Alcatel-Lucent hat trick of Chinese 3G deals

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Alcatel-Lucent hat trick of Chinese 3G deals

By CAROLINE GABRIEL

Published: 28 April, 2009

READ MORE: Alcatel-Lucent

When some investors looked askance at Alcatel-Lucent's decision to stay in the mobile infrastructure market, one of CEO Ben Verwaayen's chief justifications was the opportunity in China. His strategy has been vindicated with a hat trick of major contracts, adding deals worth a total of $1.7bn with China Mobile and China Telecom, to a previously announced win at China Unicom.

With the three Chinese cellcos each using a different 3G platform, ALU has the advantage of covering all three options - unlike any of its major rivals except China's own Huawei and ZTE. Its Chinese joint venture, Alcatel-Lucent Shanghai Bell, has announced a $1bn contract with China Mobile, the market leader, which is using the homegrown TD-SCDMA technology, ALU will provide 3G RAN equipment plus GSM/EDGE as the cellco continues to expand its 2G coverage and capacity; plus optical, microwave and IP backhaul systems, IP service routers, application platforms and services.

The deal with China Telecom, the CDMA2000 carrier, is worth about $700m and as at Mobile, ALU will supply application and transmission platforms and IP service routers, as well as EV-DO gear. The vendor said it would also look to support the cellcos' "smooth evolution to LTE/4G in the future" and that the agreements "set the stage for future collaboration on the ongoing improvement of their networks".

Last month, ALU announced a major deal with China Unicom, which is using W-CDMA, to cover 14 provinces with 3G and expanded GSM. Huawei and Ericsson are providing gear for other provinces. Also, late last year, ALU Shanghai Bell won a $230m deal to upgrade Telecom's CDMA network, and, in collaboration with Datang Mobile of China, it won the largest share in China Mobile's tender for the second phase of its TD-SCDMA trial.

Another vendor that had high hopes of the Chinese windfall, Nortel, has been hamstrung by its precarious financial state. The Canadian company is seeking a second extension of its period of bankruptcy protection, until July 30, as it tries to reorganize its operations, a process that looks increasingly likely to involve break-up. Its current period of protection expires on May 1. Its court appointed auditor Ernst & Young said in a filing that "the restructuring of Nortel will require significant additional time to formulate an agreed upon restructuring strategy... [the extension] is necessary for the restructuring strategy and plan to be fully developed". It says Nortel has sufficient cash to get through to the end of July. The filing shows that Nortel had nearly $2.6bn in cash assets as of April 11, though only just over $2bn was available to use - $859m in north America and $700m in Europe.