Cellcom yanks launch of Modu device for subscribers

Cellcom is canceling, or at least further postponing, its launch of the Modu mobile phone, according to anonymous sources. The cell phone company was to have launched the device last month.

As reported last week in TheMarker, Modu is firing 110 employees in the third round of layoffs in about a year.

A few months ago, then VP sales and marketing of Modu, Benny Einhorn - he lost his job in the last round of layoffs - asked Cellcom to stick to the companies' original plan and launch the device in October. Cellcom promised to continue its partnership with Modu but explained that it had no interest in launching a 2.5G device in October. The first generation of Modu is the smallest cell phone in the world, with 2 gigabytes of internal memory, a music player and a keyboard with only seven keys.

Cellcom officials said they did not want to roll out a device that does not support 3G, pointing out that a good chunk of the company's revenues these days derive from content (mobile Internet downloads), and that generally means faster, more capable 3G devices. They also fear that Modu hasn't really cracked the code on its own innovation, which is the development of specialized jackets for the basic device that enable a multitude of uses and let users customize them to their taste, or outfits. The word at Cellcom is that its users will simply not be lusting after those jackets.

Modu CEO Dov Moran said in interviews given since the latest layoff announcement that the company has signed contracts for the distribution of its devices in the Philippines and India, and is about to ink additional ones for a number of South American states. In an interview to TheMarker, Moran confirmed that commercial rollouts in Italy and Russia were postponed - again, because the mobile operators wanted to focus on 3G devices. Modu has gotten the message: Moran says the company is putting its energy into completing development of the second generation of the Modu, which will support 3G, and getting it into as many countries as possible in 2010.

"Cellcom continues to be fully committed to Modu," Modu said in a statement. "Cellcom intends to release the Modu when a range of jackets is ready for launch in Israel."