Subject: [NEXTEL-1] Wireless carriers to take on Nextel with push-to-talk - Mexico

From: [email-masked]
Date: Thu, 18 Sep 2003 18:43:06 -0400

Wireless carriers to take on Nextel with push-to-talk - Mexico

Thursday, September 18, 2003 15:49 (GMT-0400) 
Digital trunking operator Nextel Mexico will face competition in its 
lucrative corporate market once mobile operators start to deploy 
their own push-to-talk services next year, analysts and industry 
players told BNamericas. 

"We believe there is a huge risk of them losing their main 
competitive advantage, which is their push-to-talk capability," 
Pyramid Research's regional manager for the Americas group Carlos 
Rodriguez said. "The window of dominance in that market for Nextel 
with their advantage of push-to-talk is going to close in the next 
year or year and a half." 

Nextel Mexico uses Motorola's Iden digital trunking technology to 
provide push-to-talk or walkie-talkie services primarily for 
companies with groups of workers spread out over wide areas, such as 
a sales force or construction crew. The company reported 580,700 
subscribers at the end of the second quarter, equivalent to an 85% 
market share. 

However, push-to-talk technology for mobile operators will soon end 
Nextel's privileged position in the corporate segment. 

Solutions for operators using CDMA1x technology are already 
commercially available, and push-to-talk for GSM will be available 
soon. Verizon Wireless started offering push-to-talk in the US in 
August and the other major US wireless carriers are following suite. 

The beauty of push-to-talk is that it uses a wireless operator's 
existing infrastructure and requires only marginal investments in 
hardware and software, according to Ericsson Mexico spokesperson 
Raul Lucido. 

"We think the Mexican market is very promising for that technology," 
Lucido said, adding that his company has already started 
demonstrating its Ericsson Instant Talk product. 

MEXICAN CARRIERS MULL OPTIONS 

Mexico's third largest wireless carrier Iusacell (NYSE: CEL) is so 
far the only mobile operator to have outlined plans to offer walkie-
talkie services in 2004. 

"Iusacell is continuing to explore push-to-talk and is currently in 
talks with several suppliers for handsets. Service could be ready 
toward the end of this year or early next year," a company 
spokesperson told BNamericas. 

The country's biggest operator Telcel - which reported 21.3 million 
subscribers at the end of the second quarter and a market share of 
77% - and second place Telefonica Moviles Mexico say they are 
focused more on expanding coverage of their GSM networks than making 
a foray into a new technology. 

"This is not a core issue. Our engineers are looking at it like they 
look at other technologies, " Telcel spokesperson Patricia Ramirez 
said. "Right now we are more into optimizing our network quality, 
expanding GSM [coverage], and [offering ] new services." 

"We are in a study phase to see if we offer the service or not," 
Telefonica Moviles Mexico institutional relations director Juan 
Antonio Ascarraga said. 

Unefon, the fourth largest wireless operator, needs to upgrade its 
CDMA network to 1x before looking at push-to-talk, according to a 
company official. 

When mobile operators do launch push-to-talk services, they will 
undoubtedly go after Nextel's corporate customers. "It's an 
expensive handset you can't go to the mass market with, so their 
main interest is to go after Nextel's high end corporate clients and 
that is the only thing that would make sense for them subsidizing 
these handsets, " according to Pyramid's Rodriguez. 

NEXTEL UNPHASED BY COMPETITION 

Greater competition in Mexico could spell trouble for Nextel 
Mexico's parent company US-based NII Holdings (Nasdaq: NIHD). 
Mexican operations accounted for 89% of NII Holding's US$63mn 
operating income before depreciation and amortization in the second 
quarter. 

Even so, Nextel Mexico business development vice president Gustavo 
Cantu is upbeat about Nextel's future in a more competitive 
landscape. 

"We have competed before with push-to-talk technologies, including 
Iden technology, and in those cases we have come out on top. We have 
a lot of experience in push-to-talk. We have a solid business plan, 
specialized services and high end users, " he said in a recent 
interview. 

Indeed, Nextel Mexico's strengths go beyond its push-to-talk 
offering. The company has a specialized sales force and data 
solutions aimed at the corporate market. Nextel also started 
offering cross-border service in some parts of northern Mexico in 
partnership with US sister company Nextel Communications (Nasdaq: 
NXTL). 

Mobile operators are almost bound to face start up problems with 
push-to-talk technology. US media has reported Verizon's push-to-
talk service as inferior to that of Nextel's because of longer 
waiting time to set up calls and time lags during calls. 

Where Nextel Mexico is vulnerable is its coverage, as digital 
trunking is not available in all of the cities it serves, and the 
user patterns of its white-collar clients make them prime targets 
for mobile operators. 

While blue-collar workers use heavy-duty handsets and rely more on 
Nextel's walkie-talkie service, white-collar clients use handsets 
similar to those sold by mobile operators and make more regular 
phone calls than their blue-collar counterparts. 

"In the short term there is very little the cellular operators can 
do to take away [blue-collar users] because of the handset. But they 
can and will take away the white-collar workers, which have the 
biggest ARPUs because they have a combination of push-to-talk and 
voice minutes, " Rodriguez said. "That is really the segment they 
need to take care of and keep happy with new applications."

By Ken Parks
 
BNamericas.com

http://www.hoovers.com/free/news/detail.xhtml?ArticleID=NR200309183200.1_c9b5001848add737

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