NSN: Is Verizon on the Horizon?
Verizon is the hottest LTE game in town. Earlier this year the operator passed over NSN and incumbent supplier Nortel for radio access equipment and awarded the strategically important first contracts to Alcatel-Lucent (NYSE: ALU) and Ericsson AB (Nasdaq: ERIC). (See MWC 2009: Verizon Picks LTE Vendors and Nortel's LTE Brain Drain.)
Now with the addition of Nortel's CDMA business and LTE R&D assets, NSN not only boosts its position in the North American wireless infrastructure market -- from sixth place with a 5.5 percent market share, to second place with a 30.4 percent share after the acquisition -- but also hopes to get another shot at Verizon's LTE network with Nortel's incumbent radio access supplier position to build on. (See NSN Picks at Nortel's Mobile Bones and NSN Misses Nortel's Key APAC Assets.)
But how NSN might achieve that is a wide open question.
"Verizon keeps open the possibility of bringing in another supplier," said Simon Bereford-Wylie, Nokia Siemens's CEO, on a conference call today with media and analysts about Nortel deal. "We're right at the beginning of the LTE market. I would not judge the market... on the very few deals that have been announced in the last few months."
Nokia Siemens isn't completely excluded from Verizon's LTE network -- it is one of the IP Multimedia Subsystem (IMS) network suppliers, along with Alcatel-Lucent. But the vendor wants to be in the radio access network too.
According to Heavy Reading senior analyst Gabriel Brown, it's not likely that NSN will show up in Verizon’s LTE radio access network straight away.
“[The Nortel acquisition] must help their chances, but not necessarily immediately,” he says.
A key question from a technology point of view, says Brown, is how will Nortel’s LTE assets help Nokia Siemens?
“It’s very well to say we have all these engineers with LTE capability, but how will they make use of it?” he asks. “It’s unrealistic to run two different LTE platforms –- one for CDMA-to-LTE migration and its own Flexi BTS platform -- so they will have to converge, but how they plan to do this is an open question.
“NSN’s Flexi BTS platform," adds Brown, "is very software-focused relative to competitors, and that might lead to a faster development cycle that will allow it to incorporate Nortel technology more easily than if it had hardware-defined baseband cards.”
Indeed, Beresford-Wylie said on the call today that by the end of this year, NSN would have 100,000 base stations installed "just waiting for a software upgrade to LTE."
He also stressed today that Nortel's LTE assets were complementary to his company's, noting that "unlike the merger of Nokia and Siemens, this deal is not predicated on the need to find synergies."
Meanwhile, Verizon emerges from this deal as a big beneficiary because the combination of Nortel and NSN’s LTE assets introduces a strong supplier that will support the installed base of CDMA and be a candidate for its ambitious next-generation mobile broadband project.
“Verizon is king maker,” says Heavy Reading's Brown. “The NSN/Nortel deal is good for them.”
— Michelle Donegan, European Editor, Unstrung