Verizon Renews Deal With Lucent ; Wireless Provider to Spend $5 Billion
Posted on: Wednesday, 14 July 2004, 06:00 CDT
Lucent Technologies Inc. said Tuesday that Verizon Wireless will buy $5 billion worth of network gear, software, and services over a six-year period.
The deal extends a three-year contract Murray Hill-based Lucent signed with the wireless provider in 2001. That deal was also worth $5 billion.
This latest agreement includes $525 million that Verizon Wireless said in March it would spend on Lucent equipment to build a high- speed data network.
"Verizon's going to be a spender, and if Verizon's a spender, Lucent's a winner," said Paul Sagawa, an analyst at Sanford C. Bernstein & Co. Sagawa, who rates Lucent shares "outperform" says he doesn't own any. Lucent supplies about 60 percent of the equipment in the Verizon Wireless network, said Sagawa, who is based in New York.
Investors cheered the deal, pushing Lucent shares up 13 cents to close at $3.51.
Bedminster-based Verizon Wireless is a joint venture of New York- based Verizon Communications Inc. and Britain's Vodafone Group and is the nation's largest cellphone company. Lucent's equipment will help Verizon Wireless expand the coverage and capacity of its voice network and high-speed wireless data network.
Under the agreement, Lucent will provide technology from across its product line, including Bell Labs-developed wireless, optical, and data networking equipment, along with network management and applications software.
"While we are encouraged to see the renewal, Lucent's announcement does not substantially change its existing relationship with Verizon," Prudential Equity Group Inc. analyst Inder Singh wrote in a note to clients.
Lucent may be benefiting from proposed consolidation in the wireless industry.
Verizon Wireless' push into new technologies and services is seen by some in the industry as preparation for the proposed $41 billion merger of Cingular Wireless and AT&T Wireless.
Cingular is a partnership between SBC Communications Inc. and BellSouth, and the addition of AT&T Wireless would make it the nation's largest wireless carrier.
"Lucent has long been a key supplier and has helped us provide our customers the most satisfying wireless experience possible. Going forward, we're going to count on Lucent as we roll out high- speed mobile data services nationwide and continuously improve the quality and reliability of our network," said Dick Lynch, executive vice president and chief technical officer for Verizon Wireless.
The deal comes as Lucent appears to be making some forward progress after years of internal trouble and weak demand by large phone companies. It spent the last several years restructuring its business and laying off tens of thousands of employees.
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This article contains material from Bloomberg News. E-mail: mckay@northjersey.com
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