Brrp, Brrp! Our future is here, on the 'phone

By Alan Deans

New York view


Once upon a time, people used the phone simply to talk.

New Zealanders growing up in rural areas during the 1950s dealt with nifty features such as operators and party lines - which weren't as much fun as they sound.

The charges were horrendous, restricting long-distance calls to brief Christmas greetings or news of a distant relative's demise.

How things change. Enormous technological advances now give most homes a host of services, provided through satellites, broadband cables and silicon chips.

It all comes courtesy of the digital revolution.

We still have a bell to tell us when someone is calling, a cord connecting to a wall socket and a handpiece.

But the rest of the system has been given the Jetson treatment.

These days, telephone companies make very little from voice transmission, even on toll calls. They make it up by spending billions on technology such as wireless phones, data transmission and cable television. That enables them to levy premium charges - at least until their rivals flood the market with cheap offers.

The latest wave is the so-called third generation of wireless technology. Telecommunications companies have been reaping billions since the early 1990s by building unsightly transmission towers throughout urban areas and flogging cheap handsets to go-go technophiles.

People could talk to whomever they liked, wherever they liked.

Cellphones have become a status symbol, a fashion item, a means for teenagers to keep in touch ... and a way of avoiding the frustrations of seeing one's coins chewed up in telephone boxes that smell like sewers.

The next generation of this mobile mania involves transmission of data, so people can hook up to the internet on the bus, sitting in a park or watching a cricket game.

The phones look much like any other cellular unit, except they have larger screens which operate like palm-style handheld computers. They can be used to get stock quotes, weather forecasts, the news, to receive and send e-mail and do all of the tasks that Millennium Man simply must do.

People have been web surfing for several years using home and office phone lines and personal computers.

Telecommunication companies are betting that everyone will become so hooked on the internet that they will want it to become an all-pervasive part of their life. Soon we will all be doing it, if for no other reason than that telephone companies are flooding the market with cheap new phones.

Wall St has joined the party by frantically buying any company that has anything to do with wireless telephony. It is an extension of the online bubble. Investors have made huge profits by backing the internet boom.

Now, their online favourites are boosting customer numbers by providing wireless access, which means new software, updated content and redesigned sites.

The world's largest shopping site, Amazon.com, is already offering online shopping for wireless phone users. Others will follow.

Qualcomm, which owns the technology that makes it all possible, has had a stunning gain in price. It has jumped from being worth about $US3.8 billion early this year to $US64 billion now. Leading handset manufacturer Nokia this week became the largest public company in Europe, surpassing BP Amoco.

The fear of missing out is behind the world's two largest takeovers, Vodafone's $US124 billion bid for European phone giant Mannesmann and MCI Worldcom's $US115 billion offer for US wireless operator Sprint.

The stock prices of old-style US telephone companies such as AT&T Corp and SBC Communications are being buoyed by the promise of wireless tracking stock offerings.

Microsoft is scrambling to adapt its software for use on telephones, entering a venture with Ericsson to ensure it is not left behind.

The question is, has the investment surge gone too far? Many companies will have strong growth because of the opportunities. Some larger groups, such as equipment suppliers and telecommunications companies, should find it very profitable, at least in the early years of the technology's adoption.

Nokia is predicting its sales will soar 40 per cent next year, and that wireless phone users will treble to reach one billion by 2002.

The best way to invest now is to look for stocks that have been bypassed, or ones that will book strong profits without being solely exposed to the fad.

But big risks lie in chasing stocks already trading at giddy levels.

* Alan Deans is the New York correspondent for the Australian Financial Review.