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Is the CDMA Standard Destined for Obscurity?

TelecomTV reports that Nokia has annnounced it is to exit the CDMA market. Kai Oistamo, the head of Nokia Mobile Phones says the high cost of making CDMA handsets � partially the result of the tight grip the U.S. patent holder Qualcomm has on the technology � makes the standard too expensive for emerging markets.

And this despite the fact that analysts point out that emerging economies will be the source of most wireless growth in coming years as years as wealthier markets reach maturation. The CDMA standard is primarily used in North America, while essentially absent or retreating in other markets.

The emerging markets are projected to be the source of the bulk of the extra 2 billion new mobile subscribers expected to sign up for service over the next five years. "In this fragmented market, making money with low-end CDMA handsets is very difficult," Mr. Oistamo says.

Nokia says Qualcomm's CDMA royalty scheme played a big part in its decision to abandon the technology, with the company preferring instead to shift its production resources completely over to the GSM and WCDMA handsets -- used by more than 70 percent of the world's subscriber base.

The cheapest GSM handsets currently have a 25 percent price advantage over their CDMA counterparts, although most phones based on the latter standard are high-end models built by South Korean vendors. Critics also point out that the inability of CDMA subscribers to swap-out SIM cards while traveling creates hidden costs in the form of international roaming fees.

Apparently, some people believe that Qualcomm's short-sighted approach to the mobility marketplace pretty much assured this outcome. The announcement sent Qualcomm's share price down 4 percent in late trading. "It's a negative for Qualcomm because there was the possibility that the joint venture with Sanyo might use its chipsets. The joint venture's push into CDMA would have put emphasis on research and development for CDMA handsets," says ThinkEquity Partners analyst, Mike Burton.

At least one analyst saw the decision as indicative of a wider trend. "There are signals that CDMA is increasingly being marginalised," Strategy Analytics' Neil Mawston said, pointing to a dive in CDMA handset sales in China and several Latin American markets. Some CDMA operators such as Indian carrier Reliance Communications have even applied for GSM spectrum, leading to speculation that operators are reacting to handset pricing pressures by looking to other technologies.

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