plan," he said.

Mark Siegel, spokesman for AT&T Wireless said, "We remain firmly committed to UMTS. It is our future."

"The demand for data application is certainly strong," he said. However, he added, "It may not manifest itself as early as some of the industry's very optimistic predictions might have suggested."

Japan's NTT DoCoMo Inc.9437.T , which launched WCDMA a year ago, has been struggling to recruit users due to limited coverage areas and poor battery life on the phones.

In Europe, the roll-out of WCDMA networks has been plagued by delays as cash-strapped operators who spent 100 billion euros on wireless licenses in 2000 have slowed investments to repair battered balance sheets.

BLOW FOR EQUIPMENT MAKERS

AT&T's news, which some analysts interpreted as a delay on earlier roll-out plans, is another blow for mobile telecom equipment vendors like EricssonERICb.ST , NokiaNOK1V.HE , NortelNT.TO , SiemensSIEGn.DE , Alcatel CGEP.PA and LucentLU.N , already struggling with declining sales because operators have cut back investments.

Nikkari also said AT&T was interested in reusing its current second generation (2G) radio network when it rolls out third-generation (3G) WCDMA. This could further hurt the $45 billion a year mobile equipment market which hopes rising 3G network sales will offset declining 2G equipment revenues.

AT&T Wireless is starting a trial of WCDMA service in Dallas with Ericsson network equipment later this year. It will re-use the radio base spectrum and base stations of its 2G network.

The radio part of a mobile network requires the largest single part of total investments in a new mobile phone network.

Nikkari's comments were echoed by the Chief Executive of Smart CommunicationsSCG.AX , the largest mobile telecoms carrier in the Philippines with 7.5 million customers. "In around four to five years we would need 3G," told Reuters.

He said he also wants to reuse current radio base stations.

Smart's customers send an average 240 text messages a month. Smart could use third generation mobile technology to handle data traffic, but Nazareno said his current 2G network can handle new data services such as picture messaging, while 3G equipment is expensive and unproven.

Operators in Europe, Japan and South-Korea, aiming to boost revenues from mobile data communications to offset declining voice revenues, typically generate between 10 and 20 percent of total revenues with data communications.

Operators in Europe are legally obliged to install WCDMA networks, but carriers in the Americas and Asia can wait for sufficient customer demand. Meanwhile, ongoing upgrades mean carriers can use available radio spectrum more efficiently as data traffic grows on 2G.

Nikkari said AT&T Wireless was on track to upgrade its current high-speed network based on GPRS (General Packet Radio Service) technology to EDGE (Enhanced Data for GSM Evolution) which is an even higher-speed service next year.

GPRS and EDGE are advanced versions of second generation GSM (Global System for Mobile Communications), the dominant wireless technology standard in the world.

Nikkari said the company planned to stay with EDGE service until it sees evidence of demand for higher speed data particularly by businesses.

Nikkari said the company would likely roll out WCDMA first in big cities like New York and Los Angeles when it is ready to launch it. Shares of AT&T Wireless rose 3 cents to $4.05 on the New York Stock Exchange in afternoon trading. (Additional reporting from Yukari Iwatani in Chicago and Jeremy Pelofsky in Washington)