Comment (3)Alcatel-Lucent has struck "frame agreements" with two of China's major operators for a range of fixed, mobile, IP, optical and carrier cloud/virtualization technologies that are collectively valued at up to 8.12 billion Chinese yuan renminbi (US$1.3 billion).
The deals, with China Mobile Ltd. (NYSE: CHL) and China Unicom Ltd. (NYSE: CHU), cover just one year (unusually short) and will help the operators meet their rollout targets under the Broadband China plan, under which ubiquitous broadband access coverage should be achieved in rural areas (a minimum of 12 Mbit/s) as well as urban areas (a minimum of 50 Mbit/s but with gigabit broadband available in major cities).
The agreement with China Mobile is worth up to RMB4.53 billion ($730 million) while the deal with China Unicom is valued at up to RMB3.59 billion ($579 million). Frame agreements include details of pricing and terms and conditions and enable operators to source what they need up to a stated limit, so actual procurement values over the year may fall short of the headline numbers.
The deals are significant not only for the potential value to a company that is rebuilding its finances ahead of its impending sale to Nokia Corp. (NYSE: NOK), but also because they provide Tier 1 customer references for a broad range of AlcaLu technologies, particularly the vendor's NFV-related technology and the SDN capabilities developed by its Nuage Networks unit. (See Nokia's Suri Defends AlcaLu Deal Against Critics and Nokia & Alcatel-Lucent: What's Going On?)
The vendor wouldn't say if the NFV deals with either operator included the CloudBand NFV infrastructure (NFVi) that has proven popular with a number of operators.
Also included in the frame agreements are FDD and TDD 4G LTE access infrastructure, GPON and EPON fiber broadband access capabilities on the ISAM platform, IP and optical transport equipment and the service provider IT systems needed to support a VoLTE rollout.
The vendor has previously announced success with the country's other major operator, China Telecom. (See AlcaLu Lands 'Top 3' 4G Deal at China Telecom, China Telecom Taps Nuage SDN for Public Clouds and Major Chinese Operators Choose Alcatel IP Router.)
The competition to supply broadband and cloud technology to China's major operators is intense, however, with local suppliers Huawei and ZTE often commanding the lion's share of the engagements. That competition squeezes margins, so there's a chance that such high-volume deals in China may put a brake on AlcaLu's ambitions to grow its gross margins. The vendor reported gross margins of 34.6% for the first quarter of this year. (See Alcatel-Lucent Outperforms Rivals in Q1.)
— Ray Le Maistre, 
, Editor-in-Chief, Light Reading
