Tellabs Sneaks in a Cingular Win

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) has notched up a contract win with Cingular Wireless that the vendor hopes will presage a wave of business in wireless backhaul.

Cingular is buying a combination of Tellabs 5500 digital cross-connects and Tellabs 8800 routers, according to Tellabs officials. The win was not formally announced but did appear in Tellabs's internal newsletter, complete with big glossy figures of a Cingular exec, so it's not exactly a secret.

All told, Cingular is using 130 of the 5500s -- most of which have been in its network for some time -- and 40 of the 8800s.

Cingular is converging its wireless backhaul networks. That means combining three types of traffic: old 2G stuff, relatively recent 3G traffic based on ATM, and up-and-coming 3G traffic running on IP.

"From a RAN [radio access network] standpoint, most of the deployments are ATM-based," says Michael O'Malley, Tellabs group manager of portfolio marketing. "IP is starting for some carriers, but there's no particular timeframe" for an industrywide crossover.

Tellabs is hoping the Cingular win marks the start of a trend. Other carriers will do the same juggling act among three traffic types, and as those networks get planned Tellabs intends to helpfully point out that both the 8800 and the 5500 are equipped to deal with multiservice environments.

Analyst Simon Leopold of Morgan Keegan & Company Inc. notes this convergence template applies primarily to GSM-based networks upgrading to 3G -- Cingular and T-Mobile International AG being better candidates than Sprint Wireless (NYSE: PCS) or Verizon Wireless .

Still, there's a nice chunk of business to be had. In June, Leopold estimated the addressable market for Cingular's kind of expansion to be $80 million to $210 million in the United States and $240 million to $630 million worldwide.

The Cingular deal itself would be worth $30 million to $60 million, Leopold estimates.

Of course, Tellabs doesn't have the wireless backhaul market to itself. Alcatel (NYSE: ALA; Paris: CGEP:PA) is among the major contenders, and wireless backhaul is among the factors that handed that company the optical networking market share lead in the second quarter. (See Alcatel Tops Optical.)

— Craig Matsumoto, Senior Editor, Light Reading

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