LTE brings fast Web, not gear maker miracles

BARCELONA (Reuters) - A high-speed wireless technology that is still in development promises to make mobile Web surfing about four times faster, but its impact on the embattled network equipment industry will be much less dramatic, according to industry executives.

Several big operators recently said they will build networks using an emerging technology known as Long Term Evolution (LTE), boosting interest in the technology standard and prompting a slew of news that put it in the spotlight at the Mobile World Congress in Barcelona this week.

China Mobile, the world’s biggest mobile provider, said this week that it would test LTE. Alcatel-Lucent and Japan’s NEC Corp signed a joint-venture deal to pool their development and marketing of the technology. Even Qualcomm Inc promised chips for LTE, a competitor to its own Ultra Mobile Broadband technology.

LTE promises to make everything from mobile-video sharing to music downloads speedier, but it may not show a visible boost in sales for the network equipment industry any time soon as the first networks are not expected for two years and many operators will wait longer, until the technology matures.

“I would not look at LTE as a savior” said Simon Beresford-Wylie, Chief Executive of Nokia Siemens, the networking venture of Nokia and Siemens.

“You will start to see LTE popping up in 2010, 2011, 2012, but there is a long life ahead for HSPA,” he said referring to a technology AT&T Inc, the biggest U.S. mobile service is still adding to its network. AT&T plans to eventually use LTE.

Godfrey Chua, a network equipment analyst at research firm IDC said that even if many operators start LTE services in 2010, the technology would still only serve to help stop the industry from declining rather than create a massive growth spike.

Even with LTE, Chua sees the global network gear market growing only one to two percent a year in the next five years.

Brian Glinsman, a wireless executive from chip maker Texas Instruments said he expects early LTE products to appear in 2009, but demand may take off slowly.

“I think it’s gradual,” he told Reuters at a TI event at the show. “The real issue is going to be the operators and their acceptance of it.”

While both Verizon Wireless, the No. 2 U.S. mobile service, and its minority parent Vodafone Group, which operates in 25 countries, back LTE, others are more cautious.

Hamid Akhavan, head of T-Mobile International, which operates in 12 countries, said LTE appears to be the most promising prospect for future networks but he was not willing to commit to the technology until it proves its promise.

“There’s still quite a few issues to be resolved,” said Akhavan in an interview with Reuters. “In a best case scenario, some of our markets may be demonstrating LTE in 2010.”

T-Mobile USA has yet to start offering services based on today’s highest-speed technologies, but aims to do so in the middle of 2008.

Canada’s Nortel Networks Corp sees LTE as the most likely upgrade path for about 80 percent of the world’s existing mobile phone providers, with others going for an alternative technology known as WiMax.

But Peter MacKinnon, manager of Nortel’s WiMax business, said that clients he met in Barcelona gave mixed signals on LTE. While one client was keen to start building the network as early as next year, he said another “couldn’t believe” the technology would be ready in 2010.

The network equipment industry has struggled in recent years as massive telecom operator mergers such as that of AT&T, SBC Communications and BellSouth Corp have slowed equipment demand and put pressure on prices, as have new rivals.

Alcatel and Lucent merged and Nokia and Siemens formed a venture to pool research resources and help fend off rivals such as China’s Huawei and ZTE Corp, which analysts say have been forcing down prices.

But Alcatel-Lucent sees its venture with NEC helping it get over this problem as it expects to win business by having products ready to sell faster than it would have on its own.

“We wanted to be the first one in the market,” said Michel Rahier, head of Alcatel-Lucent’s carrier business.

He said that while network upgrades may not create an overnight spike in sales, the availability of higher speeds should boost demand for network applications Lucent could offer such as storing subscriber address books on the network.

But he said that upgrades “will take several years.”

Additional reporting by Tarmo Virki; Editing by Gary Hill