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Nokia, the Finnish telecoms company, has terminated a proposed joint venture with Sanyo, the Japanese equipment manufacturer.
The two announced in February that they wanted to unite their CDMA mobile handset businesses to create a company to challenge Samsung, the Korean mobile phone group.
But the combination of an uncertain future for CDMA technology in major emerging markets as well as the thin profit margins available prompted the Finnish
company to call off talks. “We feel it would not be in our best interests to make an agreement that proved to be less beneficial than originally anticipated,” said Kai Öistämö, executive vice-president.
The termination of the Japanese venture marks the second major strategic move in a week by Olli-Pekka Kallasvuo, Nokia’s new chief executive, following a €20bn ($25bn) merger of its systems business with Siemens.
A Nokia executive, who declined to be named, said the company had been planning to use the Sanyo JV to supply three key emerging markets – India, Brazil and China – with its low-to-mid-end handsets.
But he said that since February major operators in India and Brazil had revealed they planned to move away from CDMA handsets and use rival GSM technology instead, while China’s future direction remained uncertain.
These countries took this decision because there is a wider range of handsets available on GSM and they are generally cheaper, undermining Nokia’s strategy for the venture.
The Finnish company is also understood to have become increasingly frustrated with paying fees to Qualcomm, the US company, which owns most of the patents to CDMA technology.
“In addition to an already financially prohibitive CDMA ecosystem, recent developments may indicate the CDMA emerging markets business case is looking more challenging,” it said.
The collapse of the joint venture is a blow to Sanyo, which was last year rescued from a financial crisis by a Y300bn ($2.6bn) capital injection from financial institutions.
“The Nokia joint venture was the only hope for Sanyo,” said Hideki
Watanabe, analyst at Shinko Securities in Tokyo. “Sanyo no longer has any growth business.”
Nokia is the world’s largest manufacturer of GSM handsets, selling 34 per cent of the 795m handsets sold in 2005, but has struggled to match that success in CDMA.