So Why Did Sprint Overlook Nortel?

In the wake of Sprint selecting Nokia rather than Nortel as the third supplier for its $2.5-billion to $3-billion WiMax contract, it’s interesting read a research report issued last week by TD Securities analyst Chris Umiastowski (before Sprint officially unveiled Nokia as its choice). Umiastowski said Nokia’s selection would be a “disappointment” for Nortel because Nortel has been promoting WiMax as a strategic priority and enjoyed a long relationship with Sprint as one of the carrier’s key CDMA suppliers.
“We would argue there are few WiMax customers where Nortel would be better positioned than with Sprint,” Umiastowski said. “If Sprint were to select Nokia as an infrastructure supplier, it does not necessarily man that Nortel would not be sued. However, it would probably mean that any involvement by Nortel in the project would be a lot less relevant than it could be. In our view, it would be a huge disappointment for Nortel if they do not win at some part of Sprint’s WiMax build”.
Umiastowski suggests Nortel may have been left out of the mix because unlike Samsung, Motorola and Nokia, Nortel does not make mobile handsets. “We are starting to wonder if we could be seeing a shift in how WiMax infrastructure equipment is selected, where the vendor must also supply the carrier with WiMax handsets,” he said.
“If that were the case, it could pose a big challenge for the likes of Nortel and Alcatel-Lucent and could possibly relegate them to Tier 2 status suppliers”. (Editor’s note: Couldn’t Nortel and Alcatel-Lucent simply sub-contract the WiMax handsets as part of a contract proposal? Do they really have to make WiMax handsets?)

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5 Responses to “So Why Did Sprint Overlook Nortel?”

  1. SC Says:

    Interesting that Nortel has a joint venture with LG which should presumably be able to spit out handsets. I wonder if that really has as much to do with things as people make out of it.
    Sprint also has done strange thing in the past with this sort of contract, changed them at the last minute, not followed through on them.

    Ultimately though, if WiMax does become a big selling technology there is always room for the networks to change their minds on who’s hardware/software they want.

  2. Lakvaol Says:

    Some comments:

    – it is just speculation so far on why Nokia was picked. There are plenty of rumors that do not involve handsets. Do not underestimate these rumors. The Pres of WIMAX at Sprint is an unpredictable character for one thing.
    – will Sprint be able to implement WIMAX while it is doing a “disastrous” job in its current businesses? The Sprint exec suite is experiencing changes. Will the current plan of being in the Consumer Electronics arena with WIMAX work? Will Wall Street finance this plan? Some real issues to ponder.

  3. darwin Says:

    frankly, it’s all about Sprint hedging its bets. They are already very dependent upon Nortel for the CDMA network. They have a natural need to diversify their supply base.

    Plus, I understand that Sprint has had a fair amount of financing from their WiMAX vendors. Nortel is obviously not in a position to contribute, except possibly with EDC. I could use some enlightening on the subject…

    The Sprint strategy seems to be to have a plan to use spectrum that would otherwise be reclaimed by the FCC, using a possibly next gen technology (wimax), with vendor financing. Looks like a reasonably cheap call option on the future.

    If it works out, Sprint looks prescient, and steals a march on VZ and T. Otherwise, they don’t lose very much

    In the meantime, Nortel maintains the power of the incumbency on the CDMA network, and doubtlessly proposes an upgrade path for CDMA that includes all the benefits of the brand new WiMAX network, but as an evolution instead of a forklift upgrade. I am not sure that in the 5-10 year horizon, Nortel has lost anything here.

    And because Nortel is close to Sprint, and if they come up with a workable product, then they can get back into Sprint WiMAX at a later date.

    Tactically it is a bummer for Nortel to have lost this first round. Strategically, it’s not so bad.

  4. The psychiatrist Says:

    Sprint has already declared that at some point they will use Nortel for their CDMA part of their WiMax buildout.

  5. plut Says:

    This article has some interesting points of view on the subject:

    http://www.wimaxtrends.com/Articles/0701.shtml

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