Alcatel-Lucent (News - Alert) recently got a contract to supply Verizon Wireless with packet core technology previously supplied exclusively by Starent, which has some financial analysts speculating about what the move means for Starent, going forward. The implications are broader than simple impact on supplier market share, though.
Alcatel-Lucent's "Evolved Packet Core" is designed to support migration from either CDMA or GSM networks to LTE. Since Verizon has said it would evolve to LTE as its fourth-generation network, that capability is crucial. Alcatel-Lucent might also be applying networking lessons it has learned in the wired network triple-play business.
"Increasingly, next-generation wireless architecture is looking more like wireline, says Lindsay Newell, Alcatel-Lucent VP. And LTE is viewed as a big contributor to the ability to interwork services across wireless and wireline networks.
A number of vendors are expected to announce products that likewise ease the migration path from CDMA to LTE. In addition to Verizon, MetroPCS, KDDI (News - Alert) and other CDMA users are looking at a migration to LTE, as virtually all GSM mobile networks have said they will do.
Huawei (News - Alert) is supplying such a solution to Cox Communications.
Still, some think Alcatel-Lucent now will displace Starent at Verizon Wireless. "Now it appears clear that Starent's sole-sourced position at Verizon, where it derives close to 80 percent of its revenue...does not survive into the next generation of technology," JPMorgan analyst Ehud Gelblum says.
Others disagree. A Deutsche Bank analyst says Starent remains well positioned at Verizon, especially because of Starent's "LTE Packet Gateway (News - Alert)" upgrades, which represent a $240 million opportunity for Starent. At Verizon, Alcatel-Lucent is "likely to focus on the LTE, IMS, and EPC mobility elements," rather than the packet gateway.
Ericsson, also recently names as a supplier for Verizon's LTE migration, likely will be initially focused on the LTE radio network only, Deutsche Bank says.
Any additional Verizon suppliers would be potentially troubling for Starent, which derives at least 80 percent, and some say 90 percent, of its revenue. Cisco, Nokia and Siemens (News - Alert) also are looking to score some of the coming LTE business as well.
The Alcatel-Lucent contract win might also reduce Starent acquisition interest, as acquiring the firm would have brought a Verizon foothold. Potential acquirers might now decided that the packet core decisions already are made, that Starent has lost, and therefore does not provide hoped-for upside. Or at least that's what a couple of analysts now suggest.
Gary Kim is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.Edited by
Jessica Kostek
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