Tellabs enters the 4G core market with WiChorus buy
A new challenger has emerged in the 4G core market, but it’s not a name many would expect. Tellabs (NASDAQ:TLAB) today announced its intentions to plop down $165 million in cash for WiChorus, a tiny emerging mobile packet core vendor that recently won national attention for landing Clearwire’s 4G mobile core contract.
While Tellabs is a big player in the mobile backhaul and carrier Ethernet spaces, it has never been competed in the mobile core market, which has traditionally been dominated by the wireless infrastructure vendors. But CEO Rob Pullen said Tellabs area of expertise, data management and transport, has been converging with 4G technologies.
The influx of smartphones like the Apple (NASDAQ:AAPL) iPhone have inundated 3G networks with data traffic. Personalized data services spanning wired and wireless network are in high demand. And the mobile core has evolved from the hub-and-spoke architecture of 3G to distributed IP systems — all factors that have made it the perfect time for Tellabs to aggressively enter the market, Pullen said.
“When you think about it, we have the perfect storm of events happening right now,” Pullen said. “We’ve benefited from the growth of the mobile Internet in our backhaul business, definitely, but our customers are now asking us to integrate core functions into our backhaul products.” Tellabs decided to accommodate them, he said.
Tellabs isn’t the only wireline vendor looking to make an impact in the 4G core. Earlier this month, Cisco Systems (NASDAQ: CSCO) announced it was acquiring Starent Networks (NASDAQ:STAR), by far the most successful challenger to the incumbent wireless vendors in the mobile core. Pullen, however, feels Tellabs got the better deal, not just in terms of price (Cisco is paying $2.9 billion for the publically traded Starent). For its $165 million, Tellabs is getting a WiChorus SmartCore platform that Pullen claimed supports eight times the throughput of Starent’s next-generation ST40 platform, and it can handle four times more Internet connections and active users than any other core architecture in the market.
But what WiChorus doesn’t have is Starent’s sizable customer base. Starent’s gateways are in more than 100 3G operators’ networks throughout the world. It practically owns the North America CDMA EV-DO market — its packet data serving node has a 80% market share. And Starent has a leg up in the 4G race, winning a piece of Verizon Wireless’ (NYSE:VZ, NYSE: VOD) much coveted long-term evolution deployment.
WiChorus has two announced customers. Led by Rehan Jalil, former Aperto Networks chief architect, WiChorus is only three years old and spent most of that time developing its SmartCore architecture. It only introduced its first product last year and had been for the most part silent before announcing the Clearwire deal in September.
While WiChorus’ platform is designed for high-speed packet access (HSPA), WiMAX and long-term evolution (LTE) networks, its initial success has been with WiMAX, which will likely be a competitive 4G technology but play second fiddle to LTE. Pullen, however, said that WiChorus’ appeal among global carriers will dramatically increase once it is under Tellabs’ wing. While a competitive operator like Clearwire or Open Range, might take be willing to bet on a start-up for a critical component of the network, many of the established global operators may be more reluctant, Pullen said. But a company the size of Tellabs, with long-term relationships throughout the wireless industry, will give it the clout to win even bigger core deals, Pullen said.
“We’re going to continue to pursue WiMAX, but that alone won’t be sufficient,” he said. “We’re going to go after it all.”
Tellabs will sell the SmartCore platform as a stand-alone evolved packet core solution for LTE providers and as a gateway GPRS serving node for HSPA networks, but Pullen said it will quickly integrate WiChorus’ technology into Tellabs’ other product lines. Tellabs will combine the packet core functions with its Ethernet switching and network management platform products, combining elements of the backhaul and core network into a single unit. Almost immediately after the deal closes, Tellabs will incorporate its Internet offload software into its portfolio, creating a solution where the 70% of mobile data bound for the public Internet can be offloaded before it hits the mobile core.
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