Bloomberg News

Alcatel Bets on AT&T, Verizon to Keep U.S. Market Growth

February 26, 2013

Alcatel-Lucent SA (ALU)’s decade-old ties with carriers such as AT&T Inc. (T:US) and Verizon Communications Inc. (VZ:US) should help the unprofitable French network-equipment vendor fend off European rivals’ attacks looking to steal U.S. market share, according to its global sales chief.

Relationships with U.S. clients, which have held on despite six years of failed restructuring efforts at the Paris-based vendor, were bolstered by a multi-billion euro loan deal Alcatel-Lucent signed in December, said Robert Vrij, global head of sales and marketing.

“There is a high mutual dependency and these actors view us as extremely important to them,” Vrij said in an interview yesterday at the Mobile World Congress in Barcelona. “They weren’t sitting on pins and needles, but they cheered pretty loud when we got an injection of capital. It gives them comfort, and it gave us a boost.”

As carriers in Europe hold back spending amid grim economic forecasts and heavy competition, equipment vendors have looked outside Europe for growth. In the U.S. -- which accounted for about 40 percent of Alcatel-Lucent’s sales last year while it earned 26 percent of its revenue in Europe -- demand for wireless gear is boosted by the race to upgrade to speedier networks, making long-standing relationships vital.

‘Lock Step’

Alcatel-Lucent “aren’t just suppliers, they’re really partners,” said Nicola Palmer, vice president in charge of the network for Verizon Wireless, yesterday at the convention. “In order to have the success that we’ve had with LTE you really have to work in lock step with your suppliers. We’ve had great success and we’ll continue to work very closely with them.”

Alcatel has supplied Verizon through its second-, third-and fourth-generation technology rollouts, as well as the development of long-term evolution, or LTE, networks that allow faster data speeds, she said.

U.S. consumers continue to hunger for new products and want to view content on their mobile devices amid an economic environment that remains positive, Vrij said. That is boosting demand for wireless gear as carriers race to upgrade to speedier networks.

Alcatel-Lucent has said it expects the U.S. market to remain strong. Sales there increased 14 percent in the fourth quarter of last year, to 1.6 billion euros ($2.1 billion).

Ericsson, NSN

Ericsson reported last month sales in North America that jumped to 17 billion kronor ($2.6 billion) last quarter. The Stockholm-based company benefited from spending by carriers there to upgrade their networks and as Chinese rivals face political hurdles. The U.S. House Intelligence Committee in October recommended local companies avoid equipment made by Huawei Technologies Co., whose founder served in the Chinese military.

Nokia Siemens Networks, the telecommunications equipment venture between Finland’s Nokia Oyj (NOK1V) and Siemens AG of Germany, is also putting a push into the U.S. at the top of the list of priorities, Chief Rajeev Suri said on the eve of the Barcelona conference.

“Everyone wants a piece of that market,” Alcatel’s Vrij said. “We’ve built these networks for our U.S. customers for decades. We’ve accumulated knowledge of their networks, of their culture. We know these customers inside and out and that’s not something you can learn overnight.”

Bell Labs

Alcatel-Lucent fell 4.3 percent to close at 1.06 euros in Paris, paring the stock’s gains this year to 5.4 percent. The shares lost 17 percent in 2012.

Alcatel-Lucent, whose U.S. ties date to Lucent Technologies Inc.’s 2006 merger with Alcatel SA, is also betting on the reputation of its Nobel-prize winning Bell Labs research facilities to win and retain clients. The company pledged as collateral its 39,000-strong patents portfolio -- largely inherited from Murray Hill, New Jersey-based Bell Labs -- to get financing from Goldman Sachs Group Inc. and Credit Suisse Group AG for the loan last year.

Opening up its labs to consumers and working on so-called co-creation has also helped Alcatel-Lucent in Asia. The French company yesterday unveiled a new miniature mobile antenna that it said was designed jointly with China Mobile Ltd. (941), China’s biggest mobile-phone company.

Alcatel is in a trial run with China Mobile in three cities, and bets it can succeed there on expected expansion into more cities starting in the third quarter, Rajeev Singh-Molares, who heads Alcatel’s Asian business, said in an interview.

“They’re calling it a trial network but it’s already 200,000 base stations,” Singh-Molares said. “It’s an iconic project. It will be the biggest 4G network on the planet.”

Revamped Strategy

In Europe, where Alcatel-Lucent expects sales of network equipment will be stable this year, the company is revamping its strategy and looking at replicating its Latin American approach to win wireless contracts, Vrij said. Both markets are fragmented, with more than three carriers competing in each country, and there is aggressive competition from Asian vendors like Huawei in both regions, he said.

“We’ve been looking at how we can take what we’ve learned in Latin America and apply it to Europe,” Vrij said. “The recipe in Latin America has been building our relevancy starting with services capabilities to understand the networks, the back- office of our customers, so when we put our equipment offers forth, we have the right approach for them.”

America Movil (AMXL) SAB a year ago said it selected Alcatel to deploy 4G infrastructure in Latin America. Brazil’s Oi also said last year it will buy equipment from Alcatel-Lucent, among other vendors, to deploy 4G.

“Two years ago, Alcatel-Lucent wasn’t a wireless player there. Since, we’ve signed contracts with the largest operators. That shows we can go into a market without being one of the wireless incumbents,” Vrij said. “We’ve very optimistic we can do the same in Europe.”

To contact the reporter on this story: Marie Mawad in Barcelona at mmawad1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • T
    (AT&T Inc)
    • $35.94 USD
    • -0.02
    • -0.06%
  • VZ
    (Verizon Communications Inc)
    • $50.98 USD
    • 0.28
    • 0.55%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus