Ericsson AB, Siemens AG and other equipment makers peddling new networks to Asian phone companies may expect more haggling and end up giving steeper discounts as service providers team up to share costs.
Take Singapore Telecommunications Ltd. Southeast Asia's biggest phone company said it had S$40 million (US$22 million) in savings last year just by pooling orders with associates Advanced Info Service Pcl in Thailand and Philippines' Globe Telecom Inc.
With the emergence of SingTel and other regional alliances, and as rivals in the same market become more open to sharing some networks, analysts say equipment makers may face tougher times.
"The service providers definitely have more clout now," said Steven Koh, senior equity analyst at Standard & Poor's MMS International in Singapore. "As this becomes more prevalent, it means less equipment will be sold and it's not something that's welcomed by the equipment providers."
Those are some issues that may be posed to Kurt Hellstroem, Ericsson chief executive, and others equipment makers in Singapore this week during CommunicAsia 2001, a telecommunications trade show starting today in Singapore.
Service providers will also make up the more than 200 companies showcasing their latest technology and services at the event. Among them are NTT DoCoMo Inc, Korea Telecom Corp and WorldCom Inc.
The relationship between the likes of Ericsson and service providers such as Korea Telecom will change, analysts say.
Nokia Oyj, the biggest mobile phone maker which had resisted lending money to phone companies, two months ago said it's selling A$900 million (US$473 million) of equipment to Cable & Wireless Optus Ltd in a seven-year contract which includes financing.
Optus, Australia's second-biggest phone company, is being bought by SingTel. The purchase is expected to lend more weight to the Singapore phone company's bargaining power.
"3G [or faster mobile phone networks] is a new thing and even the telcos don't really know the returns that investments in 3G will yield," said Flavia Cheong, who helps manage US$3.3 billion at Aberdeen Asset Management Ltd in Singapore. "A lot of them will spend huge amounts and they'd be looking to farm out the costs."
Other regional alliances are also emerging like the mobile-phone joint venture between Hong Kong's Pacific Century CyberWorks Ltd and Telstra Corp in Australia.
Not all equipment makers see tougher times ahead. Some say they may end up with more sales as securing a contract with one operator within the alliance may seal other deals in that group.
"The relationship between operators and vendors will for sure change if equipment sharing is one of the main issues in the future," said Christian Unterberger, a senior vice president of Siemens' information and communications networks group. "That's why a vendor and operator relationship has to be turned into partnerships."
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