Samsung: WiMax could be as big as CDMA

SUWON, South Korea -- While WiMax will clearly play second fiddle to competing 4G standard long-term evolution, the potential for WiMax could still be enormous, performing the same role as CDMA did in the 2G and 3G theaters, according to Hung Song, vice president of Samsung Telecommunications global marketing group. And just as many of the large global vendors built sizable fortunes on CDMA, early leaders in the WiMax market like Samsung could establish itself themselves as major players in 4G by pursuing the alternate technology, Song said.

Many vendors such as Ericsson (NASDAQ:ERIC), Nokia Siemens Networks (NYSE:NOK, NYSE:SI) and Alcatel-Lucent (NYSE:ALU) either never pursued or dropped their mobile WiMax portfolios sensing a bigger opportunity in LTE. The same pattern occurred in CDMA with vendors like Nokia and Ericsson pursuing the larger opportunity in GSM and UMTS, while leaving CDMA to Nortel, Lucent Technologies, Samsung and Qualcomm, all of which grew very successful business on the competing standard. Song expects WiMax to evolve similarly, rewarding the vendors who remain committed to the standard and innovative in technology with a much larger market share.

In fact, Song said WiMax could be a much bigger opportunity for Samsung than CDMA ever was. While Samsung’s success in CDMA networks was limited primarily to Asia, its handset business was the primary beneficiary of the CDMA revolution. With WiMax it’s already won some of the largest contracts around the world, extending its reach much further than it did with CDMA.

“When we were selling CDMA solutions, we had a very limited amount of contracts,” Song said during an interview at Samsung Telecommunications Systems headquarters in Suwon. Samsung landed fewer than 10 CDMA network contracts—its flag ship deployments being primarily with South Korean operators. “Right now we already have 10 WiMax contracts, and we’re engaging 40 different operators in WiMax discussions,” Song said. “We see more and more opportunities for mobile WiMax.”

Along with Motorola (NYSE:MOT) and Huawei, Samsung is one of Clearwire’s (NASDAQ:CLWR) primary vendors, building out its network on the Northeastern seaboard from Washington to Boston as well as several markets in Texas. But it’s largest contract to date is with UQ Communications, a joint venture between KDDI and Japan Railroad that is aggressively building a nationwide network throughout Japan. UQ has already launched in Tokyo, Yokohama, Nagoya and Osaka and plans to complete its 59,000-base-station build by 2013 targeting a customer base of 5.6 million subscribers. While UQ isn’t yet commercial, another of Samsung’s customers Yota has gone live in the most dramatic of ways. Though it has only launched service Moscow and St. Petersburg with limited deployments in each (about 600 base stations per market), the operator has garnered more than 200,000 subscribers in less than a year. From August to October it added 100,000 subscribers alone. Yota offers no data caps, and the average customer consumes about 10 GB of data a month. Traffic on the operators data core has already surpassed the traffic on all of Russia’s 2G and 3G networks combined by 2.5 times.

Samsung isn’t giving up on the LTE market, Song said, but it is clearly focusing on what is now its bigger market opportunity. Song said 90% of his global marketing efforts are spent on WiMax today and about 10% on LTE. “Next year it could be 80% on WiMax, 20% on LTE, and later 70% and 30%,” Song said. “It all depends on our success with LTE.”

LTE is been largely embraced by the established wireless operators of the world, and Song fully expects its momentum with that traditional telecom segment to continue, but he added that the non-traditional telecom operators can’t be underestimated. Governments trying to foster competition in the broadband data market are awarding more spectrum to new entrants like UQ, Yota and Clearwire, some on whom have wireless operator investors, but all of whom are challenging established wireless business models. In fact, Song said that those challengers are counteracting the recent consolidation trends in wireless. WiMax is enabling a new generation of wireless operators, Song said, restoring the competition to markets where it had dwindled in recent years. “Overall the telecommunications markets will be the size it was 10 years ago,” he said.