Nortel bets on LTE as prediction rises to 32 million by 2013

In a bid to gain head start in the development of technology conforming to LTE (Long Term Evolution) technology standards across the globe, Nortel has withdrawn funds from its in-house research & development for WiMax and diverted the funds to development of LTE-based solutions. The R&D activities for WiMax will be handled by Nortel’s Joint Venture for WiMax with Israel-based Alvarion.

The Globe and Mail newspaper has an interesting analysis of Nortel's revenue model and how moving to LTE may help in long term.

Analysts praised the move, in part because some of North America's largest phone companies are leaning toward LTE.

Richard Lowe, president of Nortel's carrier networks division, says the company is the only one in the industry conducting live trials of LTE.

The first LTE products are expected to be ready for sale in 2010, and the market is estimated to be worth $400-million in the first year and $1.6-billion in 2011.

Even if Nortel is first to get LTE to market, the technology is unlikely to match CDMA for profitability. Mr. Notter describes Nortel's CDMA business as a "gravy train," thanks to what has effectively been a duopoly between Nortel and French telecom giant Alcatel-Lucent.

One reason the transition to LTE will hurt Nortel is because the company will be competing against more vendors, including Telefon AB LM Ericsson of Sweden, Finnish-German joint venture Nokia-Siemens Networks and China's Huawei Technologies Co. Ltd., Mr. Notter said.

Nortel's own financial forecasts indicate the juicy 24-per-cent operating margin in wireless will slide to between 13 per cent and 16 per cent by 2011 as annual growth falls 3 per cent on a compounded annual basis.

Nortel vows to offset these declines by offering new software and services to customers on networks capable of handling greater amounts of data in new and faster ways.

One such service is unified communications, which Nortel chief technology officer John Roese defines broadly as multimedia features that allow people to interact and collaborate from any device and any location.

In terms of intelligent network services, 61 per cent of companies said they were interested in buying unified communications, which they considered to include integrated voice, e-mail, instant messaging, Web and video-conferencing functions.

In another news, Long Term Evolution (LTE), the 4G technology of choice for many major wireless carriers, won’t be commercially launched until at least 2010, but could see upwards of 32 million subscribers by 2013, according to a new study by ABI Research.

Asia-Pacific countries will account for much of LTE’s early growth, according to ABI, given that China Mobile, and Japan’s NTT Docomo and KDDI are expected to make use of the technology.

“ABI Research anticipates about 12 million Asia-Pacific LTE network subscribers in 2013,” said senior ABI analyst, Nadine Manjaro. “The remainder will be split about 60-40% between Western Europe and North America,” where Vodafone and Verizon Wireless (respectively) have announced plans to adopt LTE.

Meanwhile in Korea, KTF announced that its working on LTE with Samsung and ETRI. LG has also been working on LTE from the start.