Nortel Adds EV-DO Scalp

As if to confirm that wireless is helping Nortel Networks Corp. (NYSE/Toronto: NT) scramble back on its feet (see Nortel’s Quarter Perking Up?), the Canadian vendor has just announced its second scalp in the nascent CDMA2000 1xEV-DO market (see Nortel Wins Indonesia EV-DO). This latest contract award will help Nortel retain its reputation as one of the probable survivors in the CDMA infrastructure market (see Nortel Wins Indonesia EV-DO). That Nortel will be a top-three CDMA player is one of the conclusions of the latest Wireless Oracle research report, available on a monthly subscription basis from Unstrung, entitled "The 'X' Factor: Competitive Positioning in the CDMA Infrastructure Market." The report reveals which CDMA equipment suppliers are best prepared to compete for business in the emerging "worldwide CDMA belt." The author, research analyst Gabriel Brown, states in the report that Nortel "is once again profitable at the operating level and has done a relatively good job of leveraging its expertise in packet core, switching, and IP-based media and application servers across its many product lines." Brown finds the Canadian company to be behind only Lucent Technologies Inc. (NYSE: LU) in the CDMA network infrastructure market, as measured by the value of contracts won globally. Nortel has 20 percent of the total CDMA market during the past four quarters (4Q01-3Q02), and 26 percent of announced CDMA2000 contracts, though that figure may have changed ever so slightly following the announcement of this latest contract in Indonesia. However, no financial details were made public regarding the contract with PT Wireless Indonesia (WIN), and Nortel could not respond to our questions before we went to press. To date, Nortel's only other EV-DO deal has been with Brazilian operator Vesper. In addition, WIN has also awarded an EV-DO contract to startup Airvana Inc., another company that features in Brown's report. Airvana is to "supply WIN with all-IP end-to-end 1xEV-DO Radio Access Network infrastructure, including IP-RN 8000 radio nodes, the IP-RNC 8500 radio network controller, and the AirVista Web-Based Management System for its CDMA2000 1xEV-DO network in Jakarta, Indonesia," according to an Airvana press release (see Airvana WINs in Indonesia). As Airvana has a separate ongoing partnership with Nortel for the startup to supply the Canadian firm with EV-DO channel cards for Nortel's CDMA2000 basestations, we can only assume that Airvana is getting a piece of Nortel's action too. Brown says Samsung Electronics Co. Ltd. (Korea: SEC) looks strong in the early stages of the EV-DO market, as it can provide devices as well as infrastructure. "Being able to supply the handsets too is a great advantage at this early stage, and that's a strength shared by another Korean vendor, LG Electronics Inc.," the report says. The more mature wireless data market in Korea has helped these vendors gain an edge on their competitors, and this will likely result in Samsung being among the vendors winning business from Japanese operator KDDI Corp. as it builds out its EV-DO capabilities to start trials early in 2003, with a view to launching service in October. Brown believes Samsung could be the principal equipment supplier. "Japan is a very interesting and exciting territory, as CDMA2000 1xEV-DO, at KDDI, will be going head-to-head with WCDMA from NTT DoCoMo Inc. (NYSE: DCM) and J-Phone Co. Ltd. KDDI's EV-DO upgrade is in anticipation of the service competition the carrier will face from its rivals having wiped the floor with them following the launch of its 1xRTT network," says Brown (see DoCoMo's Purse Stays Shut ). J-Phone launched its WCDMA network today, though with only a limited range of services that does not include email or picture messaging (see J-Phone Heads for 3G). While Samsung is on its uppers, according to Brown, Motorola Inc. (NYSE: MOT) appears to have hit a bit of a wall. "It doesn't seem to have a lot of momentum, especially in terms of order, but it is further down the restructuring line than some of its main competitors, especially Lucent, and that might work to its advantage." Overall, the CDMA infrastructure market "might be smaller than the GSM/UMTS sector, but it's growing faster, and it's exciting and thriving. I think it's going to be a fierce battle between the two technologies in the emerging markets such as China and India, and GSM might just have the advantage because of its greater economies of scale in terms of the network kit and handsets. And while CDMA uptake is increasing fast in the likes of China and Indonesia, the focus in these countries is very much on low-cost equipment and devices, which is not so great for the vendors' margins," concludes Brown. — Ray Le Maistre, European Editor, Unstrung The latest Wireless Oracle report, "The 'X' Factor: Competitive Positioning in the CDMA Infrastructure Market," is available for $400. An annual subscription to the Wireless Oracle is ordinarily $1,250 but is currently available at the special introductory price of $899. For more information, including subscription information and research examples, visit www.wireless-oracle.com.

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