Verizon Wireless’ LTE award just first round of contract awards

The selection of Alcatel-Lucent and L.M. Ericsson to build out Verizon Wireless’ Long-Term Evolution network wasn’t too surprising and some competitors should not fret, according to industry analysts.
Verizon’s close relationship with Alcatel-Lucent regarding its CDMA network and Ericsson’s relationship with Vodafone, which owns 45% of Verizon Wireless, made sense that the two infrastructure giants would be selected in the carrier’s efforts to offer the 4G technology to its subscribers as early as next year.
However, Verizon’s decision dealt a blow to Nortel Networks Corp., which has been a long-standing partner with Verizon Wireless, because the company has also provided a large chunk of infrastructure for its CDMA network.
Both Nortel and Alcatel-Lucent have been struggling financially, but when it came time to decide, Alcatel-Lucent was given the nod, said Nadine Manjaro, an ABI Research analyst.
“Verizon needed someone in this contract that understands their existing CDMA network,” Manjaro said. “It shows that Verizon has a lot of confidence in Alcatel-Lucent.
“This is a loss for Nortel gaining any traction into LTE.”
As for Ericsson, the global leader in the wireless infrastructure market has gained a new customer in North America. Ericsson has been able to buck the trend in the market by continuing to post profitable quarters.
“It made sense for them to leverage Ericsson across the board,” Manjaro said of Vodafone’s relationship with the company. “They are definitely a strong vendor.”
Ron Gruia, an analyst for Frost & Sullivan, said the contract for Alcatel-Lucent was important for the company, which has posted eight straight quarterly losses.
“The contract is positive for Alcatel-Lucent,” he said. “They were able to maintain a key account.”
Nortel’s loss will weigh heavily as the company moves forward to restructure its operations as it goes through bankruptcy.
“It remains to be seen how this will trickle down,” Gruia said. “Nortel is a business that is under a lot of pressure. This was not good for them.”
Gruia said Nortel could still emerge as an LTE vendor because it is participating in trials with T-Mobile International and has established relationships with operators in Asia.
Although Verizon has not announced how the contract between Alcatel-Lucent and Ericsson will be divided, Gruia expects for each company to get an even split.
“It’s possible Verizon Wireless could bring in a third vendor later on,” Gruia said.
A third to emerge could be one that also has been tapped to work on Verizon’s LTE network, Gruia said.
Nokia Siemens Networks and Alcatel-Lucent will be the suppliers for the IP Multi-Media Subsystem network and Starent Networks was selected as a packet core vendor.
“There are plenty of trials for LTE, but it is good for these companies to get the first reference,” Gruia said,
Manjaro agrees but said contracts sometimes don’t pan out and vendors not selected initially could still get in on the action with Verizon.
“Many times after a contract is awarded, a company is unable to live up to the contract,” she said. “It opens the door for other competitors to come in.”
Manjaro said numerous infrastructure vendors, including Nokia Siemens Networks and Motorola Inc., will continue to be viable options for delivering LTE networks.
“Just because these other companies were not selected, does not mean they are not good,” she said.
To move forward with its 4G network, Verizon has created the LTE Innovation Center, which will be based in a Boston suburb. The center will be a catalyst for early development of non-traditional products for use on LTE networks. The wireless provider is hopeful the center will be able to create innovative solutions for segments of the market that include consumer electronics, machine-to-machine and business.