Wireless Confusion

There were a flurry of reports yesterday that Alcatel was talking to Nortel about buying some or all of its wireless assets for as much as $1.9-billion. The question is exactly what may be on the table – a question the usually-dependable Scott Moritiz of the The Street.com wasn’t able to pin down. Is it Nortel’s GSM/UMTS business that has nowhere near the 20% market share demanded by CEO Mike Zafirovski? Or is it the CDMA business, which has more market share but plays in a market that appears to be passe? While there has been lots of speculation about the future of Nortel’s GSM business, Lucent could be interested in the CDMA division because it would bolster Lucent’s operations. Unless Nortel is ready to spill the beans during its second-quarter conference call tomorrow, we may be in the dark for awhile.

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6 Responses to “Wireless Confusion”

  1. Godzilla Says:

    it’s UMTS, specifically UTRAN

    Alcatel needs it badly for market share, and to replace its Fujitsu sourced UTRAN. It’s hard to make profit from a JV product, and when it comes right down to it, Nortel’s UTRAN is pretty darn good. Hence Alcatel would be widening its margins on the business they already own, mainly with Orange. On top, they would be getting Nortel’s other business (the other half of Orange France that Alcatel does not already have, some Vodafone properties, some others)

    For Nortel, the previous management would have angled for a JV rather than an outright sale. In fact, this has been an on and off topic with Alcatel for close to 5 years now.

    Getting rid of UMTS sort of puts into question Nortel’s GSM business. One of the strategic rationale for keeping GSM is that it gave critical business relationships to address UMTS. In truth, few Nortel GSM customers committed to use Nortel UMTS. If I were Nortel, I would want to get rid of GSM at the same time. But why would Alcatel want it?

  2. nortel Says:

    thanks for the insight.

  3. Razor Says:

    There is one reason I could imagine for Alatel also being interested in the GSM business. And that is GSM-R, the railway specific variant of GSM.

    Here, Nortel’s market share is ~60% worldwide! Believe it or not. Way beyond the 20% target share. And likely the only Nortel product with THIS market share. In fact, Nortel is the GSM-R market leader, with only SIEMENS being a real competitor. Huawei tries to get into this market as well, but so far no success for them.

    With Alcatel being closely related to Alsthom, and Alsthom also offering rail track signalling, controlling and other rail equipment, I wonder if Alcatel is not willing to obtain the GSM-R product as well.

    The GSM-R business is still growing. European countries mostly have jumped on the GSM-R train replacing their still analogue-transmission based rail-operator internal communication equipment.
    Other countries outside Europe look more into a total renewal of their rail signalling, controlling and communication equipement.
    With Nortel’s GSM-R product line, Alcatel/Althom could complete their rail portfolio for these markets. And get 60% of the existing GSM-R market right away.

  4. Ricardo Says:

    How do you figure that CDMA is passé? CDMA is the only thing keeping Nortel afloat at the moment, and with Verizon and Sprint still forking out the cash it will continue to be a big money maker.

  5. nortel Says:

    perhaps the wrong use of words but GSM does seem to be ruling the day, given what vivo is doing in brazil and what may happen in china.

  6. anon Says:

    It’s hard to imagine that with the price being bandied about — $1.5 billion — any deal would include Nortel’s CDMA business that generates most of its 10% market share in mobile networks. Alcatel-Lucent was a $13.4 billion deal, and those two companies combined hold just 6% of the market.

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