Much Ado About CDMA

The Imminent Death of the Market Has Been Greatly Exaggerated

Nortel Networks’ CDMA and LTE division is preparing to go up on the auction block this week, and a surprise revelation that Research in Motion Ltd. was prepared to offer $1.1 billion for the bankrupt vendor’s wireless assets suggests that the imminent death of CDMA has been greatly exaggerated.

Last week Nortel held a Webcast that may or may not have been a sales pitch, for lack of a better term, with Nortel division marketing veep Bruce Gustafson noting that the vendor is “absolutely open for business.”

“Now that we know that we have continuity for this business, it is the time for us to get out and remind people why we have been so successful in the business,” he said. “We did not get to be No. 1 in EV-DO because we don't know what we are doing, we aren't No. 2 in this market because we just did this by accident.”

Wanting Nortel’s CDMA Biz

BlackBerry-maker RIM says it was blocked from bidding (and is apparently not happy about it), so the auction primarily remains a showdown between Nokia Siemens Networks, which has offered $650 million, and MatlinPatterson, a private equity firm and Nortel creditor, which has a $725 million offer on the table – by all accounts bargain, fire-sale prices. While a bidding war is in the offing between lowball offers, what’s not being debated is the ongoing value of the CDMA market, even as conventional wisdom calls it a lame-duck technology waiting to be supplanted by 4G or even HSPA.

Nadine Manjaro, senior analyst at ABI Research, says that any vendor (or handset-maker, for that matter) would be making a smart investment with the Nortel assets, simply because of that market position, and because CDMA is still growing and has relevance, despite what the low offers would seem to indicate.

“A vendor like NSN doesn’t have a huge presence in North America, so being able to acquire the assets and have an automatic presence in these operators’ networks is very valuable, particularly if they can do it for the price they have named,” she noted. “It opens the door for them to acquire a revenue-generating business unit but also gives them a future foothold for technologies like LTE.”

Whoever ends up with Nortel’s assets will find themselves competing against Alcatel-Lucent and the Asian vendors Huawei and ZTE. “The vendors that have both products, CDMA and LTE, will be in a lucrative position because most CDMA operators are looking to go to LTE directly,” Manjaro noted. “GSM operators are more likely to upgrade to HSPA first. So it’s helpful to have both to be in a position to aid CDMA operators in transitioning the network, particularly considering that they will run side by side for some time.”

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