ALU set to win Telefonica's Spanish LTE deal
Would boost French firm in bid to grab Ericsson's top spot, while in Latin America it will see Virgin Mobile entering
Published: 20 February, 2012
Telefonica has been running some of the world's most extensive LTE trials, working with most of the major vendors across its European and Latin American territories. The firm is expected to award its first major contract, for its Spanish homeland, to Alcatel-Lucent.
The incumbent operator aims to accelerate its 4G roll-out to seize back the competitive initiative from smaller rivals. It plans to outline its plans, including its supplier choices, at next week's Mobile World Congress show, also in Spain. Although there was no confirmation of the reports, Alcatel-Lucent's stock jumped 5.1%$ to the highest level in more than three months.
Robin Bienenstock, an analyst at Sanford C Bernstein, told Bloomberg that Telefonica may need to spend about €300m ($394m) to build an LTE network to cover about 65% of the Spanish market, estimates based on one of the largest LTE deployments in Europe so far, by Vodafone Germany. He thinks rural broadband will be the initial focus, as at Vodafone, since Telefonica will need to hang onto its rural customers, whose slow wireline speeds will make them prey for third party LTE services. "In the absence of significant cable coverage, Telefonica's wireline customers are threatened by faster speeds available through LTE, hence the company has to build LTE to prevent further revenue declines in these areas," said Bienenstock.
During the first phase of Telefonica's Spanish trials, ALU provided infrastructure for networks focused on businesses, while Huawei supplied modems. ALU had 30% of the global LTE market at the end of Q311, according to Dell'Oro, while Ericsson had 44%. Both firms won the lion's share of the US deployments at Verizon and AT&T, the biggest deals so far.
Telefonica may face another challenger, this time in Latin America, where its huge holdings account for most of its growth as its European markets stagnate. UK-based MVNO Virgin Mobile has unveiled plans to move into Latin America, but at least this will be a revenue stream for Telefonica's Movistar unit, which will support the brand on its network.
Viring is emulating its strategy elsewhere, of targeting the youth market first. "When you have a high penetration, the challenge for a big network operator is to be all things to all people," Virgin Mobile CEO Peter Macnee told Bloomberg. "So when they partner with someone like us, we focus on one thing: We focus on the youth."
The MVNO will kick off services in Colombia and Chile this year, and will partner with content brands including the Cine Colombia cinema chain. The move is part of a plan the company outlined last June to invest $300m over five years to expand into Latin America in partnership with Tribe Mobile, an MVNO focused on emerging markets in the Middle East and Africa. From 2013, Virgin will target Brazil, Argentina, Mexico and Peru.
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