Orange Shackled by FT
Nokia Corp. (NYSE: NOK) is a major supplier across the group but is fortunate in that most of its exposure is in the U.K. (sole supplier), which is not being delayed, and in France, where it shares the contract with Alcatel SA (NYSE: ALA; Paris: CGEP:PA). The number of UMTS deals it has in total means the affect of the French delay will be significantly cushioned. Analysts at Lehman Brothers who follow Nokia see "little negative impact" on the Finnish firm. Alcatel's situation is a little different. It is a 3G minnow, though trying hard, as we saw in the latest Wireless Oracle (see Siemens One to Watch in UMTS, Alcatel Gets Real in Europe, and Alcatel Centers on Cost). The impact on the French vendor as a whole is minimal, as the company's revenues are so diversified in terms of product range and geography. And even though France is a major market (France Telecom's plans will affect Alcatel's fixed product revenues, too), the company's share price dipped but has recovered to roughly the same level since the announcement (see Alcatel's stock chart here on Unstrung). What could be of concern is the impact on its wireless infrastructure business, which is small, at $3 billion a year at present, but growing and profitable. Most of that business is from small but healthy GSM contracts, but the firm wants more action in the UMTS world. Alcatel's 3G customer list, however, is short. It has signed deals with Orange in France and Sweden, with France's number two operator SFR, and with Portugal Telecom TMN. And that's it. "The biggest risk to Alcatel in our view remains Orange's Swedish business," say Lehman's wireless analysts. "Alcatel has 100 percent of this contract, which represents one of its few WCDMA contract wins. The postponement of this reduces Alcatel's opportunity to demonstrate its WCDMA capability. If cancelled, it would raise further questions over Alcatel's ability to sustain its position in the mobile infrastructure space." While that final assessment may be harsh, this week's announcements by France Telecom could turn out to have the greatest impact on the 3G aspirations of its fellow French firm. — Ray Le Maistre, European Editor, Unstrung
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