Nortel has agreed to sell $274 million worth of network infrastructure to Chinese firms.
Optical networking firm Nortel yesterday signed $274 million worth of deals to sell telecoms equipment in China, including $101 million worth of fiber optic equipment for Internet access to China Telecommunications and $130 million worth of GSM wireless equipment to China Mobile.
China is certainly a good place to build networks. It’s got huge potential: China’s telecoms market is already one of the world’s largest and is still growing extremely fast. At the moment, carriers are trying to build out their mobile and Internet infrastructure to cope with this subscriber growth, since the country is currently behind more economically developed regions. So there’s a lot of demand for network equipment.
It’s also an opportunity for Nortel to demonstrate its skill in next-generation networks, since many of the Chinese projects are greenfield operations that don’t need to maintain compatibility with existing systems. Instead of using legacy ATM technology, the firm can focus on systems that carry Internet Protocol traffic as efficiently as possible.
So it looks like a good deal and the market prospects are high. However, it’s important to get it into perspective. Compared with the amount of money that will be spent on network infrastructure in China over the next few years, $300 million is hardly anything. And in any case, Nortel is already a major operator in China, with 70% of the market for 10 gigabit per second optical systems.
Yesterday’s deals should boost Nortel’s Chinese presence further, putting it in a stronger position to win more of the serious money contracts that will become available in the market in the next few years. But the Canadians will still have to work hard to achieve this. The other major Western equipment manufacturers including Ericsson and Lucent also have large and expanding Chinese operations and will put up fierce competition.
