September 25, 2008

Ericsson Tries to Impress Telecom


AS ALCATEL-LUCENT's New Zealand workforce climbs toward the 1000 mark, Swedish rival Ericsson has stepped up its efforts to muscle in on its close relationship with key customer Telecom.

Telecom outsourced the management of its fixed and mobile network to Alcatel and Lucent -- which have since merged -- in two five- year deals worth a combined $320 million when they were announced in 2003.

Alcatel-Lucent New Zealand has taken on more than 200 staff in the past year as additional work has flowed from the partnership, including building a new mobile network for Telecom and cabinetising its fixed-line network, and it now employs more than 800 people. Five years ago the subsidiary employed fewer than 200.

The French-American technology giant has recently signed expat New Zealander Steve Lowe -- formerly an AT&T vice-president based in Hong Kong -- to head its business here.

Mr Lowe says the company's workforce could reach four figures this year as a result of the spike in activity at Telecom and other work, such as a network communications upgrade it is carrying out for national grid operator Transpower. Future growth will depend in part on whether future governments subsidise the roll-out of fibre to the home.

The depth of Telecom's outsourcing relationship with Alcatel- Lucent was unusual when it began, and there has been speculation that it might be reviewed by the company's new management, led by Paul Reynolds, which has inherited it.

Ericsson has been demonstrating its roadside cabinets and multimedia technology to opinion-formers such as InternetNZ, but New Zealand managing director Jeff Travers concedes it is difficult to know if it stands a chance of unseating Alcatel-Lucent.

"Certainly we will give Telecom every support they need in anything they look for, but I think it's too early to know the consequence of their changes."

Ericsson has been showing off roadside cabinets that don't require air- conditioning and in which internal VDSL2 Internet access cards are cooled by small fans built on to their circuit boards, but with Alcatel dominating the world market for dslams and Telecom's cabinet-purchasing decision made, its best chances may lie in the mobile arena.

"The past in Telecom has been all about voice, but the future is about video, images, TV and other media and the networks in New Zealand need to be prepared to offer that, including over mobile," Mr Travers says.

"In that respect I think Ericsson is a world leader. We have recently purchased Tandberg -- the head-end encoder for most television operators, Marconi for their high-speed transmission capabilities and Redback to bring IP into the core network. These are very strategic acquisitions to strengthen the technology base for video and television."

Mr Lowe says his own appointment is a demonstration of Alcatel's commitment to the New Zealand market.

"Our relationship with Telecom continues to be very strong. Part of my role is to ensure we continue to maintain that."

He says there have been occasions when Alcatel-Lucent, as Telecom's trusted outsourcer, has recommended buying equipment from rival vendors instead of using its own, but would not give details.

Telecom Wholesale product manager Paul Hayes says equipment supplied by the likes of Ericsson and Alcatel is often "much of a muchness" and new suppliers sometimes have to raise the bar to get a look-in.

"The big challenge from our perspective is really around the integration into our various bulk management, billing, provisioning and operational support systems and that is where the benefit of having a partnership with one vendor brings rewards in terms of making that a little bit easier.

"We have a partnership with Alcatel and buy a lot of equipment from them. That doesn't necessary preclude other vendors, but it has obviously got to be a very strong proposition."

Having other suppliers snapping at Alcatel's heels helps to keep the partnership honest, and giving sufficient encouragement to competitors is a difficult and delicate balancing act, Mr Hayes says.

"Given everything on our plate in terms of what we have got to deliver this year, it is quite hard in terms of the cost and resource but you don't want to rule it out."

Mr Travers says Ericsson is prepared to be patient.

"We are here to support Telecom and if they have what they need from their current arrangements that's great.

"We will give them what advice they need in new areas, and we want to be part of their future -- and New Zealand's future."


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