CDMA Mon Amour

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By BRational
May 21, 2001

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Yes, this is about Lucent goes to Paris -- and the conversion of Alcatel.

As has been suggested on this board, the first thought I had when I saw the news was that this really shakes up the stakes in the wireless network infrastructure market, giving Alcatel a potent new weapon, and CDMA a most unlikely possible advocate (one I had predicted a few months back).

1. Alcatel is an also-ran in wireless infrastructure, though it's a powerhouse in wireline and fiber optics, with very strong global presence. In wireless, it has played a small role in Europe, mostly in France and other francophone (French-speaking) countries, and in some French-orbiting nations with historic ties to France. It is not a powerhouse in GSM, though it has a respectable brand in GSM handsets in Europe. It is not a powerhouse in w-cdma, which is why it has been a prime advocate of the move to create a free-to-low-royalty for w-cdma (I reported on that in a post on IPR), and it has no CDMA whatsoever.

2. With Nokia and Ericsson slogging it out to get w-cdma contracts, mostly selling to service providers for whom they had set up existing GSM networks, Alcatel does not have much of a competitive position.

3. Nokia has virtually no CDMA infrastructure, other than of the W-variety (and we know how well that works...); Ericsson on the other hand had a great CDMA infrastructure division, which they acquired from Qualcomm. However, Ericsson has so much vested interest in the GSM view of the world that they have not allowed their CDMA division to compete for 3G contracts. It seems Ericsson bought it for the CDMA technology that might go into the W- version, and to show a complete range of capabilities (and to settle an IPR infringement battle), then limited its 3G role only to those operators who already had 2G CDMA.

4. How does Siemens compete? Try TD-SCDMA. And Alcatel? Create yet another CDMA flavor (or is it "parfum")? Now we know. They can have the real deal, and instantly become the numero un de la CDMA. And, unlike Ericsson and Nokia, they have nothing to lose, and everything to gain! They have no real vested interest in w-cdma, had opposed adopting it as a 3G standard, and had been playing the Euro-solidarity card to gain a role in it.

5. Will Alcatel kill off or at least let decay Lucent's global position in CDMA? After all, they were interested in the fiber optic stuff. No way! Lucent is the powerhouse in CDMA network infrastructure. If you check the CDG list of CDMA2000 deployments, Lucent is the leader. Lucent does not have much by way of GSM; they had predicated their wireless business on CDMA. Alcatel certainly recognizes the value of that asset!

6. What can Alcatel do that Lucent or Motorola couldn't? Alcatel is in the Euro-club; they have access to European operators; they should welcome and will seize the opportunity to have something that is clearly differentiated from Nokia and Ericsson, who have not been too generous about sharing the sandbox. They will sell to some French operator, and could always run it themselves if need be. Alcatel also has a very strong global presence, which benefits greatly from France's role in international diplomacy, and the francophone legacy in many states around the world.

Bottom line: this could be good for CDMA, and at least introduces an element of uncertainty with a potentially positive outcome. Any fear that Alcatel would buy Lucent to kill off its CDMA division makes no sense at all, for it defies rationality -- given the value of the contracts and relationships already in hand, the value of the likely future contracts, and the value of the technological know-how that Lucent has in this domain (which Alcatel could leverage into w-cdma contracts as well).

Enough to make Jorma choke on his escargots.