Wireless Interconnection Charge Problems, Wireless Handsets Companies Turn a Profit

Verizon Wireless recently sued Sprint Nextel for allegedly failing to pay it millions of dollars in interconnection charges. In other news, wireless handset makers Nokia and LG Electronics both reported profitable quarters, with cautious outlooks to the future.

Focal Points:

• Lawyers from Verizon Wireless filed a lawsuit against Sprint Nextel because officials allege that Sprint did not pay Verizon its interconnection fees. According to officials, the amount owed is $10 million. Officials from Verizon Wireless said it tried to get the money it was owed without resorting to litigation. Officials said most of the money is from interconnections in the east, which are subject to Federal Communications Commission (FCC) tariffs. At the same time, Sprint Nextel is communication with the FCC in an effort to get AT&T Corp. to honor its interconnection agreement with Sprint that it agreed to as part of its merger conditions with BellSouth.
• Officials from Nokia recently said that the company increased its profits by 25 percent from the previous quarter. Officials cited emerging markets for the strong performance. However, officials also cautioned that the recent slowdown in the U.S. economy, as well as a possible slowdown in Europe, would put a downward pressure on profits for the future. While profits increased, officials also said Nokia’s global market had dropped by one percent in the quarter, from 40 to 39 percent. Average handset prices dropped from $132 to $125. This lower price is a reflection of lower-priced handsets that are purchased in the emerging markets.
• Officials from LG Electronics recently stated that it had a quarterly net profit of $427.9 million, which was a positive change from last year's quarterly loss of over $120 million. Officials said profits were the result of an increase of sales by 17 percent, with a record sale for LG worldwide of over 24 million handsets. While the U.S. economy has negatively impact sales there, strong growth in Asia, Europe, and the Middle East increased overall performance. LG officials predicted future handset growth to increase by 20 percent, with double-digit profits. Officials further stated their plans were to sell over 100 million handsets this year.

Experton Group believes wireless networks providers will continue to battle in courts and behind doors over the next 18 months, as they fight for winning positions in the US markets. The recent FCC auctions, combined with a softening U.S. economy and company acquisitions, will all work to make the wireless market very unstable for the next two to three years. Experton Group cautions IT executives from making any dramatic changes in investments in wireless handset technologies until the economy and wireless technology direction both stabilize.