Nortel seeking quick Ch. 11 exit, keeping customers

Nortel Networks is trying to reassure customers of its viability as it quickly prepares a restructuring plan for creditors in hopes of re-emerging from bankruptcy protection as an intact company, according to its president of carrier networks, Richard Lowe.

“Our stated objective is to come out of this as Nortel,” Lowe said in an interview this week. “We are deciding what assets we have that are generating earnings or what assets we feel we can grow into fundamental businesses.” Once Nortel completes that plan, it will present it to its creditor committee, composed of Nortel’s banks and pension fund, with the aim of getting it approved as quickly as possible, Lowe said.

One of the first steps of that restructuring came to light Thursday night when Nortel announced it would exit the mobile WiMax business entirely, ending its 7-month-old strategic partnership with Alvarion. Nortel was of mobile WiMax’s earliest proponents, building off strong R&D in next-generation radio interface and smart antenna technologies. But after Nortel failed to win a major WiMax contract and as Long-Term Evolution (LTE) began to emerge as the clear winner in the 4G wars, Nortel decided to get out of the WiMax radio business, choosing instead to sell its WiMax core network technology in conjunction with Alvarion’s base station.

By exiting the WiMax business, Lowe said, Nortel was narrowing its focus on areas where it could see a higher return on investment. While WiMax has growth potential, the technology is being targeted at new entrants to the wireless market, Lowe said, not Nortel’s traditional mobile operator customer base, an estimated 80% of which are adopting or leaning toward LTE. By focusing on its current customers, he said, Nortel is putting itself in a better position when the economy finally does improve and spending levels increase.

While Lowe wouldn’t comment on specific businesses that are being identified in the reorganization plan as fundamental or expendable, he did point to the divisions he viewed as Nortel’s strengths. Though Nortel sold its UMTS business to Alcatel-Lucent in 2007, Nortel still has a strong profitable CDMA business. The life cycle of CDMA is coming to an end after 3G, but Nortel’s sizable customer base will still maintain and even expand those networks long into the future, Lowe said. While Nortel is abandoning WiMax, its 4G business still has enormous potential with LTE. Not just UMTS operators, but CDMA operators are moving toward LTE, giving Nortel an incumbent status with dozens of operators not shared by Ericsson or Nokia Siemens Networks.

Its biggest prospect on the LTE front is Verizon Wireless. Nortel has built a trial network for Verizon in Columbus, Ohio, and though Verizon is testing equipment from four other vendors, Nortel has a long-standing relationship with VZW as one of its primary CDMA vendors. Lowe said the Columbus trials and field tests in Ottawa have gone well, making Nortel hopeful it will make the final list of vendors to build what could be the world’s first commercial LTE network.