Alcatel, Ericsson seen as Verizon upgrade vendors

NEW YORK Tue Feb 17, 2009 6:43pm EST

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NEW YORK (Reuters) - Alcatel-Lucent is seen as a key supplier of network equipment for a big upgrade at Verizon Wireless, along with other top contenders such as Ericsson, Nokia Siemens and Huawei, according to analysts and experts.

Verizon has said it would announce vendors for a wireless network it is building to speed up mobile Web access at the Mobile World Congress show in Barcelona this week.

Alcatel-Lucent's involvement in the network, based on an emerging technology known as Long Term Evolution (LTE), is seen as a given since it is already a key supplier to the venture of Verizon Communications and Vodafone Group Plc.

"They'll probably select two to three vendors," said Ricky Watts, a technology director for telecom consulting firm Aircom. "I'd be very surprised if (Alcatel-Lucent) didn't move forward." Alcatel-Lucent declined to comment.

But Verizon Wireless' choice for a second or third vendor is not so clear cut as it has to balance the cost of the system, expected to run into the billions of dollars, and the vendor's financial situation and its nationality.

"At the moment the finger is pointing at Ericsson" as the second vendor, said Nomura technology specialist Richard Windsor, who believes Verizon Wireless will go with the same suppliers as its parent Vodafone.

"We believe Vodafone is very keen on Ericsson as a partner and they would like to see Ericsson on Verizon," he said. "They have a strategy for procuring equipment on a global basis."

Nokia Siemens, a venture of Nokia and Siemens, could also be a strong contender for the business. Nokia Siemens was not immediately available for comment.

The prospects for Nortel winning a long-term contract with Verizon are seen by many as very poor, as the Canadian company recently filed for bankruptcy protection. Nortel declined to comment.

And unless Verizon is particularly keen to use a vendor with U.S. headquarters, analysts also see Motorola Inc, whose handset business has struggled in the last few years, having a tough time winning the business. Motorola declined to comment.

"The future of Motorola is somewhat uncertain right now. I do not see Motorola as being a lead player in the market for LTE infrastructure. I don't think they've invested enough in it," said Windsor.

Avian Securities analyst Matthew Thornton said he believes Ericsson has made the best progress developing LTE technology, followed by Nokia Siemens and then Motorola.

Thornton said that all the vendors are likely facing tough competition from China's Huawei in bidding for the project as Huawei has a reputation for offering cheaper prices.

Some experts worry that choosing a Chinese vendor could lead to security concerns from the U.S. government. Huawei abandoned its plan to invest with a private equity company in 3Com, another U.S. communications gear maker, after the deal was scrutinized by the U.S. foreign investment watchdog.

But others argue that any carrier could not afford to ignore a low-priced vendor in the weak economy. A Huawei spokesperson was not immediately available for comment.

"It would be interesting to see if Huawei were able to break in," said Avian Securities analyst Matthew Thornton. "I doubt they'd be the primary vendor but they may be a secondary supplier. They may bring some pressure on the prices the others can negotiate."

(Reporting by Sinead Carew; editing by Richard Chang)

(email: sinead.carew@thomsonreuters.com; +1 646-223-6186)

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