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Top Ten 2004 Network Deals

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LR Mobile News Analysis
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12/30/2004
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2004 proved to be a turnaround year for the wireless industry following the turbulence of recent times. As confidence returned, carriers could at last be seen putting pen to paper and finalizing network upgrade contracts in an effort to secure future customer revenue.

Listed below is Unstrung’s pick of the bunch. This is not designed to be a breakdown of the biggest deals in terms of revenue, but instead aims to highlight those contracts that have helped shape the wireless industry this year.

10: Kodiak Snaps Up Orange

Californian startup Kodiak Networks kicked off the new year in style, casually sweeping aside big-name cellular network vendors to secure a high-profile deal with Orange Communications SA for the European launch of its Push-to-Talk (PTT) services (see Orange Pushes Startup).

The win was Kodiak’s first ever customer announcement, beating off more established PTT equipment rivals Ericsson AB (Nasdaq: ERICY), Motorola Inc. (NYSE: MOT), and Nokia Corp. (NYSE: NOK). Orange has a worldwide customer base of approximately 50 million.

Further PTT deals soon followed for the market newcomer (see Kodiak Pushes in Kentucky, Kodiak Pushes Bluegrass Cellular, and Cellcom Deploys Kodiak).

9: P-Cube Exits on a High Note

In May Unstrung revealed that data services platform startup P-Cube had struck a high-profile win at BellSouth Corp.'s (NYSE: BLS) Latin American subsidiaries (see P-Cube Salsas With BellSouth).

The contract not only gave the startup a serious edge over rivals Megisto Systems Inc. and ProQuent Systems Corp., but also marked the last time P-Cube hit the headlines as an independent business.

Clearly impressed with the startup’s three major wireless carrier deals, Cisco Systems Inc. (Nasdaq: CSCO) later swallowed the newcomer in a $200 million acquisition (see Cisco Plucks P-Cube for $200M).

8: Ericsson Builds CDMA Share

Not one deal in particular, but rather a succession of contract wins have seen Swedish vendor Ericsson creep up on its 15 percent target share of the CDMA (Code Division Multiple Access) infrastructure market (see Ericsson Nears CDMA Target and Ericsson Eats Into CDMA).

Traditionally associated with the GSM (Global System for Mobile communications) and Wideband-CDMA markets, the vendor has made public its intention to battle Lucent Technologies Inc. (NYSE: LU), Motorola, and Nortel Networks Ltd. (NYSE/Toronto: NT) in the rival CDMA business. Although such ambitions were initially dismissed by analysts, recent CDMA wins suggests the company is on track to achieve its goal (see Ericsson Wins Extra China Deal, Ericsson Expands TTSL and Ericsson Doubles Up in China).

7) Indian Deal Curries Favor

Nokia and Nortel were the recipients of an $862 million deal at Indian GSM carrier Bharat Sanchar Nigam Ltd. (BSNL) in August (see BSNL Splits GSM Deal).

Not only was the contract of serious financial value, the deal also strengthened India’s standing as one of the fastest growing wireless markets. Lehman Brothers expects the Indian region to reach 50 million subscribers by the end of this year and 100 million by 2006.

Are you listening, vendors?

6: HSDPA Kicks Into Europe

Twelve months ago HSDPA (High-Speed Downlink Packet Access) had been written off by many as an unnecessary technology. A software upgrade to W-CDMA networks intended to crank up data rates to a theoretical 10 Mbit/s, it seemed unlikely that carriers would deploy the technology in the near future.

Then came a joint announcement from mmO2 plc and Lucent in December, stating that a small commercial HSDPA deployment was to be set up on the Isle of Man, a tiny island off the west coast of Britain. The really big news, however, was that the carrier plans to follow this project with larger launches in Ireland, Germany, and the U.K. (see MMO2 Preps for HSDPA).

No decision on a network supplier for these larger launches has yet been announced, but Lucent, Nokia, and Nortel are the clear favorites.

5: Lucent Finally Wins Big W-CDMA Deal

Until December this year Lucent Technologies was a laggard in the 3G W-CDMA equipment market. With only two piddly European contracts under its belt, the company was widely criticized for a lack of major wins, a huge contrast to its CDMA market dominance and past success in the GSM space.

Then came the massive Cingular Wireless deal, estimated to be “30-35%” of a planned $1.5 billion spend over the next two years (see Cingular Confirms 3G Trio). The win looks set to legitimize Lucent’s W-CDMA business, and is rumored to be the catalyst for a future $500 million network consolidation services deal with the carrier (see Lucent Linked to Cingular Deal).

4: Huawei Steals 3G March

Earlier this month Chinese network vendor Huawei Technologies Co. Ltd. gave its Western rivals major cause for concern, announcing a surprise 3G win at Dutch carrier Telfort B.V. (see Huawei Wins in West). The deal was a massive achievement in light of Ericsson’s status as Telfort’s current GSM network supplier.

Rumored to be worth between €200 million (US$265 million) and €400 million ($530 million), the deal marks the first time a Chinese vendor has won a W-CDMA deal in Europe. Expect more to follow, especially with the likes of UTStarcom Inc. (Nasdaq: UTSI) and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) also making headway in the region (see UTStarcom Makes Euro Headway).

3: EV-DO Hits Europe

Twelve months ago it was difficult to imagine any non GSM-based technology gaining attention in Europe. How things change.

Carrier interest in the European rollout of CDMA450 is now at an all-time high, with Germany, Portugal, Norway, Sweden, and a bevy of Eastern European countries all expressing commitment to the technology (see CDMA 450 Seeps Into Europe).

Things really hit a peak in August with Czech carrier Eurotel Praha spol. s.r.o.’s launch of a third-generation CDMA2000 1x EV-DO (Evolution, Data Only) network using the 450MHz spectrum band (see EV-DO Hits Europe). The souped-up network offers data speeds of between 300 and 500 kbit/s. As well as being Europe’s first EV-DO launch, the network also marks the first time EV-DO services have been available anywhere in the 450MHz band.

Nortel was the chosen network supplier (see Eurotel Picks Nortel).

2: Sprint EV-DOes It

Sprint Corp. (NYSE: FON) in June announced it was to launch a $1 billion EV-DO network, music to the ears of network suppliers Lucent, Motorola, and Nortel (see Sprint Confirms EV-DO Network and Sprint Invests in EV-DO).

When the carrier later announced its $35 billion mega merger deal with Nextel Communications Inc. (Nasdaq: NXTL), it became clear that Nextel’s 15.3 million subscribers would also be moved across to Sprint’s EV-DO network (see Deal Solves Nextel 3G Dilemma).

The move was a major blow to infrastructure startup Flarion Technologies, which was hopeful of securing its first big-name commercial deal, potentially worth up to $3 billion. Nextel had previously revealed it was mulling over two standards as its own long-term technology of choice: Flarion's proprietary Flash Orthogonal Frequency Division Multiplexing (OFDM) and industry standard CDMA 1xEV-DO (see Deal Solves Nextel 3G Dilemma and Nextel Eyes $1B Network Saving).

1: Lucent Scores $5 Billion Payday

U.S. carriers have certainly been good to Lucent this year. Back in July the vendor secured a monster deal worth “at least $5 billion” with Verizon Wireless for the upgrade of the carrier’s national voice and data network (see Lucent Scores $5B Verizon Deal).

The deal included the $525 million contract Verizon awarded to Lucent in March for the deployment of its EV-DO network (see Verizon Repeats on 3G).

Of course, a $5 billion payday is massive news for any vendor, but analysts argued the win was doubly so for Lucent.

“Compared to the first $5 billion contract signed in March 2001, Lucent’s total revenues have declined by approximately two thirds, and thus this contract is much more meaningful,” wrote Lehman Brothers’ Steve Levy.

“This contract looks to cover a more comprehensive set of products and services than the original contract did… Given the lowering of all carrier capex spending, and the likelihood that Verizon could spend the full amount in much less than the six years, and the use of the term ‘at least,’ we see this as a big positive for Lucent.”

— Justin Springham, Senior Editor, Europe, Unstrung

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