PrimeCo Personal Communications L.P. awarded Lucent Technologies Inc. a $500 million three-year exclusive contract to supply personal communications services equipment and services for the next phase of its network development.
The announcement is a blow to Motorola Inc., which was in discussions with PrimeCo in recent weeks to continue as an infrastructure provider. PrimeCo reportedly was dissatisfied with the performance of Motorola’s equipment. Motorola shared the initial $1 billion contract with Lucent, for which PrimeCo already has paid.
“We are disappointed that a valued customer decided to expand networks with another vendor,” said Motorola spokesman Scott Wyman. “However, this is not unusual in this industry. Motorola has expanded the equipment of other competitors’ in the U.S.”
Lucent will install its Code Division Multiple Access mini-cell equipment, the 5ESS-2000 switch, its GlobeView-2000 ATM switches, transmission equipment, operation systems and power systems. Catarina Wylie, a PrimeCo spokeswoman, said PrimeCo eventually will implement the Lucent platform in all of its markets, replacing Motorola’s equipment over time.
Sources familiar with the discussions between Motorola and PrimeCo said PrimeCo’s decision to choose Lucent for the next phase of network development was expected. Motorola’s failure to correct network snags in a timely fashion has been cited as a reason why PrimeCo chose Lucent.
PrimeCo’s award is seen as a big win for Lucent, which aggressively has been working to grab a fat share of the U.S. digital cellular and PCS market by taking business away from its competitors. In recent months, Lucent has won a multimillion-dollar, 5-year contract with U S West NewVector Group Inc., operating as AirTouch Cellular, to install CDMA equipment, including switches, in seven markets. Grupo Iusacell, Bell Atlantic Corp.’s communications venture in Mexico, also granted Lucent a contract to replace its existing analog system with a CDMA system. These contracts essentially displaced the incumbent infrastructure provider, said Sam Gronner, Lucent’s public relations manager.
Figures from The Yankee Group indicate Lucent, which supplied both Time Division Multiple Access and CDMA equipment in the U.S. market last year, was the 1997 leader in digital cellular and PCS equipment market. It grabbed a 38-percent market share, while L.M. Ericsson, which supplied both TDMA and Global System for Mobile communications infrastructure, had a 23-percent market share last year. Northern Telecom Inc. had 21 percent of the market, while Motorola had 13 percent. Nortel supplied both GSM and CDMA equipment while Motorola supplied only CDMA equipment.
Both Nortel and Lucent have a much better story in the marketplace right now, said David Kerr, director of wireless programs at Strategy Analytics in Milwaukee. “Both focus on delivering revenue-enhancing ideas and applications development,” he said. “Motorola is losing communications with the client. They really have lost the leadership position from a vision perspective of figuring out what they are going to do to help the operator with key business problems. Delivering the hardware is not enough.”
Many analysts believe carriers are attracted to Lucent’s switch-based network, which bodes well with its strategy of getting the customer to use wireless in place of wireline service. Lucent’s solution allows carriers to deliver switch-based capabilities such as enhanced routing services, personal number and wireless centrix-like features, such as four-digit dialing.
“Many carriers are finding the need for a switch-centric solution in metro areas,” said Alex Cena, telecommunications equipment analyst with Bear, Stearns & Co. “Lucent’s main strength is the 5ESS switch … Carriers can provide wireline service capabilities.”
Motorola still has many loyal clients, and analysts are bullish about the company. 3607 Communications Co. last week granted Motorola a contract in excess of $100 million for CDMA infrastructure in six of its markets. Pilipino Telephone Corp. in the Philippines also awarded Motorola a contract for CDMA equipment. Motorola’s international presence also is stronger than Nortel’s or Lucent’s, said Crispin Vicars, program director with The Yankee Group. “Motorola is basically taking advantage of its historical presence in wireless markets,” he said.
