Alcatel-Lucent defends decision to remain in 3G game

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Alcatel-Lucent defends decision to remain in 3G game

By CAROLINE GABRIEL

Published: 29 January, 2009

READ MORE: Alcatel-Lucent

Wireless infrastructure will be a game of scale in the coming years, with the market increasingly converging on a few major suppliers. This trend leads to almost constant speculation about further consolidation of the sector, and the possibility of Huawei and/or Ericsson, in particular, making an acquisition. Nortel's wireless activities are one obvious candidate, but there are still simmering rumors that Alcatel-Lucent will also move out of wireless.

This week, though, ALU CEO Ben Verwaayen repeated the commitment he made before the holidays, when announcing a major restructuring plan, that he would stick with the mobile business. In an interview with the London Financial Times he said that W-CDMA remained important, as it had more than 50 customers, including AT&T, who "really value what we're doing". As in the CDMA market, which ALU also refused to exit entirely, Verwaayen justified remaining in a wireless market where his company trails Ericsson, NSN and Huawei, partly by pointing to opportunities in China.

Some analysts remain convinced that ALU should get out of W-CDMA because it is so competitive, and sign a reseller deal with another manufacturer, perhaps re-entering the game at the LTE stage if it could steal a significant march in product development and pricing. The W-CDMA unit is thought to have been lossmaking since ALU was formed in 2006. Overall, the company, which reports results next week, is looking for an 8-12% decline in the wireless infrastructure market as a whole in 2009. It aims to break even in terms of operating profit this year and achieve mid to high single-digit operating margins by 2011. "I will give it my all to make sure that we arrive at that stage," Verwaayen told the FT. "We have been ambitious in our strategy, but prudent in our financials."