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Euro Carrier Turfs Out Huawei

Bulgarian mobile operator Vivatel will rip out all its installed Huawei Technologies Co. Ltd. GSM base station subsystem equipment and replace it with new gear from Alcatel-Lucent (NYSE: ALU) as part of a €32 million (US$50 million) network upgrade, Unstrung has learned. (See Vivatel Picks AlcaLu for GSM.)

Vivatel, which is the mobile operator subsidiary of national operator Bulgarian Telecommunications Co. plc , issued a tender at the beginning of this year to replace its Huawei GSM base station subsystems, according to an industry source.

Alcatel-Lucent announced yesterday that it would replace half of Vivatel's current GSM base stations as part of a deal to supply GSM and EDGE equipment as well as support services to the Bulgarian operator.

A spokeswoman for BTC confirmed to Unstrung that the GSM equipment that Alcatel-Lucent will replace belongs to Huawei.

"We chose new GSM equipment to upgrade the network, provide better coverage, and to provide a better service to the customer," says the BTC spokeswoman. "Technology is very important, but I'm not authorized to say why we chose Alcatel-Lucent."

However, the Chinese vendor will still have a presence in Vivatel's network because it will continue to provide the GSM core equipment, according to a spokeswoman for Huawei.

The news will be a blow to Huawei, which has made inroads into key European Tier 1 operators, including Vodafone Group plc (NYSE: VOD), T-Mobile International AG , and Telecom Italia Mobile SpA (Milan: TIM). (See O2 Germany Picks Huawei, Huawei Plans Italian Centre, Huawei Reports 2007 Revenues of $12.5B, Heavy Reading Homes In on Huawei, Huawei's Core Euro Breakthrough, Huawei Wins Vodafone Deal, and Huawei Wins HSPA Contract.)

In a press statement, Vivatel CEO Bernard Moscheni said: “We are confident that relying on Alcatel-Lucent’s extensive experience in providing turnkey integrated and cost-effective mobile network solutions will enable us to meet the growing demand for mobile services in Bulgaria. In addition to their state of the art GSM/EDGE+ solutions, their local services capabilities are the most extensive that we have found, and this played a key role in our decision.”

While Alcatel-Lucent will supply half of Vivatel's GSM radio access network, Nokia Networks , which is the operator's current cellular infrastructure vendor, will supply the other half of the GSM radio network.

"Nokia Siemens Networks is working with Vivatel to help it meet its infrastructure rollout plans," says a Nokia Siemens spokesman. "Following the network expansion, Nokia Siemens Networks will be supplying approximately 50 percent of Vivatel's 2G infrastructure. In addition, NSN is a supplier of a complete 3G core and radio network to Vivatel and is working on an implementation of IMS and helping digitalize the rural radio network in Bulgaria with 2G."

The news that AlcaLu will replace Huawei sounds like the mobile network infrastructure version of a Man Bites Dog story, as usually it is the major, incumbent cellular equipment vendors that are forklifted out of networks and replaced by the likes of Huawei and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) (See O2 Germany Rips Out Nortel and ZTE Ousts NSN in Hong Kong .)

For Alcatel-Lucent, the deal adds to other recent GSM contract wins. In a call with analysts for AlcaLu's first-quarter results in April, CEO Pat Russo said the company's GSM business had "good, profitable growth due to a refreshed product portfolio."

The vendor introduced a new GSM platform in 2007 that comprises its Twin TRX radio transceiver, which doubles the base station capacity, and its ATCA-based BSC (base station controller). (See CDMA Hits AlcaLu's Wireless Biz, AlcaLu Posts Loss, Warns on Full Year, Alcatel-Lucent Gets $10M Contract, Africell Picks AlcaLu, and T-Mobile Upgrades Network.)

Vivatel, which has more than 1 million customers, is the third largest mobile operator in Bulgaria, boasting a market share of about 10 percent. It has 1,900 2G base stations in commercial operation and plans to have a total of 2,500 base stations deployed by the end of 2009, according to an industry source.

BTC is majority owned by U.S.-based investment firm AIG Investments . (See AIG Buys BTC Stake.)

— Michelle Donegan, European Editor, Unstrung

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