Toshiba drops Siemens, will sell phones in Europe

Toshiba Corp. nixed its alliance with Siemens AG for the development of 3G (third-generation) mobile phones, but will sell its own handsets in Europe, the company said Thursday.

Delays in the launch of 3G networks led to the breakup, Toshiba said. 3G, or WCDMA (Wideband Code Division Multiple Access) networks enable high-speed mobile data communications.

"We ended our cooperation (with Siemens) within the last week, it's over," said Midori Suzuki, a Tokyo-based Toshiba spokeswoman. "We can't benefit from each other in development because the launch of 3G service has been delayed."

"The launch of 3G services was originally scheduled for 2002 and we made an alliance with Siemens last year. Now the 3G launch won't be until 2004. In these circumstances, and with the IT bubble bursting, we didn't find it beneficial for the companies to keep working together," Suzuki said.

Siemens called Suzuki's statement "very hard" and said it still sees room for future cooperation with the Japanese company.

"We stopped joint development because of two different approaches. We stopped it, but that doesn't mean we cancelled it. It's on ice," said Axel Heim, spokesperson for Siemens' Information and Communication Mobile division. "Toshiba wants to focus more on their regional area and we decided to focus more on Europe for 3G development."

Toshiba will still develop 3G handsets and plans to enter the European market with GPRS (General Packet Radio Service), or 2.5G, handsets early next year, according to Suzuki.

"We're going to start selling phones in Europe with 2.5G and will sell 3G phones as well, but those won't be developed together with Siemens," Suzuki said, adding that a Taiwanese company will manufacture the phones for Toshiba.

Toshiba is creating a "chicken and egg situation" with its claim that the alliance is being broken up because of network rollout delays, said Eirwen Nichols, principal consultant with market analyst Ovum Ltd. in London.

"You hear operators saying that one reason for delaying their rollout is a handset shortage and now you have handset makers saying the same thing," she said.

The 3G delays aren't a bad thing for users, Nichols reasoned. She expects mass-market 3G services in 2004 and limited service in 2003.

"Operators are right delaying the rollout. Users aren't waiting for these services. Users have GPRS to become used to higher speed mobile data connections and to find out what they really need."

Toshiba and Siemens announced in November last year that they would work together on the development of handsets for the European market. These handsets would work on today's GSM (Global System for Mobile Communications) and tomorrow's WCDMA networks. The first products were due out early 2002.

The alliance with Toshiba was already on shaky ground. Toshiba in September delayed the joint development work with the Germans. Siemens continues the search for its loss-making mobile phone division, Heim said.

"We are in talks with many potential partners and these can be in Europe, Asia or America," he said, adding there is no time pressure as Siemens' restructuring efforts seem to be paying off.

Siemens was the world's fifth-largest vendor of mobile phones in the third quarter of this year, with 6.8 million units shipped, according to research firm Dataquest Inc., a unit of Gartner Inc.

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