Alcatel Bucks the Trend

Deals with Japan's NTT DoCoMo and Nigeria's Globacom indicate that Alcatel's business will continue to grow

February 21, 2003

2 Min Read
Alcatel Bucks the Trend

CANNES, France -- 3GSM Congress -- French vendor Alcatel SA (NYSE: ALA; Paris: CGEP:PA) is saying "Pah!" to the current decline in the mobile network infrastructure market in 2003.

While the sector is set to shrink by anything between 5 percent and 15 percent this year, Jérôme Albert, VP of marketing and communications for the vendor's mobile networks division, says Alcatel's wireless business (excluding handsets) will grow from about $3.5 billion in 2002 to around $4 billion in 2003.

Part of that will come from the joint fixed/mobile equipment deal announced this week with Nigerian operator Globacom (see Alcatel Supplies Network in Nigeria). "The wireless element of that deal is worth half of the €675 million [US$732 million] total value of the contract and includes GSM network equipment and wireless backhaul." Was there any vendor financing involved? "None at all," says Albert.

While Alcatel's business is not in the same league as GSM/GPRS/UMTS infrastructure market leader LM Ericsson (Nasdaq: ERICY), which had revenues from mobile network products of about $15 billion in 2002, the French company is making a profit on its business, and Albert says the mobile unit expects its margins to increase in 2003 (see Alcatel Profits From Mobile).

The business will be helped by Alcatel's involvement with 3G networks partner NTT DoCoMo Inc.'s (NYSE: DCM) WCDMA network upgrade. The Japanese operator, which has been struggling to capture customers for its 3G service, built its network so early that it does not conform to industry standards (see DoCoMo's Purse Stays Shut ). "Now we are involved in DoCoMo's migration to a fully 3rd Generation Partnership Project (3GPP)-compliant network. And we are teaming up with DoCoMo's engineering business to offer indoor optimization solutions outside Japan," adds Albert (see Alcatel, DoCoMo Team on 3G).

And that's not the full extent of the DoCoMo relationship, either. IDC senior research analyst Paolo Pescatore tells Unstrung that DoCoMo and France Telecom SA-owned mobile operator Orange SA (London/Paris: OGE) are recommending Alcatel as a preferred supplier of UMTS network equipment and associated services platforms to their operator partners and allies. "Not only does that include all the Orange operators around the world, but DoCoMo has strong relationships with major carriers such as AT&T Wireless Services Inc., KPN Mobile, and Telefónica Móviles SA," says Pescatore. "Alcatel has a very strong strategy, and most importantly it is making money," he adds.

Albert says financial success is the result of a strong emphasis on keeping costs low and focusing on emerging markets for new business. "C'est bon," as they say here in sunny Cannes.

— Ray Le Maistre, European Editor, Unstrung

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