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NTT takes $560M stake in NEC to forge 5G, optical alliance

Japan Inc. heavyweights NTT and NEC have come together to develop new wireless and optical technologies.

NTT, Japan's biggest telco, will take a 4.8% stake, estimated to be worth around $560 million, in the IT hardware and services firm.

The two companies said in a press release Thursday that through their alliance they will jointly develop and sell "ICT products utilizing innovative optical and wireless technologies."

Specifically they say they will work on O-RAN-compliant 5G network kit and a high-performance DSP circuit and contribute to NTT's IOWN optical project.

In the key area of 5G radio access, NEC has shipped O-RAN-based 5G small cells to NTT subsidiary NTT DoCoMo but has had little traction outside Japan.

This alliance has global aspirations, with the partners saying they will work with global operators and vendors to sell their O-RAN products worldwide and to "attain top global market shares under NEC's leadership."

However, a spokesperson told Light Reading it is too early to say when the first products will be shipped.

Yet even with the investment from NTT, NEC's carrier equipment business is still a minnow compared with its bigger European and Chinese rivals.

The unit achieved revenue last year of 510 billion yen (US$4.8 billion) across a broad range of products, including small cells, packet optical transport, microwave backhaul and submarine cable.

In the other main area of partnership, optical, the two partners have committed to develop technologies for NTT's IOWN concept, a photonic-based system that is intended to have 100 times more capacity than today's networks by 2030.

"As part of the development, the companies will enable greater capacity, higher functionality and lower costing submarine cable systems, large capacity, low latency and automatic/autonomous space communication, and more sophisticated technologies to ensure infrastructure network security," they said.

Beyond the individual technologies, the deal is as much about strengthening Japan's own capabilities in an era of rising protectionism as it is about forging ahead on new tech. Besides committing to enhancing Japan's competitiveness, they have branded their alliance as "Brand new made in Japan."

The NTT investment will make the telco NEC's third-biggest shareholder and the largest industry shareholder.

It is the second deal NTT has struck this year with a big Japanese firm to jointly pursue a promising new technology.

It announced a $1.8 billion accord with Toyota to work on smart city projects in March, with each also taking a stake in the other.

— Robert Clark, contributing editor, special to Light Reading

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