Infrastructure providers partner for LTE: Alcatel-Lucent, NEC plan to tackle space together as carriers call for single standard

BARCELONA, Spain – In an increasingly difficult environment for network providers, Alcatel-Lucent announced it is teaming with Japan’s NEC in a joint venture to focus on LTE technology.
The move comes on the heels of disappointing 2007 financials for Alcatel-Lucent; the one-year-old company posted a $3.74 million loss in the last quarter and more than $5 billion for the year. Meanwhile, speculation is growing that Motorola Inc. may combine its wireless infrastructure business with embattled Nortel Networks Corp., which has sold much of its networks business. Nokia Siemens Networks, which also combined last year in an effort to continue to compete in the networks business, is heading in the right direction financially, CEO Simon Beresford-Wylie said yesterday, but characterized the market as “tough with fierce competition.”
Because the LTE market is just starting to develop, Alcatel-Lucent and NEC believe combining their resources early on will help them develop a market advantage. Alcatel-Lucent CEO Patricia Russo said the move is an offensive play, rather than a defensive one.
“It’s about scale, time to market, and pooling existing R&D,” she told reporters during an afternoon press conference at the Mobile World Congress in Barcelona, Spain. “This is not a way to reduce our investment.”
Japan’s NTT DoCoMo Inc. already has selected NEC to help deploy its LTE solution, while Verizon Wireless selected Alcatel-Lucent as one of its trial partners for a planned LTE deployment.
The two network vendors said they plan to participate in trials beginning this year and launch a commercial network in 2009. The two companies will use a common LTE platform and then customize the configuration depending on the needs of the carrier.
The JV does not include WiMAX or other technologies, but both CEOs said they were open to future collaboration as the JV developed. However, when asked whether the JV was a first step toward anAlcatel-Lucent-NEC combination, NEC President Kaoru Yano said no such discussion has taken place.
Russo noted that the JV should have an easier time in the LTE space rather than the W-CDMA space because there are half as many competitors today due to consolidation and other factors. Alcatel earlier tried to team up with Fujitsu to attack the UMTS space but ultimately that venture failed because the companies were too late to market and essentially the venture offered two platforms: one for the Japanese market and one for the rest of the world, Russo said. The Alcatel-Lucent JV is offering one platform architecture, which has already been decided. Russo also noted a common history between Alcatel-Lucent and NEC: NEC was started as a subsidiary of Western Electric, which also is where Lucent’s roots began.
However, research firm UBS believes the LTE landscape is likely to be more competitive than the W-CDMA market. “We believe that the Chinese vendors are likely to use the technological disruption to gain further share and others (such as Nortel) may renew their market intentions.”
On the topic of next-generation technologies, Vodafone Group plc Chief Executive Arun Sarin said he was in favor of combining some of the standards.
“We should take WiMAX and put it into the LTE standard” he said.
Sarin added WiMAX would fit inside the TDD portion of the LTE standard, a move that would free up the wireless industry’s researchers and engineers to focus on one single product, rather than splitting them into two potentially competing camps.
“The world is moving toward one technology,” noted Manoj Kohli, head of Indian carrier Bharti Airtel.
Qualcomm Inc. recently announced support for LTE in its chipsets, and is providing a migration path for CDMA carriers to move to LTE.