Nortel Captures Israeli Contract

Copyright 2002 Toronto Star Newspapers, Ltd.
Toronto Star...04/24/2002
From LexisNexis

By Tyler Hamilton, Toronto Star
from BroadbandWeek Direct, April 24, 2002

Nortel Networks Corp. continues to demonstrate that wireless is the brightest spot in its otherwise uncertain future, announcing yesterday that Israel's second-largest mobile phone operator is buying $240 million worth of the Canadian company's equipment.

Under the two-year agreement, Tel Aviv-based Pelephone has chosen Nortel to be its sole infrastructure supplier for Israel's first third-generation wireless network, based on CDMA2000 1X technology.

The deal, while relatively small, was complemented yesterday with an announcement that Dutchtone, an Orange SA subsidiary in the Netherlands, will use Nortel's GSM and GPRS technology to update its mobile network.

Last week, Europe's fifth-largest wireless company, mm02 PLC, awarded Nortel a contract likely exceeding $1 billion to build third-generation networks in Britain, the Netherlands, Germany and Ireland. Smaller deals for other networks in Germany, Spain and the United States have also been announced in the past two months.

Frank Dunn, Nortel's chief executive officer, said last week that wireless will become an increasingly important part of Nortel's revenues, which have declined by more than half in the past 18 months.

"Nortel will become more and more a wireless company," Dunn told analysts. "We are absolutely and passionately committed to the wireless business .... I will not do anything that slows our momentum down and loses control of that momentum."

But in a market that's expected to be weak for at least the remainder of the year, maintaining that momentum won't be easy.

Sweden's L.M. Ericsson AB, the world's largest supplier of wireless network equipment, said on Monday that a slowdown in its business requires that it eliminate more than 17,000 jobs, representing about 20 per cent of its workforce.

Ericsson's outlook echoed that of Finland's Nokia Corp., which last week cut its sales forecast for 2002 and slashed its estimates for industry handset sales. Shares in both companies have since been hammered.

Meanwhile, Nortel announced another 4,000 job cuts last week, bringing its total headcount down to 44,000 from 95,000 at the beginning of 2001.

David Powers, a telecommunications analyst from Edward Jones in St. Louis, said Nortel is more a wireless company these days than a fibre-optic equipment maker - its claim to fame in the late 1990s.

"Nortel has been gaining some market share (in wireless)," said Powers. "Nonetheless, it's a market that's going to decline this year."

He said there's probably enough room for three or four major wireless equipment suppliers in the long term, adding that consolidation in the industry will take place but Nortel is likely to remain one of the top players.