Worldwide group picks LG to supply high-tech phones

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Worldwide group picks LG to supply high-tech phones

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LG Electronics Inc. has been chosen to provide affordable cell phones with the latest, third-generation technology to a worldwide consortium of wireless operators, according to a source in the company’s cell phone development division. The company could make as many as 10 million phones.
“We were recently chosen as the winner, and the low-priced cell phone is currently under development,” the source said.
The source, who refused to be named, said the new cell phone will be introduced to the market as early as May of this year.
Third-generation mobile phones are able to access the Internet at high speeds. They allow users to download e-mails and exchange instant messages while they talk on the phone.
LG Electronics and Finnish cell phone giant Nokia Ojy had been competing for the contract, sought by 12 wireless operators in Europe, America, Africa and Asia with a total of 620 million customers.
The operators include Cingular Wireless, Globe Telecom, Hutchison 3G, KTF, MTN, Orange, Smart, Telecom Italia, Telefonica, Telenor, T-Mobile and Vodafone.
The consortium agreed last October to choose a manufacturer for the third-generation cell phones, with features such as high-speed Internet browsing, a screen for television and instant messaging.
Their plan, called “3G for All,” allows the winning bidder to achieve the economies of scale in manufacturing needed to offer a cut in price over existing third-generation cell phones.
Although LG Electronics was chosen, the company still needs to sign contracts with each of the 12 wireless operators. “We estimate the total contract volume to be 5 million units at worst,” said the source.
The latest deal is expected to bring a significant boost to LG Electronics, which has been struggling with intensifying market competition and eroding profit from overseas sales due to the strengthening won.
LG Electronics in late January posted a fourth-quarter net income of 48.2 billion won, down 85 percent from 312.2 billion won a year earlier. Its sales also slipped 11 percent to 5.5 trillion won.
The company’s profit will hit a new low in the first quarter this year, said chief financial officer James Jeong.
According to Strategy Analytics, a London-based market researcher, LG Electronics’ global market share slipped to 5.7 percent in the fourth quarter last year from 6.6 percent a year earlier. Another major Korean firm, Samsung Electronics, also saw its market share shrink to 10.7 percent from 11.1 percent in the period.
Due to speculation that LG Electronics would win the bidding for the next-generation phones, share prices of the company shot up during the past five trading sessions.
Yesterday, LG shares closed at 58,100 won, an 11.3 percent increase since Feb. 1.
The consortium is expected to make the official announcement on Monday during the 3GSM World Congress 2007, which begins next week in Barcelona, Spain.
LG Electronics declined to make an official comment.
“The selection will be made and announced by the consortium. We will make whatever announcement necessary after the consortium does on Monday,” said LG spokeswoman Judy Pae.
Korean cell phone makers have faced increased competition from overseas rivals including Nokia and Motorola Inc.
Nokia held a 35.2 percent share in the global market in the fourth quarter, up from 34.1 percent a year earlier. Motorola and Sony Ericsson Mobile Communications also grabbed a market share of 21.9 percent and 8.7 percent, respectively, up from 18.2 percent and 6.6 percent a year ago.


By Jung Ha-won, Wohn Dong-hee Staff Writers [hawon@joongang.co.kr]
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