Nortel Networks Ltd.'s (NYSE/Toronto: NT) recent success in the Korean wireless market is giving investors a reason to cheer.

According to a report released this morning, UBS Investment Research raised revenue estimates for Nortel on the basis of its success in securing two major UMTS/HSDPA contracts with KT Freetel Co. and SK Telecom (Nasdaq: SKM) in Korea, which Nortel garnered in partnership with LG Electronics Inc. (London: LGLD; Korea: 6657.KS).

On the strength of these contracts, UBS says Nortel will increase its revenues in the Korean market, and the analysts upped Nortel’s target price from $3.00 to $3.30 while maintaining a Neutral rating of 2. Nortel shares were up $0.15 (4.55%) to $3.45 in early afternoon trading on Tuesday.

“We believe these wins are likely to allow LG to gain share in the Korean wireless infrastructure market from the 30–35 percent level it now has in CDMA,” UBS's analysts wrote in this morning's report. “The LG/NT JV share target is 50 percent for UMTS/HSDPA.”

The analysts also expect capex growth to increase by 22 percent in 2005 and 6 percent in 2006, due in part to the mandatory build-out of UMTS/HSDPA in the 2Ghz spectrum awarded to operators two years ago.

But they warn that Nortel's revenue bump from Korea won't be instantaneous, given that the country has widely adopted EV-DO, another flavor of 3G wireless technologies, and may warm slowly to UMTS.

Still, UBS says it expects $960 million in combined LG and Nortel revenues for 2006, based on estimated 2004 LG telecom infrastructure revenues of $540 million and the strong estimated capex ramp.

-- Joe Tuzzo, special to Light Reading