Alcatel takes on telecoms heavyweights on home turf

The small white van is in a controlled orbit around the spotless back streets of Malmo, Sweden. The driver turns right, right, and right again, making a long loop around some old warehouses and newer furniture stores, among polite drivers in Saabs and Volvos.

In the back seats, heads crane toward a laptop plugged into a little electric blue phone handset, which doubles as a third-generation (3G) network receiver.

Lacking a 3G device - just as the whole European market lacks the delayed devices - the neatly groomed young man from French telecommunications company Alcatel streams a trailer for the latest Star Wars film onto a small window on the laptop instead.

It works pretty well but occasionally stutters, stops and restarts as the van accelerates to 80 kilometre per hour.

The van is demonstrating that the Alcatel research and development centre about a kilometre away - one of its seven operating (and oddly named) Reality Centres - really does have a live 3G mini-network with a reach of perhaps two kilometres.

More interesting than watching the video, however, is ringing everyone back at the centre on a mobile videophone. Built-in cameras on each handset allow the speakers to see each other as they speak, but conversations are short - no one really knows what to say after "hello". Picture quality is decent, if a bit washed out, and sharp enough to let everyone know if you've answered your mobile in your pyjamas.

Alcatel's demonstration is more than just a show of 3G capability - and occasional 3G glitchiness. It's also a gesture of French audacité. For Alcatel - maker of networking equipment and mobile handsets, and more recently applications that it hopes will attract users to 3G networks - is trying to take on dominant Scandinavian telecoms companies Ericsson and Nokia on their home turf.

So far, so good, in a modest kind of way. A major contract to be the main network equipment supplier to mobile operator Orange in Sweden has kicked open the door to one of the world's most advanced wireless markets for Alcatel.

Scandinavia has 25 million inhabitants, 11 million households and the highest mobile phone penetration globally. At least 80 per cent of the population owns a mobile in Sweden, Norway, Denmark and Finland, and internet penetration hovers around 80 per cent as well.

"Alcatel is an aggressive and intelligent organisation," said Mr Frode Haugen, Alcatel's chief operations officer in the Nordic region. "We started with Orange and we are very likely to do more."

Success in these markets should buy small-player Alcatel respectabilité in other markets, said senior analyst Mr Paolo Pescatore of International Data Corporation (IDC).

"The Orange contract is obviously quite lucrative because Sweden is one of those very creative countries in telecommunications," he said. "So Scandinavia is very very important for Alcatel to have a presence in."

Alcatel, which employs 150 in the Republic doing development work in Bandon, Co Cork, and sales and marketing in Dublin, had trouble creating a foothold in the Nordic region with first-generation GMS networks so it took some convincing to get headquarters in France to sanction another assault.

"People said we were crazy to try to attack Sweden," said Mr Marc Rouanne, president of mobile networks and mobile markets for Alcatel. "But now, if we can be in Sweden. . ." - his voice trails off in satisfaction.

Still, the company is exceedingly cautious in making predictions, no doubt wary of hype that may come back to haunt it. Alcatel might or might not try to take on the rest of the Nordics, he said. "We have secured one. We will see."

He gingerly approaches any estimate of the time it will take for 3G networks to roll out across Europe and is eager to dissociate the company from more aggressive estimates made about the industry in recent years. "At least 18 to 24 months to ramp up traffic," he said.

"We have said repeatedly that \ roll-out would not be in 2001 but 2003. There will be no services with users in 2002. We have not changed our mind, and we don't see it as delayed. It just takes time."

Likewise, he insists the company is thinking medium to long term as far as its market success goes. "We want to be a strong player in mobile over the next 10 years," he said.

Its strategy is to focus on developing applications that will run over 3G networks, rather than dividing itself between other possibilities such as building networks or handsets (though it keeps its hand in on those areas as well).

Mr Pescatore says the company is proving itself capable in this area so far. "Basically, it's put all its eggs in the basket on the applications side, making real applications for real users, at the end of the day. The strategy seems to be paying off."

In the Republic, Nokia country manager Ms Michelle Mahony said Nokia was focusing on services it could offer mobile users, particularly in getting multimedia messaging (MMS) off the ground by next year.

MMS, Nokia hopes, will form a bridge for users between 2G GPRS networks, which are up-and-running, and incoming 3G networks, getting people used to 3G's multimedia capabilities.

This need for real applications is likely to keep telecoms companies in friendly rather than cutthroat competition - at least initially. "This is an area where everyone really has to work together with the adoption of 3G, to ensure it's successful," said Mr Pescatore.