Alcatel to License IPWireless?

IPWireless Inc. has been linked to a potential deal with French incumbent Alcatel (NYSE: ALA; Paris: CGEP:PA) as part of the alternative infrastructure vendor’s attempts to generate the majority of future revenue from licensing agreements.

Founded in April 1999, IPWireless developed a high-speed, time-division duplex (TDD) data system that conforms to universal mobile telecommunications system (UMTS) standards but -- unlike standard cellular systems -- uses unpaired spectrum, sending and receiving data on one channel rather than two.

The vendor’s initial business model involved the direct sale of infrastructure equipment such as base stations and data cards to service providers (see IPWireless Strikes Double Deal and IPWireless Powers Sentech). An agreement with UTStarcom Inc. (Nasdaq: UTSI) in March last year, however, signaled the company’s intent to focus efforts on licensing its UMTS-TDD chipset technology to incumbent network vendors (see UTStarcom, IPWireless Team and UTStarcom Makes Euro Headway).

Media reports state that IPWireless generated 90 percent of its revenues in 2004 from direct sales to operators or OEM resale. In 2005, the vendor reportedly expects this figure to fall to 50 percent, with the remaining half coming from licensing deals with partners. By the end of next year, 90 percent of its revenues will be from licensing deals.

IPWireless confirmed the accuracy of such reports.

In light of an earlier agreement, Alcatel is being tipped as a likely future licensing partner (see IPWireless Teams With Alcatel ). “UTStarcom is currently the only vendor partner for IPWireless,” notes a recent Lehman Brothers report. “While other vendors – we believe including Alcatel – are likely to license the technology, UT has a ~9 month lead... We recognize that UT may lose its exclusive status fairly soon.”

IPWireless’s director of corporate communications, Madelyn Smith, points out that the existing Alcatel partnership is “a distribution agreement” rather than a licensing deal. “UTStarcom actually uses our chipset technology to manufacture its own equipment, whereas Alcatel would buy our equipment and play an integrator role.”

Alcatel was unable to provide comment by press time.

Looking ahead, Smith is confident that the company’s licensing strategy is the best way forward. “A lot of this is driven by the operators themselves. Operators have existing OEM relationships and once they like our technology then they tap those manufacturers.”

— Justin Springham, Senior Editor, Europe, Unstrung

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