Less than a week after Motorola, Inc. (MOT) announced its split into two publicly traded companies, India’s Videocon Industries Ltd. said it is interested in buying Motorola’s mobile-phone business.

"We are in consumer durables, we are in retail and we also have" mobile-phone licenses in India, Videocon Chairman Venugopal Dhoot said in an interview with Bloomberg News. "We are very, very interested."

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Not only is Videocon interested, it is well positioned to turn Motorola’s slumping sales into profit in India, the world’s fastest-growing mobile-phone market. Dhoot said Videocon, which secured wireless licenses earlier this year, plans to begin offering mobile-phone services in India by the end of 2008.

A quarter-century ago, Motorola pioneered the mobile phone. But in recent years, increased competition has taken a large chunk of its customers, who have instead opted for products from market leader Nokia Corp. (NOK), stalwart Samsung Electronics and hyped newcomer Apple Inc. (AAPL).

Last Wednesday, under mounting pressure from billionaire investor Carl Icahn, Motorola announced it would split into two companies in 2009. Analysts said the split would put the company in a better position to sell assets or negotiate a joint venture.

Videocon is India’s largest consumer electronics maker. Its lineup of televisions, refrigerators, air conditioners, audio equipment, microwaves and more account for a 23% share of India’s consumer electronics market, Bloomberg reported.

Notably missing from that list, however, are cell phones.

Motorola’s fourth-quarter profit was down 84% from declines in sales of its phones and handsets, one of the many problems that induced top management to give investors a sober analysis for 2008.

"We are focused on aggressively rationalizing the company’s cost structure and working to get Mobile Devices back on track," said Greg Brown, president and chief executive officer of Motorola. "The recovery in Mobile Devices will take longer than expected and there is a lot more work to be done."

Motorola is also reportedly in talks to combine with Nortel Networks Corp. (NT), which would result in a joint venture valued at $10 billion.

News and Related Story Links:

• Bloomberg: 
  Videocon May Bid for Motorola’s Mobile-Phone Business

• Money Morning:
  Motorola’s Stock Drop on Sharp Fourth-Quarter Declines

European Union antitrust regulators have launched an in-depth investigation into Nokia Corp.’s (NOK) proposal to buy U.S. digital mapmaker Navteq Corp. (NAVT), expressing concerns the $8.1 billion deal could stifle competition in the red-hot market for navigation products and services.

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The U.S. Federal Trade Commission won approval of the deal in December. But the FTC’s European counterpart – the European Commission – has opted to conduct a detailed review of the deal, noting that Navteq is one of only two freestanding companies that produce digital maps – a critical ingredient for the navigation services that can be distributed by such devices as cell phones or global-positioning systems (GPS).

"The [European] Commission’s initial market investigation has indicated that the proposed merger raises serious doubts with regards to … competition concerns," the commission announced.

Just because the EC opted to open the investigation doesn’t mean its findings have been "prejudged," it noted. The commission now has until Aug. 8 to render a final decision on whether the proposed buyout would "significantly impede effective competition within the European Economic Area or a significant part of it," the antitrust regulator of the 27-nation European Union said Friday.

As part of the investigation, the EC will attempt to make several key assessments:

• Whether the deal will lead to an increase in the price of navigable digital maps for other companies that are trying to offer competitive navigation services on wireless phone handsets or other devices.
• Whether the deal will limit the access of third-party companies to these maps.
• And whether consumers will be "harmed" – have to pay more – as a result of the deal.

Nokia’s proposed buyout of Navteq raises many of the same issues European regulators are concerned about as a result of the proposed acquisition of Tele Atlas NV (PINK: TLATF) by TomTom NV, a Dutch company that makes portable GPS navigation devices and sells navigation software for mobile phones, the commission said Friday.

The proposed TomTom/Tele Atlas transaction also is under review by the commission, which earlier on Friday extended the deadline for its decision on that deal by 10 days. The new deadline is May 30.

The commission and both companies made the decision, EU spokesman Jonathan Todd told Bloomberg News in an interview on Friday.

The commission announced its intent to review the Nokia/Navteq deal later the same day.

Booming Sales Open up New Markets

Although Nokia already is the world’s No. 1 seller of wireless handsets, the company is looking for new sources of revenue because the cell phone industry is rapidly maturing. With the added ability to offer navigation services, Nokia could give itself a strong position in this emergent sector – which is one of the fastest-growing fields in the high-tech sector.

That potential benefit wasn’t lost on other industry players.

Once Nokia struck its deal with Navteq, Garmin Ltd. (GRMN), the largest U.S. maker of satellite-navigation devices, launched a $3.4 billion hostile bid for Tele Atlas, which already had agreed to be acquired by TomTom for $2.8 billion.

When TomTom boosted its bid to $4.2 billion and Tele Atlas accepted the offer outright, Garmin raised the white flag and dropped out of the bidding battle.

Garmin – a Wall Street darling for much of the past several years – has subsequently seen its shares plunge from their highs, as investors worried about how the loss of the deal might impact future earnings.

Garmin’s shares, which traded as high as $125.68 each last year, closed Friday at $56.08.

According to recent reports, however, Garmin appears to be faring well from a competitive standpoint. Garmin sold more personal navigation devices worldwide than any other manufacturer last year, according to research by independent technology market analyst firm Canalys.

Just last week, Garmin said it delivered 31 million devices equipped with global positioning systems since the company’s inception in 1989. The company delivered more than 12.3 million of the devices last year, the company said in its recent Securities and Exchange Commission (SEC) filing.

"Garmin achieved the worldwide number one spot for mobile navigation devices in 2007 by performing consistently well in Europe, more than doubling its shipment  [totals from] 2006 and increasing its market share, while also retaining its clear lead in the booming U.S. market, which grew to represent 34.7% of the total worldwide market in 2007," Chris Jones, a vice president and principal analyst for Canalys, said of the research firm’s report. "Garmin had an enviable 47% share in the U.S. [market] in 2007, and the market quadrupled in size."

News and Related Story Notes:

• Bizjournals.com:
  Analyst: Garmin is No. 1 in personal navigation device sales.

• PRNewswire:
  Garmin(R) Named Global Leader in Portable Satellite Navigation.

• Bloomberg News:
  Nokia’s Navteq Acquisition Faces In-Depth EU Probe.

• Reuters:
  EU opens in-depth probe of Nokia’s Navteq purchase.

• Bloomberg News:
  Tele Atlas Drops on Extended Review of Sale to TomTom.

• Money Morning News:
  Garmin Withdraws Tele Atlas Bid; May Become Takeover Target.

• Money Morning News:
  GPS-Maker Garmin Sees its Shares Plummet on Profit Worries.

After months of negotiations, Brazilian telecommunication titan Oi Participacoes (TNE) has reached an agreement to acquire rival Brasil Telecom (BRP), two newspapers reported Friday.

The reported $4.6 billion deal would consolidate a rapidly growing industry in the emerging South American economy, giving Oi – also called Tele Norte Leste Participacoes SA and already Brazil’s biggest phone carrier – a 70% share of Brazil’s fixed-line market.

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The newspapers reporting the deal – Folha de S. Paulo and Valor Economico – said the companies will announce more details next week.

The companies have been in talks since early this year. Brasil Telecom top shareholders, including Previ, Citigroup Inc. (C) and local pension funds, have said they are willing to sell.

Until the deal is official, investors can’t be too certain, as Brazilian law forbids one group from holding two separate telecommunications concessions. Although, the government is seeking ways around the law to permit the takeover, Reuters reports.

The World’s Biggest Emerging Market

Last year, Brazil’s main stock market index, Bovespa Holding SA, rose 71% – even faster than India’s.

And on Feb. 20, Brazil displaced China to become the world’s biggest emerging market, according to a key index – Morgan Stanley Capital International Global Emerging Markets (MSCI GEM). 

That shift will likely attract billions in new money to Brazilian stocks, especially from money managers who benchmark their portfolios against the MSCI GEM index.

The bottom line: Expect money to flood Brazilian shares, says Keith Fitz-Gerald, Investment Director for Money Morning.

"Anytime a country moves to the top of that index there’s a strong re-indexing effect," Fitz-Gerald said. "And that will lead to billions of dollars of institutional money being shifted as those professional investors rebalance their portfolios. They’re going to move substantial amounts of money into Brazilian stocks."

News and Related Story Links:

• Reuters:
  Brazil’s Oi finalizes Brasil Telecom deal -reports

• Money Morning:
  With its Move to the Top of an Index, Brazil Moves to the Head of the Class For Investors

Sprint Nextel Corp. (S) posted a $29.45 billion fourth quarter loss, or $10.36 a share, as declining subscribers in an increasingly competitive market took its toll on the third-largest wireless carrier.

Sales fell 5.7% to $9.85 billion. Total post-paid subscribed declined 683,000 compared to the 337,000 it lost in the third quarter.

Sprint also wrote down $29.7 billion from its $36 billion purchase of Nextel and related companies in 2005. If that expense was left out of the equation, profit was 21 cents a share, according to Bloomberg estimates.

Needing capital, Sprint scrapped its dividend and borrowed $2.5 billion under a credit line, Bloomberg reported.

"The fourth quarter financial results reflect the challenges facing our Wireless business," Dan Hesse, Sprint Nextel’s chief executive officer, said in a statement, adding that Sprint is making "significant" company-wide changes to streamline operations and increase its dwindling customer base.

And like execs of other reeling U.S. companies, Hesse deflected the company’s performance onto the slowing economy.

"Given current deteriorating business conditions, which are more difficult than what I had expected to encounter, these changes will take time to produce improved operating performance, and our near-term subscriber and financial results will continue to be pressured," he said. 

By "take time to produce," Hesse isn’t referring to the first half of 2008, as the company expects to lose 1.2 million customers in the first quarter and that number is "unlikely to improve in the second quarter."

In a conference call, Hesse announced an unlimited calling, texting and walkie-talkie plan for $89.99 a month, undercutting similar – and recently introduced – plans by rivals
Verizon Communications Inc. (VZ), AT&T Inc. (T) and T-Mobile USA that go for $99.99 a month.

Sprint’s plan follows up earlier reports that it would undercut its rivals, a strategic move that could rattle rival service providers and stoke a price war.

Some analysts went so far as to predict Sprint would undercut rivals by as much as 40%. But $89.99 isn’t set in stone, especially in this highly competitive market.

Who can forget the price war between AT&T, Sprint and MCI Inc., when the companies frequently lowered prices and personally baited customers to switch teams?

And on the manufacturing side, Apple Inc. (AAPL) has knocked $200 off the cost of its iPhone since it debuted last summer.  

News and Related Story Links:

• Bloomberg:
  Sprint Posts $29.5 Billion Loss on Nextel Writedown

• Money Morning:
  Sprint Rumored to Undercut Rival Flat Rates, Price War on the Horizon

Sprint Nextel Corp. (S) is expected to offer flat-rate calling plans – with prices that could undercut competing plans by up to 40%  – a strategic move that could rattle rival service providers and stoke a price war, Reuters reported.

Sprint’s actually late to the parade, as many rivals already have flat-rate plans. On Tuesday, Verizon Communications Inc. (VZ) and AT&T Inc. (T) unveiled $99.99/month plans for unlimited calls. T-Mobile USA followed up with a similar plan and price, but included text messaging in the package. 

Meanwhile, Sprint is in dire need of a resurgence. Last year, its stock price dropped 31% as the company lost 1.2 million customers with wireless contracts in 2007.

A UBS AG (UBS) analyst went so far as to lower his guidance on AT&T and Verizon, thinking that the companies would have to struggle to compete with Sprint’s lower prices.  

"Additional downside in the shares likely exists if Sprint launches an unlimited plan for $60 per month – a real possibility given the current state of competition," UBS analyst John Hodulik wrote in a research note.

And he’s not alone.

Phil Cusick, an analyst for The Bear Stearns Cos. Inc. (BSC), said AT&T and Verizon might have to offer deeper price cuts to compete.

"We believe the stock sell-off implies that Sprint will undercut very aggressively and that AT&T and Verizon will eventually be forced to respond," he said.

Historically speaking, the telecommunications industry is especially prone to intense rivalries. And consumers have a lot of sway in the matter.

For example, look no further than the intense price war waged by AT&T, Sprint, and MCI Inc. over a decade ago. That rivalry was highlighted by quick cuts announced boldly on national television. Companies would also make calls to consumers who switched service to try and entice them back. 

One can also argue that such drastic undercutting taints the reputation of the entire industry. If a plan is knocked down 40% in price, consumers can legitimately wonder if these telecom providers have been overcharging them for years, eroding customer loyalty.

And that only makes jumping ship easier with each new and lower price.

Service providers aren’t the only telecom companies waging war. As mobile phones evolve from phones to all-purpose devices, manufacturers are racing to offer phones with more features.

News and Related Story Links:

• Reuters:
  Sprint expected to undercut rivals’ call plans

• Bloomberg: 
  Verizon Wireless, AT&T Offer Flat-Rate Calling Plans

• Money Morning:
  Cell Phone Makers Add Features and Up the Ante in a High-Risk/High Return Market for Investors

On April 3, 1973, Motorola, Inc. (MOT) engineer Martin Cooper – considered the father of the mobile phone – made the first cellular phone call. It wasn’t to his wife, mother or children, but to rival Joel Engel, head of research at AT&T Bell Labs.

"He tried to pretend it was nothing significant. But if you think I was trying to needle him, you’re right," Cooper told ZD Net, a tech-focused business news site.

To say the cell-phone market – and the rivalry between manufacturers – is red-hot would be a major understatement.

First, consider that what used to be a standard cell phone has morphed into a veritable toolbox of technologies that boost efficiency and provide entertainment: clock, planner, calendar, calculator, map, phone book, PC, Internet-navigator, voice-mail system, e-mailbox, digital camera, gaming console, news portal, voice recorder and stereo – to list just some of its capabilities.

And as the wireless phone’s keyboard becomes increasingly user-friendly, an entire new language subset – replete with abbreviations and symbols-from-text has evolved with the technology as such new "killer apps" burst from this portable desk-in-your-pocket.

Talking – with your vocal cords, that is – has almost turned into an ancillary feature.

And the initial hero of our story – Cooper, the Motorola engineer – isn’t all that happy about how his baby is growing up.

"The last thing the public is asking for is a phone that is also an MP3 player, a flash camera and a voice recorder," Cooper said. "Those [handsets] are so complex that it’s even hard for a techie to use them."

Not only is Cooper wrong about that [because teenagers are more handy with their handsets than are most adults over the age of 40], it’s also reasonable to suggest that Cooper is responsible for the phone’s transformation into a multi-purpose tool. 

After all, wasn’t the cell phone developed to speed communication by making it more portable [even though his first model weighed two pounds]? And wasn’t Cooper’s famous first call made to a rival – someone whose job was to provide customers with something Motorola couldn’t?

And so began the wireless-era’s Gold Rush, a race to put these phones on steroids, pumping them up with as many applications as possible. It may have started slow, but it’s turned into a downhill slalom.

But that’s hardly saying all the companies that sell mobile phones are gold-mine stocks. Over the past year, several companies have emerged as industry leaders in the rush to provide customers around the world with more features and lower prices. Others – such as Cooper’s Motorola, ironically – found themselves far behind in the race.

Indeed, just last week, Motorola effectively announced it was putting its handset unit up for sale – although analysts say it will be a tough sell to get someone to buy it outright.

The Winners

Industry leader Nokia Corp. (NOK) has been on a roll that has seen its share price skyrocket 58.4% in the past year, which is all the more dramatic when you consider the stock is down almost 10% year to date in the New Year. The Finland-based manufacturer upped its global market share to 40% in the fourth quarter, driven by a 44% spike in profits [full-year profits rose 67%].

Also, in the past six months, Nokia made aggressive buyout moves – offering $8.1 billion for leading digital mapmaker Navteq (NVT) and an undisclosed sum for privately held mobile advertiser Enpocket. The Navteq bid hasn’t gone through because the companies are waiting for the European Union to rule on another merger deal [TomTom NV's proposed buyout of Navteq rival Tele Atlas NV] before filing for required antitrust clearances, but Nokia and Navteq are committed to the deal, Medill reports.

The Navteq purchase is a clear shot across the bow of Apple Inc. (AAPL), whose iPhone debuted last summer with mapping and navigation capabilities powered by Google Inc. (GOOG) technologies. The iPhone muscled its way into the marketplace so quickly that Time magazine anointed it as the Invention of the Year.

In a very short time, the iPhone has changed the direction of how mobile devices are designed, causing other companies to mimic its sleek look and touch-screen ["haptics"] technology.

The result: In the fourth quarter alone, Apple sold 2.3 million iPhones worldwide.  And rivals took notice.

Last month, LG Electronics Inc., the world’s fifth-largest cell-phone maker, set a bold goal by saying it would boost its global phone sales by about 25% this year, Reuters reported.

And the Sony Ericsson Mobile Communications unit of Sony Corp. (SNE) has cleverly launched two "entry-level" handsets specifically focused on the India market, which is the world’s hottest mobile phone market – not just because of its growing population and incomes, but also because there are hundreds of millions of people without mobile phones

Sony Ericsson wants to sell 10 million handsets in India by 2009.

The Biggest Loser

Motorola got trounced last year. The Illinois-based manufacturer posted an 84% decline in profit growth for the fourth-quarter profit on sales declines of its handsets.

Also in 2007’s final three months, sales for the Schaumburg, Ill.-based company dropped 18.2% to $9.65 billion, down from $11.79 billion the year before. Net income was a paltry $100 million [4 cents per share] down from $623 million [25 cents per share] in the same period last year.

In the past year, the company slipped to third place in global market share, from 20.7% to 13.1% – putting it behind Nokia and Korea-based Samsung Electronics Co., Ltd. [14.5% market share].

Greg Brown took over as chief executive officer on Jan. 1, after former CEO Ed Zander retired amid falling profits and declining sales.

MarketWatch reported that it could take all of 2008 – or longer – for the company to overcome these setbacks in terms of lost sales and declining market share. Motorola’s challenge: It will take several years to bring new phone models to market, and even then the company’s costs remain too high, meaning the phones may not be price-competitive, anyway.

The Wild Cards

The tech world is abuzz over Samsung’s G810 Smartphone, that company’s answer to the iPhone and Nokia’s popular N95.

In addition to having a small platform of products, Research in Motion Ltd. (RIMM) – makers of the near-ubiquitous BlackBerry – could face what Citigroup Inc. (C) analyst Jim Suva called a "double-barrelled risk," causing RIMM’s share price to drop as much as 25%.

Ironically, the mobile device that’s talked about the most may well be the one that hasn’t even been invented, yet – the "G-Phone," or whatever it ends up being called, if or when search-engine leader Google decides to roll it out.

Google has remained mum about its wireless-communications aspirations, but the company has been racking up a portfolio of patents that show it is preparing to enter the mobile phone market [as well as video game and TV markets], InformationWeek reported, citing research from Evalueserve, a global research-and-consulting.

There’s even been heavy speculation that Google would become a bidder for wireless spectrum licenses, either now or in the future. However, UBS AG (UBS) just this week reported that Google has likely dropped out of the current "C-Block" wireless license auctions that the Federal Communications Commission is holding to sell licenses for broadcasting spectrum once used by analog TV broadcasters.

Key Considerations for Investors Hoping to Profit in this Sector

With the current global credit crunch, consumers may be a little more cautious about spending for "luxuries," such as highly featured new phones. Better to make their existing handset last a little longer. Indeed, since consumers know how competitive high-tech industries have become, they often have no problem waiting six months before buying the newest gadget, understanding that with the wait, the price will come down substantially.

[On the other hand, investors have seen how one white-hot product - be it the Apple iPod or Apple iPhone - can supercharge a stock, creating stratospheric returns].

Investors might want to employ the same strategy but for a different reason. The bottom line here is that this sector is highly susceptible to risk, especially with the players that are the most tied to the U.S. market.

As of now, the least risky investments – relatively speaking, at least – may be the titans of the group – Nokia, Apple and Google, even though the latter isn’t officially in the race.

Google may be the only company big enough to give Apple, who like Motorola’s Cooper struck first between the two innovative companies, a run for its money.

Google can strike back in two ways. It can wait until global markets recover to unveil its phone. Or it can make its move during the rough patches of the first half 2008.

The latter is a gamble, but it has possible parallels to the iPhone’s June debut and continued success – even as the markets started their initial descent.

All three stocks are down from their highs, and have declined in the New Year. And they are decidedly risky plays in a market as unforgiving as this one. On the flip side, all three are innovators.

For prospective investors, the key question for each company is this: How long before the next catalyst appears, and what’s the downside risk to my purchase until that happens? Here are some of the key considerations for each, both pro and con:

• Nokia, with its purchase of digital mapmaker Navteq, could push the cell phone into new markets, and it could conceivably develop new revenue streams with new products and services. Plus, as an industry leader, it has the market power to survive and thrive so long as its management team stays focused on the prize.

• Apple has engineered more comebacks than Sylvester Stallone. It not only innovates – it does so with style, something high-tech products are too often bereft of. All it will take is another iPod, iPhone or Mac Mini to give the shares a Saturn V-like lift.

• Google started out with a simple concept, and has just kept adding capabilities and services that the enhanced market position is to the company what a moat is to a castle. Analysts often decree that Google’s growth phase is "over," listing logical reasons why this is so – only to be embarrassed when the company proves them wrong.

News and Related Story Links:

• Wikipedia:
  Martin Cooper

• ZD Net:
  30 years later: What’s wrong with cell phones

• Money Morning:
  Nokia Announces $8.1 Billion Acquisition of Navteq

• Money Morning:
  Nokia buys mobile advertiser Enpocket, T-Mobile buys SunCom

• Medill:
  Wall Street not yet sold on Navteq-Nokia deal

• Reuters:
  LG aims to sell 38 pct more handsets in Europe|

• Telecom Tiger:
  Sony-Ericsson launches two India specific entry level handsets

• Money Morning:
  Motorola CEO Steps Down Amid Tanking Sales and Profits

• MarketWatch:
  Motorola profit sinks on mobile woes

• Mobile Magazine:
  Samsung G810 Smartphone is a Potential Nokia N95 Competitor

• InformationWeek:
  Google’s Secret Patent Portfolio Predicts gPhone

• Reuters:
  Motorola May Have Tough Time Selling Mobile Phone Unit.

• Forbes.com:
  Google May be out of Wireless Spectrum Race: UBS..

Shares of Sprint Nextel Corp. (S) suffered the worst decline in 25 years after the third-largest mobile phone company issued a report saying it lost 1.2 million subscribers in 2007 and planned to lay off 4,000 workers. 

Sprint is eliminating almost 20% of its retail locations, as the company is still struggling after the $36 billion merger with Nextel in 2005. According to Bloomberg data, the two companies combined market share pre-merger was valued at $70 billion. That share has dropped two-thirds, to only about $24 billion.

Sprint has struggled to keep up with its two main rivals AT&T Inc. (T) and Verizon Communications Inc. (VZ), both of which have had more success with popular handsets like the iPhone and Chocolate. Sprint’s troubles lead to the ouster of former Chief Executive Gary Forsee in October. Forsee was replaced with industry veteran Daniel Hesse.

Fitch Ratings lowered Sprint Nextel’s issuer-default and senior unsecured notes ratings to "BBB-" from "BBB" on the news, only one rating level above junk bonds.

News and Related Story Links:

• Bloomberg:
  Sprint Drops Most in 25 Years on Subscriber Losses

• CNNMoney:
  Fitch Downgrades Sprint Nextel Ratings

• Money Morning:
  AT&T Shares Drop, But Recession is Not to Blame

Earlier this week (Tuesday), Sprint Nextel Corp. (S) named Daniel R. Hesse, 54, as president and chief executive officer, effective immediately. 

Hesse replaces Gary Forsee who resigned in October under growing pressure from the board of directors due to continued loss of subscribers and operational troubles resulting from the Sprint and Nextel Communications merger. 

The third-largest U.S. wireless carrier, Sprint Nextel has lost customers in four of the past five quarters, the Financial Times reported.  The board was concerned about losing even more customers to the two largest carriers – AT&T Mobile and Verzion Wireless – and looked to Hesse, a 23-year telecom veteran, to helm the company through these difficult times.

"Dan Hesse is the right person to lead our company," said board member Irvine O. Hockaday, Jr., who chaired the board’s CEO search committee, in a statement. "He is a proven leader with deep wireless experience as a chief executive and an established track record of generating strong operating performance. He has the board’s full support to take decisive actions necessary to improve our performance."

Hesse served as CEO of Sprint’s Local Telecommunications Division for one year prior to the spin-off that created Embarq Corp. (EQ) in 2006. He has served as Embarq’s CEO since the firm’s inception.  Prior to joining Sprint, Hess spent 23 years at AT&T (T), including serving as the president and CEO of AT&T Wireless Services from1997 to 2000. At that time, AT&T Wireless was the United States’ largest wireless operator.

Just last month, while still searching for a new CEO, struggling Sprint Nextel spurned a $5 billion investment from Providence Equity Partners and South Korea-based SK Telecom Co. Ltd. (SKM) because the offer was contingent on naming Timothy Donahue, former executive chairman of Sprint Nextel and Nextel Communications CEO prior to the merger, as chief executive.  The board refused to meet with them to discuss their offer.

"I am honored and excited to lead Sprint Nextel at this important time in its history," said Hesse after the announcement. "There is no company in the wireless industry with a stronger set of assets. I believe through solid execution and commitment to our customers we can reinvigorate our operating performance and return the company to a growth trajectory. We will review every aspect of our strategy as we intend to lead Sprint to the forefront of the wireless industry."

News and Related Links:

• Forbes:
  Embarq’s Hesse Is New Sprint Nextel CEO

• Financial Times:
  Telecoms veteran to head Sprint

Declines in sales and profit have forced Motorola, Inc. (MOT) Chairman and Chief Executive Officer Ed Zander to announce he is stepping down.

President and Chief Operating Officer Greg Brown will be his replacement. Zander will step down as CEO effective Jan. 1 and will remain Chairman until the company’s annual stockholder meeting in May.

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Motorola’s stocks have dropped considerably since the company released its third-quarter earnings report – a 94% plunge in profit on sharply lower sales. For the year, Motorola’s stock is down almost 23% 

"This man got the company into a pickle,"  saidJoan Lappin, president of Gramercy Capital Management in New York to Bloomberg News. "They’re losing money and they’re continuing to lose share, and he’s put the stock in the dumper."

Thirty-four years ago, Motorola manager Martin Cooper made the first call on what was considered the first mobile phone, as heavy and enormous as it was compared to today’s standards. 

Now, the company’s market share fell from 20.7% to 13.1%, causing the Illinois-based company to slip behind Korea-based Samsung, whose market share boosted from 12.2% to 14.5% in the third quarter. Industry leader, Finland-based Nokia Corp. (NOK) increased its market share from 35.1% to 38.1%.

Brown’s work to turn the company around won’t be much easier, as Apple’s iPhone and the highly anticipated Google Phone will continue to pile-on the evolution of the cell phone.

But at least investors are eager for the new era, as Motorola stocks jumped as high as 4.5% in early morning trading on Friday.

News and Related Story Links:

• Bloomberg:
  Motorola’s Zander Steps Down Amid Sales, Profit Slump

• Money Morning:
  Nokia Announces $8.1 Billion Acquisition of Navteq

Telus Corp. (TU), the Number Two telephone company in Canada, on Friday said that its third-quarter profits jumped 28%, thanks to increased customer spending on wireless phone services. But the results still fell short of analyst estimates because the increased wireless revenue couldn’t overcome the increase in lower-priced phone calls.

The company’s U.S.-listed shares declined 11 cents each, or 0.19%, to close at on Friday.

With revenue from local phone service on the decline, Telus has embraced the same strategies as many other telecom carriers that are trying to offset such shifts by boosting sales of mobile-phone and wireless-data services. For Telus, third-quarter wireless sales rose, boosted by text messaging and e-mail. Still, average revenue per user declined 1.3% because  “competitive pressures” forced the Telus to slash rates on voice calls, the company said.

For the three months ended Sept. 30, net income climbed to $434 million, or $1.32 a share, from $342.2 million, or 98.5 cents a share, for the comparable quarter a year ago [all figures have been converted into U.S. dollars]. Net income was $271 million in the second quarter, the Vancouver-based Telus reported.

The company’s second-quarter results had been hampered by high costs related to acquiring and retaining customers in the new era of “phone-number portability,” which became available in March. The results were also hurt by the implementation of a new client billing-and-care system in Alberta that temporarily kept the company from taking on new customers in that region.

Darren Entwistle, the Telus president and chief executive officer, told analysts that those problems have been resolved.

“I am encouraged that Telus addressed the short-term operating challenges we faced at the mid-point of 2007,” Entwistle told analysts during a teleconference early Friday. “The third-quarter results demonstrate, unequivocally, our improved execution – but they also demonstrate the challenges that we still need to answer if we are to continue advancing our growth strategy at the pace investors have come to expect from this organization.”

Excluding a $99.6 million gain, profits were $1.02 a share, beating the average estimate of 99.6 cents a share, according to a survey of analysts conducted by Bloomberg News.

Third-quarter sales totaled $2.47 billion, up 4.5% from sales of $2.36 billion for the comparable quarter a year ago – although they still fell short of the consensus revenue estimate, according to the Bloomberg survey. Telus cut its 2007 sales forecast to a range of $9.78 billion to $9.83 billion. Analysts had been forecasting sales of $9.81 billion, the survey said.

Entwistle, the CEO, said that Telus decided to slightly reduce its revenue guidance “based on the challenges we faced in the second quarter and our inability to overachieve in the second half of the year to ameliorate fully this shortfall.”

In terms of overall growth, revenue from wireless services continued to lead the way, leaping 9.4% to $1.18 billion for the third quarter. According to the company, the bulk of that increase was due to a 56% increase in revenue from data traffic as music downloads and text messaging soared, and as customers increased their reliance on – and use of – personal digital assistants (PDAs).

Telus added 31,000 high-speed Internet subscribers during the quarter, compared to only 14,000 a year earlier.

The company also signed 98,200 new mobile-phone customers to long-term contracts, fewer than the 103,000 estimated by Scotia Capital analyst John K. Henderson, who told Bloomberg that he’s worried about the per-customer wireless sales “trending down.”

Indeed, the average revenue per customer (known, in industry parlance, by its acronym: ARPU), fell 1.3% to $69.38 a unit. That drop – the first year-over year decrease in 18 quarters – was due to a decline in voice-related ARPU, as spiraling mobile-phone competition brought down pricing for voice minutes and prompted carriers to offer more free minutes in their wireless packages.

Sales from local telephone service – typically one-fifth of the yearly revenue for Telus – dropped 4.1%. The reason: More customers defected to the cable-based phone service of regional rival Shaw Communications Inc., (SJR).

On Thursday, Rogers Communications Inc. (RCI) the biggest mobile-phone company in Canada, said its wireless revenue grew 18% and noted that wireless data sales advanced 53%. BCE Inc. (BCE) Canada’s biggest phone company, reports its results on Wednesday (Nov. 7).

Telus also declared a quarterly dividend of U.S.48 cents per share, an increase of 20% over the prior dividend of U.S.40 cents that had been paid Oct. 1. The new dividend will be paid on Jan. 1.

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