Nortel watches as Ericsson capitalizes on CDMA-to-LTE conversion

It's no secret that these are tough times for Nortel Networks, which filed for Chapter 11 bankruptcy back in January. The uncertainty surrounding the company's future naturally is causing trepidation for customers looking to issue contracts for new business. It was also the reason Nortel lost out on the Long Term Evolution (LTE) contract with Verizon Wireless earlier this year, acknowledged Bruce Gustafson, vice president, Carrier Networks Strategic Marketing at Nortel.

Verizon instead gave contracts to its existing vendor Alcatel-Lucent and Ericsson, which has been quite eager for many years to obtain a bigger foothold in the U.S. market but never had a viable CDMA story to do so. Gustafson said Nortel's LTE gear was a top performer in trials with Verizon but said the operator didn't feel comfortable giving Nortel a contract given the uncertainty of its future. Nortel already has a big chunk of the operator's CDMA business, and Verizon didn't want to put anymore on the vendor's plate, Gustafson said.

"It's hard for us to win a multi-year LTE deal until the bankruptcy is cleared up," Gustafson said. "If we have to take steps to make sure that we're over-rotating to support existing customers rather than bringing in new business, so be it."

That strategy is highlighted in the news Nortel released during last week's CTIA Wireless 2009 show--smart power management software for GSM demonstrated with China Mobile, a GSM-R expansion contract with Algerian Railways and a reminder that Nortel is powering more than 1 million LG Dacom (Korea) voice over broadband customers. It wants to demonstrate that it continues to invest in R&D and that none of its customers are tearing out the vendor's gear. It is working hard to make sure none of its equipment gets displaced.

All the while, Nortel is watching Ericsson pounce on its CDMA customers that are planning a move to LTE, and Ericsson's deal with Verizon is giving the vendor the momentum it needs. "The deal itself was a huge milestone because for the last few years that part of the market was not available to us," said Arun Bhikshesvaran, senior vice president of Multimedia and Infrastructure Solutions with Ericsson. "It opens the market to allow us to address other CDMA operators... It's a fantastic reference that gives us a lot of credibility."

Those aren't exactly the words that Nortel wants to hear. But there really isn't anything the vendor can do about it until it emerges from Chapter 11 proceedings. Even then, will Nortel emerge intact? While the vendor waits, Ericsson gains more ground. Perhaps Nortel's saving grace will be the fact that many CDMA operators around the world use Nortel CDMA gear. Nortel could argue going forward that it is better than anyone at integrating new LTE networks to work with its existing CDMA infrastructure.--Lynnette [1]