Nokia, Sanyo agree to combine CDMA businesses

Merged company aims to be No. 1 in the CDMA handset market

Nokia and Sanyo Electric have basically agreed to merge their CDMA (Code Division Multiple Access) mobile phone businesses into a single company with a view to capturing the top share of the global CDMA market, they said Tuesday.

A final agreement is expected to be signed in the second quarter of this year and the new company is projected to begin operating in the third quarter of this year, executives of both companies said at a Tokyo news conference. The merged company will have bases in Tottori and Osaka in Japan, where Sanyo has CDMA operations, and in San Diego, where Nokia's CDMA division is headquartered.

The product line-ups of both companies are complementary, said Tyler McGee, president of Nokia Japan. "Nokia is very competitive in the entry and mid-level market and Sanyo is bringing strength in the high end," he said. Sanyo markets mid- to high-end handsets in the U.S. and Japan markets while Nokia has been concentrating its CDMA efforts in developing markets.

Both companies trail market-leaders Samsung Electronics and LG Electronics in the CDMA market but together they stand to be a formidable challenger. Nokia had a 13.3 percent share of the market while Sanyo claimed a 7.3 percent share, based on 2005 market estimates. That ranks them 3rd and 5th respectively but together they would have tied with Samsung for top spot with a 20.6 percent share last year.

"We aim to be number one in the CDMA handset market," said Timo Ihamuotila, senior vice president of Nokia's CDMA business unit, who was speaking to the news conference by telephone from New York.

Several details of the merger need to be worked out including the precise shareholding but the new company "will be operated in the spirit of partnership," said Takenori Ugari, president of Sanyo's telecom company.

Nokia and Sanyo hope to ship a total of 35 million handsets in their first year of joint operations and eventually raise this to 50 million phones a year, although they wouldn't give a time frame over which they hope to make this happen.

Initially the new company will continue producing Nokia and Sanyo handsets but the product roadmaps will merge "in due course," said Ihamuotila. How phones produced by the partnership will be branded has also yet to be decided but Ihamuotila ruled out the creation of a new brand for the company. The company will initially target all CDMA markets except South Korea, where neither company has a strong hold.

Copyright © 2006 IDG Communications, Inc.

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