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February 14, 2006 10:46 am

Nokia and Sanyo in CDMA venture

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Nokia, the world’s biggest maker of mobile handsets, and Sanyo, the troubled Japanese electronics group, are set to combine their CDMA mobile handset businesses in an effort to strengthen their position in the market.

The move will give the combined business a market share of more than 20 per cent, putting it on a par with Korea’s Samsung, the largest manufacturer of CDMA devices. CDMA is the main rival to GSM, the world’s most popular wireless technology.

Sanyo is expected to take a controlling stake in the venture, which will combine the Japanese company’s strength in mid- and high-end handsets with Nokia’s focus on cheaper CDMA phones.

“Obviously it is an advantage for our customers to offer a full range in our portfolio,” Rick Simonson, Nokia’s chief financial officer, told the 3GSM Congress in Barcelona, the mobile industry’s biggest annual gathering.

Nokia is the biggest maker of GSM handsets and had a 34 per cent share of total world handset sales of 795m units last year. But the Finnish operator has failed to replicate that success in CDMA, which is most widely used in the US, Japan, India, Latin America, Korea and China.

The new venture will employ 3,500 people and is due to become operational by the third quarter. Mr Simonson said “several hundred” Nokia employees would lose their jobs as a result.

Negotiations are continuing between the two companies, which have still to finalise the name, brand, final ownership structure, management and headquarters for the venture. Nokia and Sanyo will keep their non-CDMA businesses separate.

The companies did not provide official financial targets, but Takenori Ugari, a Sanyo official in charge of mobile phones, said he believed the new company should achieve Y30bn (€214m) in profits in about two years. Mr Ugari said the new company was aiming to ship 50m units as soon as possible. Nokia ships about 22m CDMA handsets, while Sanyo expects to ship 12.5m handsets this year, most using CDMA technology.

The joint venture, which echoes the creation of Sony Ericsson in 2001, highlights the impact of fierce competition and rising development costs in the sector.

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