$1bn China Mobile deal injects new confidence into ALU April 01 2014
By the Maravedis-Rethink RAN Service team
The patience of those who kept the faith with Alcatel-Lucent is starting to be rewarded after more than eight years of one of the stormiest marriages in technology. However, behind the recurrent losses, the management dramas and the endless rounds of cuts and reorganizations, ALU has been playing some highly strategic long games. Several of these have fed directly into a huge $1bn, one-year contract the firm has announced with China Mobile - a deal which goes some way to justify the focus on converged IP and virtualization, in particular.
The deal is to "provide technology that will move the world's largest mobile service provider to an all-IP ultra-broadband network paving the way for future network functions virtualization (NFV) and cloud-based services", said the official statement. Technologies involved will include lightRadio distributed RAN units for TD-LTE overlay, evolved packet core elements, IP routers, optical transmission systems such as OTN 100G, fixed broadband access technology based on GPON, and professional services.
Of course, every vendor will hope that China Mobile, with its huge wireline and LTE expansion programs, will be a savior this year. In the carrier's recent financial results call, its capex forecast for the year was RMB225.2bn ($36.3bn) came in about $3bn ahead of analyst expectations, with much of that being driven by TD-LTE. The operator gained its commercial licences late last year and can now offer full services on its 'trial' network as well as expanding it rapidly. ALU has about 11% of the current TD-LTE awards (about the same as Ericsson, with NSN having 14% and the rest going to Huawei and ZTE). Its aim will be to increase that percentage, and the way to do that will not just be about TD-LTE base stations, but taking a far more strategic role in China Mobile's famously radical network strategies.
This is clear in this latest award, which is not about the LTE RAN but speaks to the close collaboration ALU has with China Mobile in the area of virtualization, particularly Cloud-RAN. The world's largest mobile operator - flush with fiber and with an almost greenfield willingness to leapfrog other carriers on the back of new architectures - is the biggest flagwave for C-RAN, and ALU has enjoyed a seat at the top table in the intensive R&D around the platform.
More immediately, this large contract helps vindicate ALU's decision to focus on a converged platform built around wired and wireless IP. In its recent restructuring, initiated by former CEO Ben Verwaayen and executed by current chief Michel Combes, it resisted calls by some shareholders either to spin/sell off the mobile unit, which has lower market share than the company as a whole, or conversely, to emulate NSN and focus very specifically on mobile broadband. The latter would have been foolish, given that ALU's core current strength is in IP routers, but the former looked feasible.
However, Combes's team have kept the faith that, as carriers increasingly move to converged quad play platforms, they will want converged suppliers, and that thinking is clearly seen at China Mobile. The frame agreement is worth $1bn over just one year, and so should have a significant impact on short term performance, a fact which sent the French giant's shares upwards on Thursday. Neatly, the announcement coincided with a visit to France by Chinese president Xi Jinping to commemorate the fiftieth anniversary of French-Chinese diplomatic relations.
At last month's Mobile World Congress, ALU and China Mobile demonstrated Cloud-RAN and NFV, and the vendor also supplies many elements to the cellco including its lightRadio distributed base stations, to support the TD-LTE overlay roll-out, small cells, and evolved packet core elements. The two companies co-developed the lightRadio MRO (metro radio outdoor) unit for TD-LTE.