MWC: Alcatel-Lucent, NEC form LTE venture
BARCELONA--Alcatel-Lucent and NEC are creating an joint venture focused solely on Long Term Evolution in a bid to bring the 4G technology to market as quickly as possible. The partnership, announced here at the Mobile World Congress, has been running on silent for the last six months, and has already defined an LTE base station design the two plan to begin production of this year.
"This should be considered an offensive play to attack, at a fairly early point in its development, the opportunity of LTE," Alcatel-Lucent CEO Pat Russo said. Very few operators have committed to LTE trials and none have selected their final vendors for their future commercial networks, Russo said. By combing R&D efforts and bringing a unified product to market ahead of the competition, the joint venture stands to benefit in market share.
While NEC is a big 3G vendor in its native Japan, the company hasn't penetrated far beyond it. Meanwhile Alcatel-Lucent's 3G business, along with its Western competitors, hasn't made much of a dent. By teaming with NEC, Alcatel-Lucent wins a piece of NTT DoCoMo's LTE launch, one of the first such networks to be deployed. Furthermore, North America rather than Europe is expected to be the fast follower of Japan in this latest generation of cellular network technologies. Sprint is building a Mobile WiMAX network, and Verizon has committed to building an LTE network, which will likely mean 4G competition will heat up in the States before it crosses the Atlantic. While Alcatel-Lucent is the world's 3rd largest UMTS equipment maker, it is the dominant CDMA vendor in the U.S., giving it an advantage in Verizon's LTE vendor competition. It was one of five vendors named to conduct Verizon and Vodafone's LTE trials. The fast time lines in Japan and the U.S. will mean that the AL-NEC venture will be conducting field trials in 2008, rather than the 2009 timeframe that most vendors have committed to.
Whether those time-to-maket advantages can translate into market dominance for the venture is an open question though. NEC was one of the vendors that launched NTT DoCoMo's wideband CDMA network a year before commercial UMTS networks went live in Europe. While Korean CDMA vendors were the first to launch CDMA2000 networks, Alcatel-Lucent and Nortel still dominated the global CDMA market. In addition, these tie-ups between Asian vendors and their Western counterparts haven't yielded very big results. Alcatel, Siemens, Nokia, Nortel and Motorola have at some point teamed up variously with LG Electronics, Huawei, ZTE and Fujitsu. Most of those relationships dissolved or produced a product targeted at a specific market such as China. The only western-eastern venture that is still reasonably active today is Nortel and LG's venture, which are handling the base station and handset aspects respectively of WiMAX and LTE development. But even that one partially disbanded when Nortel sold its UMTS business to Alcatel-Lucent.
Russo, however, said those previous joint ventures were broad unfocused initiatives that produced separate platforms for different markets. Alcatel-Lucent and NEC are not looking to build a separate product for NTT and a separate product for Verizon, she said. Rather the venture will develop a single platform for both operators, and then will market that same product to the rest of the world.
The move comes shortly after Alcatel-Lucent announced a 2.5-billion euro ($3.6-billion) impairment charge largely related to lost value in the CDMA assets that were a key part of Lucent's contribution to the merged company.
Though unstated at the companies' media event, Lucent will make another contribution to the NEC partnership. It developed the inital technology and algorithms behind Multiple Input/Multiple Output smart antenna technology, a critical element in future LTE networks. Lucent was slow to take advantage of MIMO initially--it never launched a WiMAX product line for instance--but the unified Alcatel-Lucent has said it plans to re-exert Lucent's technical dominance of the technology with both its current WiMAX and future LTE product lines.
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