AlcaLu Lands 'Top 3' 4G Deal at China Telecom

Alcatel-Lucent has landed a major 4G contract with China Telecom that will make it one of the operator's top three suppliers of the high-speed mobile broadband access technology. (See Alcatel-Lucent Lands 4G Deal at China Telecom.)

The contract win follows the government's recent award of licenses to use FDD LTE technology and comes several weeks after rival Nokia Networks claimed to have become China Telecom Corp. Ltd. (NYSE: CHA)'s biggest non-Chinese 4G vendor on signing its own FDD LTE deal with the operator. (See Nokia Sees Off Non-Chinese Rivals for China Telecom 4G Work and China Issues LTE FDD Licenses .)

The implication is that Alcatel-Lucent (NYSE: ALU) is third in the 4G pecking order, with Huawei Technologies Co. Ltd. -- China's leading supplier of LTE equipment -- likely to have scooped the largest share of the business.

In its statement, Alcatel-Lucent said it would deploy LTE access networks for China Telecom in 40 cities across 12 provinces, including Shanghai, Jiangsu, Shandong, Zhejiang, Hunan, Hubei, Guangxi, Fujian, Jiangxi, Shaanxi, Inner Mongolia and Liaoning.

The Paris-headquartered supplier will roll out its 9926 eNodeB radio access network technology and related services during the first half of this year.

Announcing its deal with China Telecom during this year's Mobile World Congress, Nokia did not indicate which geographical areas its agreement would cover.

Besides its Flexi Multiradio 10 Base Station and the NetAct-branded network management system, Nokia is supplying a range of professional services to China Telecom, covering network planning and implementation, network implementation and systems integration as well as "hardware, software and network competence development services."

Neither Alcatel-Lucent nor Nokia has revealed financial details of their 4G deals with China Telecom, although the geographical information provided by the former suggests the contracts carry substantial value, covering some of China's biggest cities.

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In January, China Telecom was reported by China's C114.net to have chosen five vendors for its FDD LTE rollout -- those players being Alcatel-Lucent, Ericsson AB (Nasdaq: ERIC), Huawei Technologies, Nokia and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) -- but Alcatel-Lucent and Nokia remain the only ones to have flagged contract wins. (See China Telecom Names Five LTE FDD Suppliers.)

Prior to the recent announcements, both players had been working with China Telecom on the deployment of a trial 4G network covering 56 cities.

Like China Unicom Ltd. (NYSE: CHU), its bigger rival, China Telecom received a license to use TDD LTE technology in December 2013 but appeared to hold off on a widespread deployment of 4G services, preferring to wait until it had received an FDD LTE license.

This year, it plans to spend as much as 63 billion Chinese yuan renminbi (US$10.15 billion) on its mobile network, up from just RMB29.6 billion ($4.77 billion) in 2014, and has said most of the investment will go on its 4G rollout. (See China Mobile Profits Fall on 4G Spending.)

While FDD technology uses two spectrum allocations -- one for the uplink and another for the downlink -- TDD runs everything over the same frequency slot.

Although most of the world's 4G operators are using FDD technology, China Mobile Ltd. (NYSE: CHL) has built a commanding lead over China Unicom and China Telecom by relying on the TDD variant and was serving as many as 90 million 4G customers by the end of 2014.

China Unicom had 149 million "mobile broadband" customers on its books on the same date, with China Telecom then serving 119 million subscribers with 3G and 4G technology. In each case, 4G subscriptions were likely to account for a relatively small percentage of the total.

China Telecom's spending plans augur well for Alcatel-Lucent and Nokia Networks, both of which cited a year-on-year decline in Chinese business in the fourth (October-to-December) quarter of 2014.

Alcatel-Lucent held a "temporary slowdown in China" chiefly responsible for a 1% drop in revenues from the Asia-Pacific region, while Nokia blamed a 3% fall in Chinese sales on a slowdown in the TDD LTE market.

The Asia-Pacific generated about a fifth of Alcatel-Lucent's revenues in the fourth quarter, while China accounted for roughly 12% of Nokia's.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

Steve Saunders 3/30/2015 | 11:27:01 AM
happy days? Seems like a pretty major deal 
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