Alcatel-Lucent announced on Thursday Sep 5, that it had contracted with Telefónica to deploy 8,000 basestations as part of an LTE overlay network in Spain. In addition to the basestations Alcatel-Lucent will provide its 5620 Service Aware Manager (SAM) as well as system integration and management services. Alcatel-Lucent estimates that it has captured a majority share of 60% of this contract and according to the company this is its largest LTE contract in Western Europe to date. Although neither Telefónica nor Alcatel-Lucent has put a value on the contract the Wall Street Journal has estimated that it is worth €300 million ($396 million).
This announcement was quickly followed, on Friday Sep 6, by an announcement from Ericsson which said that it had also reached agreement with Telefónica to supply 1,000 of its RBS6000 multistandard basestations for deployment in Madrid and Barcelona this year.
Telefónica will initially use its 1800MHz frequency band for the deployment until the 800MHz digital dividend spectrum becomes available. Although the company has not provided commercial launch dates for its LTE network we expect this to occur in the fourth quarter this year with network buildout continuing throughout 2014.
These agreements are part of Telefónica’s push to catch up with its competition in Spain –its mobile brand Movistar has been losing subscribers to competitors Yoigo and low cost MVNO’s. Vodafone was the first company to launch LTE in Spain in May this year followed by Orange and Yoigo, and until now Telefónica has been paying for a network sharing agreement with Yoigo. It is for these reasons that Telefónica has been investing in its networks in a down economy and although the Spanish economy is still in bad shape Telefónica will be ready when the economy returns, unemployment increases and mobile bandwidth demand picks up.
This is also a validation of Alcatel-Lucent’s recently announced “Shift Plan” and surely is a precursor of similar deals to come as the company focuses on investing in Ultra Broadband Access. More details on the Shift Plan can be found here (subscription required)
This deal provides Alcatel-Lucent with a real foothold in Europe - a region where it has been relatively unsuccessful so far and perhaps is a sign that it is able to dislodge powerful rivals such as Huawei which along with Ericsson equips the Telefónica-owned O2 LTE network in the UK.