Verizon RFPs: More Fizzle Than Sizzle
The RBOC has reportedly split a much-coveted contract for next-generation Sonet equipment among three of its existing suppliers, putting a damper on what some observers were hoping would be a dramatic win for one or two of them.
Verizon's not confirming it, but sources say the RBOC has awarded a three-year contract worth about $750 million jointly to Fujitsu Ltd. (KLS: FUJI.KL), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. (NYSE/Toronto: NT).
Deployment probably won't start until 2003, sources say, and it's likely the agreement has an option to extend from three to five years.
"Verizon's pretty much made it clear it's not buying anything new this year unless it has to," says Sam Greenholtz, senior analyst at Communications Industry Researchers Inc. "And they're not going to deploy next-gen Sonet until they can do it throughout the network."
It's not known how Verizon will split the equipment it eventually buys among the chosen trio, or whether it represents win, lose, or status quo for the selectees. "All three have existing run-rate procurement arrangements with Verizon," notes George Notter of Deutsche Banc Alex Brown LLC. "It could even be negative to one or more of them, representing less business than they had before. It's hard to tell."
Some say Nortel, as a longtime supplier to the areas that were formerly served by GTE prior to its merger with Verizon, will likely continue to provide gear for the southwestern and midwestern areas of the network. Lucent and Fujitsu have been supplying the old Bell Atlantic and Nynex areas in the East and will probably continue to do so.
The vendors won't clarify any of this. At press time, none of them would comment on the rumored award, although all three were previously identified as finalists in the next-gen Sonet contest.
Originally, RFP-watchers hoped the deal would be a bit more dramatic in its impact (see SBC, Verizon Mull Metro Buys and Capex Cuts: How Low Can They Go?). But the lackluster outcome clearly signals that with the market in turmoil, carriers are playing it safe, sticking with suppliers they know, rather than moving to ones they haven't dealt with before.
Analysts say the Verizon developments -- and the likely delay in actual deployment -- indicate that RFPs should not be counted on as signs of solid market activity. It's a warning that's been sounded about other RBOC bids, such as those emerging at BellSouth Corp. (NYSE: BLS) (see BellSouth to the Rescue?).
"I don't think any of the RFPs out there are odds-on bets to be executed even if there's an award," says Tom Nolle, president of the CIMI Group consultancy. He says regulatory issues as well as the market downturn could be playing into Verizon's caution.
"You're chasing ghosts," says Frank Dzubeck, president of Communications Network Architects. "Winning an award in 2002 does not mean revenue." Lots of RFPs and RFIs (requests for information) are out for all carriers, he says, and they won't mean anything until the contract's not only signed but implemented.
— Mary Jander, Senior Editor, Light Reading