Alcatel-Lucent (ALU) announced that it has been chosen to be one of two suppliers for Telecofica’s 4G LTE network in Spain. It will deploy 8000 LTE base stations overlaying Telefonica’s 3G network. This deal is Alcatel-Lucent's largest 4G LTE contract in Western Europe so far.
This contract should be the most important win for the vendor in RAN market out of the US, France and China. Unlike its major competitors (Ericsson, NSN and Huawei), Alcatel-Lucent has little presence in the markets out of above three countries. So, ALU has to focus on an overlay approach to gain LTE contracts. But operators usually intend to maintain a long term relationship with incumbent suppliers. The contract in Spain proves ALU’s LTE overlay approach can work in a developed market. It will be a great boost to ALU’s confidence on its LTE strategy.
However, Alcatel-Lucent’s win must mean someone’s loss. It is said that Ericsson would be the other supplier for Telefonica’s LTE network. If it is true, it would mean NSN loses its position in Telefonica’s LTE network, although it is a 3G incumbent. It is not clear yet whether current LTE contracts only cover 2.6GHz band or also include the future deployment at 800MHz band. In the former case, NSN would still have opportunity to gain contract in the future.
The win of ALU’s overlay strategy may also encourage other smaller vendors, e.g. ZTE and Samsung. The two vendors have little installed base in global 3G RAN market either, so they will take the similar overlay approach in LTE market. To convince operators accept the overlay network, strong selling points are needed. LightRadio is the one for ALU. Two pilot networks based on LightRadio products have been run in Madrid and Barcelona before ALU gains Telefonica’s contract. For ZTE and Samsung, it looks both of them are working on the centralized/cloud LTE solution, named as Cloud Radio by ZTE and Smart LTE by Samsung. They will try to leverage the experience in domestic LTE market to build global presence.