Deal with Verizon ‘a boost’ for Nortel and Canadian telecom

Nortel Networks Corp.’s US$2 billion contract to supply equipment and services to telecom firm Verizon Wireless is a huge shot in the arm for Nortel – as well as Canadian telecommunications, according to one industry insider.

The deal will help Verizon Wireless deliver faster access to music, video and other features over cellular phones.

It may also lead other wireless carriers to bump up investments in 2007, says Roberta Fox, principal of telecommunications consultancy firm Fox Group in Mount Albert, Ont.

“This is certainly a vote of confidence in Nortel,” Fox said. She said Verizon’s plunking down of US$2 billion over the next five years for radio base stations, optical networking hardware, switches and professional services may be one of the few “big deals” in the industry in recent years.

“We haven’t seen big deals like this in recent years,” Fox said, adding that if other carriers follow Verizon’s lead and increase their technology spend, it would be good for the market.

The analyst noted that Brampton, Ont.-based Nortel had promised it was staging a comeback, and had delivered on that. The deal with the second largest wireless carrier in the U.S. would assure investors that the troubled company was heading back on the right track, Fox said.

“The popularity of Internet services such as user generated videos, online gaming and music is driving an explosion in bandwidth demand,” said Richard Lowe, president, mobility and coverage, core networks division, Nortel in a statement.

Verizon’s planned network expansion responds to the growing business and consumer adoption of services that use broadband networks – such as the company’s V-Cast video and music services, and Broadband Access high-speed Internet and e-mail offering, said Jeffrey Nelson, communications director, Verizon.

“With data services accounting for 14 per cent of Verizon’s revenue from our nearly 57 million customers in the third quarter of 2006, Nortel’s support will be instrumental as we build up our lead in the U.S.,” said Nelson.

Under the agreement, Verizon plans to deploy code-division multiple access (CDMA) 2000 radio base stations, switching hardware, Internet protocol (IP) platforms, optical networking and related equipment from Nortel over the next five years, said Scott Wickware, marketing leader, mobility and converged core networks, Nortel.

Verizon phones runs on CDMA wireless technology, which is widely used in the U.S. and Canada and parts of Asia, but a few of the company’s competitors – such as T-Mobile and Singular – use GSM technology.

The technology, which is relatively cheaper than CDMA, is also big in countries such as India.

CDMA, however, is better suited for voice, data and video traffic because it offers faster transmission of signals, said Wickware. “GSM is fine for voice but CDMA enables quality mix media transmissions.” Wickware said Nortel will also work with Verizon to develop and deploy IP multi-media subsystems (IMS) applications and services which will support high-definition television and video services to the home.

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