Vodafone CEO Seeks Cheap Femtos

Vodafone Group plc (NYSE: VOD) CEO Arun Sarin is excited about the prospects of femtocell technology, but he's looking to the vendor community to supply the home base stations at margin-crunching prices.

Talking during today's first-quarter trading update conference call, Sarin was positive about the emergence of femtocells, which will act as tiny base stations within homes and offices, feeding calls and data sessions back to mobile operators' core networks via broadband connections. (See Vodafone Unveils Q1 Interims.)

Vodafone has already issued a femtocell RFP, which is regarded as the most significant in the sector to date. (See Vodafone RFP Fuels Femtocells.)

The CEO said the deployment of femtocells is a productive way "to use our 3G spectrum," and he sees the home base stations being deployed from the middle of 2008 onwards. "We have exercised a number of suppliers to look at this."

But Sarin added that he is "looking for a mass market price that is substantially less than $100" per unit.

That's going to be a tough price point to reach, according to Gabriel Brown, chief analyst of Unstrung Insider, the author of "3G Home Base Stations: Femto Cells & FMC for the Masses," a report issued earlier this year. (See 3G Base Stations Hit Home.)

Brown notes in his report that femtocells will ideally be as cheap as WLAN access points, which retail for as little as $50, and that "several vendors claim a price of $100 per unit can be achieved when or if volume production kicks in -- i.e., units of 500,000 or more -- with some saying this price point could be reached by the end of 2008."

Femtocell vendor ip.access Ltd. is one of the companies that thinks the sub-$100 price can be achieved. (See IP.access Joins Femto Forum and IP.access, Tatara Team.)

“It certainly ought to be possible to meet these prices," says ip.access VP of marketing Andy Tiller in an email response to questions. "How quickly this can be done depends on the rate at which component suppliers can create integrated component sets to reduce the bill of materials. It also depends on the speed with which operators ramp up volumes. ip.access is working very closely with operators to ensure we can meet their price expectations, and we welcome Mr Sarin's comments...

"Operators are beginning to speak publicly about their plans to deploy femtocells, which is providing extra momentum for our industry to accelerate the process towards cost reduction.” (See Is AT&T Putting Out Femto Feelers?, FT Preps Femtocell RFP, and Softbank Trials Femtocell.)

But other vendors, and Brown himself, are skeptical such a low price can be achieved. The analyst believes "a more realistic, yet still aggressive, target is $200 to $300 per device by the end of 2008," considering the likely costs associated with the various components each unit will need.

— Ray Le Maistre, International News Editor, Light Reading