Nortel's Korean Deployment: How Big?

Nortel claims another deal with Korea Telecom, but lots of folks are fighting for pieces of the pie

August 22, 2003

3 Min Read
Nortel's Korean Deployment: How Big?

Nortel Networks Corp. (NYSE/Toronto: NT) this week announced a contract win with KT Corp., formerly Korea Telecom. Terms of the deal were undisclosed, though Nortel says it's the first long-haul agreement the vendor's struck with the carrier (see Nortel Builds Korean DWDM).

It's certainly not the first job Nortel's done for KT. Nortel's been supplying gear to the carrier, Korea's largest, for years. In November 2000, the vendor announced $105 million in financing from KT for a DSL rollout involving Shasta gear. In June 2001, it boasted the sale of OPTera Metro 5200 platforms to KT to reduce access bottlenecks in Seoul. In December 2001, it announced the sale of the OPTera Connect DX switch for a new 10-Gbit/s optical backbone.

In the latest deal, Nortel is supplying OPTera Long Haul 1600 systems for DWDM submarine links with Raman amplification in place of more costly repeaters. KT has installed the links between a couple of Korea's mainland cities and Cheju Island, which comprises 1,825 square kilometers off the country's southwest coast. Nortel won't specify the application, but one of the point-to-point connections spans 351 km and the other, 513 km.

With so little information, it's tough to determine the real value of this agreement. But one thing is clear: For telecom vendors, Korea is like Hollywood's Oscars. It's important to be there. Indeed, only not being there seems notable.

Nortel's got a ton of competition at KT alone. Lucent Technologies Inc. (NYSE: LU) announced last month that it's set to deliver WaveStar OLS 1.6T systems to KT for Internet links in Seoul and two other cities by the end of August (see Lucent Powers KT Network ). In 2002, it won a KT job for 25 WaveStar TDM 10G systems to fuel long-distance services in four provinces.

A slew of other vendors, including Ciena Corp. (Nasdaq: CIEN) and Riverstone Networks Inc. (Nasdaq: RSTNE), also count KT as a customer. Indeed, at one point in 2002, Riverstone made 10 percent of its revenues from Korean contracts, many of them from KT (see Riverstone Wins in Korea -- Again). How much this reliance subsequently helped the vendor isn't clear, however (see Riverstone Restates, Stock Falls, Riverstone Faces Nasdaq Delisting, and Riverstone Readies Restatement).

It's easy to see KT's attraction. In a survey last year, the Telecommunications Industry Association (TIA) found that Korea led the world in broadband access deployments (see Broadband: Will It Bust a Move? ). KT is the largest carrier in Korea, privatized in May 2002. It is a key player in the Asia/Pacific region, offering opportunities in areas where others are holding back. As Nortel says in a prepared statement to Light Reading: "While the Optical Long Haul market is still a tough space, there are opportunities out there in which we are seeing success, specifically in the APAC region."

As proven in the case of Riverstone, the Asia/Pac market in general is unpredictable, with pricing and product selection peculiarities that can stymie the largest vendors. But not being there is worse. At least a presence on the peninsula guarantees that companies like Nortel will be ready to take the attractive opportunities as they crop up.

— Mary Jander, Senior Editor, Light Reading

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