Mobile carrier Pele-Phone hopes to save $50m by changing terms with suppliers

Company is pressuring Samsung and Motorola to cut prices by contracting with rivals
Author:
Publish date:

Mobile operator Pele-Phone Communications wants to re-open its contracts with equipment and infrastructure suppliers. It means to make business relations contingent on substantial price cuts, TheMarker.com has learned.

Pele-Phone hopes that its cost-cutting clout can save it $50 million, mostly in the fourth quarter of 2001 and the rest during quarters to come. It plans to start the process of re-negotiating business terms once done compiling its third-quarter results, which are expected to be weak.

Meanwhile, it has begun applying pressure to Samsung and Motorola (NYSE:MOT) to lower prices by forging stronger relations with Lucky Goldstar, and SK Telecom (NYSE:SKM), which typically offer prices 20% below Samsung and Motorola.

Although as a privately-held company, Pele-Phone's spending is not on public record, its procurement from Samsung and Motorola is thought to be worth $80 million a year. Industry sources estimate that Pele-Phone can save $20 million a year by changing the terms.

Pele-Phone's infrastructure contracts to build a 2.75-generation 1X network are estimated at $150 million. Third-generation upgrades will probably cost it another $200 million.