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C&W Moves Ahead With NGN

Light Reading
News Analysis
Light Reading
5/26/2005

It’s been a busy day for Cable & Wireless plc (NYSE: CWP), which named Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) as the first supplier for its next-generation network (NGN) migration, announced a separate access network deal with Marconi Corp. plc (Nasdaq: MRCIY; London: MONI), and posted its first annual profit in three years.

The framework contract with Tellabs marks the first step in the rollout of the U.K. operator’s £190 million all-IP network strategy announced last month (see C&W Plans Its Own 21CN). Like an increasing number of carriers, is investing big over the next few years to shift its legacy networks to a single IP platform.

It will use Tellabs’s 8800 multiservice routers, which provide metro Ethernet capabilities coupled with the ability to aggregate lots of different types of legacy traffic (see C&W Picks Tellabs). That will allow it to support customers using legacy services while transferring them to the new network and signing up customers for the next-gen services.

Pat Dolan, VP of Europe at Tellabs, says the 8800 platform, which came as part of its Vivace acquisition, has proved very popular in Europe as carriers expand their Ethernet service capabilities. “We have a number of opportunities that are set to close” in addition to C&W, says Dolan.

He says the sales of Tellabs’s gear are going to become much more significant in the next 12 to 18 months, and that’s in the face of stiff competition. Tellabs comes up against Alcatel (NYSE: ALA; Paris: CGEP:PA), with its Timetra platform, most frequently, but is also competing against Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR), both directly and through its partnership with Siemens Communications Group.

And what about Huawei Technologies Co. Ltd.? “We’ve demonstrated we can win business against them and still make money, but they’re definitely visible,” says Dolan.

Cable & Wireless is being tight-lipped on who else is in line for an NGN deal, but sources say it would be extraordinary if Cisco, which has been working closely with the carrier, isn’t part of the IP core. The tender for that has been sent out, and the company expects to announce the winner before the fall. Other tenders, including optical network and VOIP infrastructure, are yet to be issued.

It has, however, signed a five-year agreement with Marconi for a multiservice provisioning platform (MSPP), which isn’t specifically part of the NGN project, but will support its migration from legacy SDH gear (see Marconi Wins C&W Deal).

Marconi could do with some good news after its surprise loss to Huawei when BT Group plc (NYSE: BT; London: BTA) announced its NGN suppliers last month (see BT Shuns Marconi for 21CN, Marconi in Turmoil, and Marconi CEO Takes Stock). Since it’s a frame agreement, there isn’t a guaranteed value to the deal -- but Marconi spokesman Stephen Hobson says it does give the vendor a much-needed boost.

“We see this as a fantastic win because it’s our next generation of optical products,” he says. “It shows a lot of confidence in Marconi that they’re willing to sign a firm commitment for the next five years.”

Investors seem to agree, as Marconi’s shares closed up 6 pence (2.03%) to £3.01 today on the London Stock Exchange.

For Cable & Wireless, the deals have an added benefit. “This is part of our drive to save money in the U.K.,” says spokesman David Thane. “Not only is it implementing the next phase of our network build, but it’s going to save us money as well.”

It was saving money that helped boost the operator’s results in the past financial year (see C&W Reports FY05 Results). Although revenues fell from £3.67 billion ($6.72 billion) to £3.22 billion ($5.89 billion) in fiscal 2005, thanks to excess capacity and pricing pressure, Cable & Wireless reported a profit of £302 million ($553.32 million), compared with a loss of £237 million ($434.23 million) the year before. It expects the NGN rollout, which should be completed by 2008, will bring a further £22 million in cost savings.

C&W's shares were up by $0.28 (3.94%) to $7.38 in midday trading on the NYSE.

— Nicole Willing, Reporter, Light Reading

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