Nokia and Sanyo to set up joint CDMA venture

Nokia seeking firmer foothold in Japanese market

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The Finnish mobile telephone manufacturer Nokia and the Japanese electronics company Sanyo Electric plan to set up a joint venture.
      According to a statement issued by Nokia on Tuesday, the companies are to turn their third-generation CDMA mobile telephone operations into a single company, whose main locations will be in San Diego in California and in Osaka and Tottori in Japan.
      CDMA is a telephone standard in use in the United States and in some Asian countries that competes with GSM and the European UMTS. It is used in about 20 percent of all of the world's mobile telephones.
     
A final deal is to be drawn up in the second quarter of 2006. The joint venture could begin operations in the third quarter of this year.
      "The mobile telephone market grew last year by 24 percent, and sales of CDMA phones grew by 12 percent. This is smaller, but it is nevertheless interesting growth", says Nokia's Chief Financial Officer Rick Simonson.
      Nokia has held its own in competition on the market for cheap and medium-priced CDMA handsets, while Sanyo has done better in medium-priced and expensive models. Therefore, Simonson feels that setting up a joint venture could be advantageous for both companies.
      The joint venture would also allow Nokia to get a better foothold in the Japanese market, which is notoriously difficult for foreign companies to penetrate.
     
Analysts interviewed by news agencies say that the joint venture could be an attempt by Nokia to reach out to Sanyo, which has been struggling with an increasing burden of debt.
      According to Reuters, Sanyo has planned to cut 15 percent of its workforce, shut down factories, and to halve its debt, in the wake of poor profitability. Nokia also plans to shed about 200 jobs. However, these cutbacks do not apply to Finland.
      According to news agency reports, Nokia would have a 49 percent interest in the joint venture, as against Sanyo's 51 percent. Simonson would not comment on the ownership ratio except by saying that the joint venture's turnover would not be a part of the net sales figures for the Nokia Group. This would mean that Nokia's holding would be less than half in any case. The branding of the joint company's phones would be carried out on the basis of market requirements.


Links:
  Nokia press release: Nokia and SANYO Announce Intent to Form a Global CDMA Mobile Phones Business (14.2.2006)

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