Shares of Alcatel-Lucent (NYSE: ALU ) have lost more than 30% of their value over the past year, but for investors in the Franco-American telecom equipment giant, hope of a turnaround springs eternal. Today, it might even be justified.
On Tuesday, Alcatel announced that key customer Telefonica (NYSE: TEF ) has chosen its 7950 Extensible Routing System (XRS) core network router to use in upgrading its mobile broadband and Internet protocol television services. Calling the 7950 XRS a "disruptive solution" to the problem of increasing network capacity, Telefonica said in a statement that the new device "will give us one of the most powerful and efficient IP networks."
Telefonica says it will begin installing the 7950 XRS in networks in Argentina and the Czech Republic initially, before expanding rollout elsewhere. Telefonica does business throughout Latin America in countries including Brazil, Peru, Columbia, Chile, Mexico, and Argentina. In Europe, aside from the Czech Republic and its home market in Spain, Telefonica does business in the U.K., Germany, Ireland, and the Netherlands.
According to SEC filings, prior to this announcement Telefonica was one of Alcatel's larger customers. While Verizon (NYSE: VZ ) and AT&T (NYSE: T ) accounted for 12% and 10% of the company's business, respectively, Telefonica contributed less than 10% of annual revenues to Alcatel-Lucent.