GSM in the green: Technology developers get cash infusion from carriers

In technology circles, money usually speaks louder than words. Knowing that, a global group of GSM operators has formed a venture capital fund and agreed to sink more than $137 million into the development of new products and applications for GSM networks.

"Our intention is to provide service operators with the ability to have the best access possible to value-added services," said Andre Tremblay, president and CEO of Microcell Telecommunications, a Canadian wireless carrier and founding partner of GSM Capital. "We have to push the envelope to make sure that service operators will have the benefit of innovation."

The financial backing is partly designed to encourage development from smaller companies instead of the large vendors that are the usual suspects in enhanced services development, Tremblay said. "Having the fund gives a new generation of entrepreneurs the ability to readily tap into this market," he said.

The fund's backers see advantages for both investors and investees. The developers receiving investment automatically get the attention of nine major operators, although there is no guarantee that the carriers ultimately will buy their products. Carriers will be more involved in the development process and will gain a better sense of what's coming, as well as increased interaction with each other.

"For us to be able to track and see performance data from 30 or 40 entrepreneurial companies in our sector gives us a window on what's happening," said Don Warkentin, CEO of Aerial Communications, one of the fund's U.S. carrier partners. "It's also another forum where we can mingle with our peers, and the result is innovation."

The fund is being managed by financial professionals who will make the ultimate decisions on where to direct investment, said Warkentin.

"Clearly, anyone with interests in the fund is investing for financial return," said H.H. Haight, president and managing partner of Argo Global Capital, the fund's management entity.

"The operating companies are interested in getting a return and in accessing technology-hardware, software, products and services-that will help them run their networks better," he said.

Some developments that might be targeted for investment include applications that address churn, reduce the cost of customer acquisition and reduce network buildout and operating costs, Haight said. "We will invest in companies that address the problems of the operators," he said.

One analyst noted that investment in new technology enhancements is necessary because of the spectrum glut that exists.

"There's this tidal wave of spectrum out there, and the carriers are going to have to differentiate themselves," said David Roddy, chief telecommunications economist at Deloitte & Touche. "Particularly in the U.S., the GSM carriers know they're going to have to swim upstream."

Microcell Telecommunications (Canada)

Aerial Communications (U.S.)

Omnipoint Communications (U.S.)

Celcom (Malaysia)

Deutsche Telekom via T-Venture (Germany)

ESAT Digifone (Ireland)

France Telecom via Innovacom (France)

Singapore Telecom Mobile (Singapore)

Smartone (Hong Kong)

NORTEL GETS OMNIPOINT BUILD Omnipoint Communications has granted a three-year, $210 million equipment and construction contract to Northern Telecom for Omnipoint's GSM networks in Indianapolis, Detroit and several other markets. Nortel will provide financing for the build.

INDUS TAPS ALCATEL, HUGHES Alcatel Network Systems and Hughes Network Systems have been contracted by C block PCS provider Indus to provide 1.9 GHz IS-136 equipment. Alcatel will supply its 1000 S12 mobile switching center as part of Hughes' AIReach GMH system.