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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Les H who wrote (156107)3/18/2002 1:38:31 PM
From: Les H  Read Replies (1) of 436258
 
vendor financing house of cards

Nortel Finances Telefonica 3G Deal

(13/03/2002, BWCS Staff) Nortel Networks has been awarded a US$250 million contract to supply radio access equipment for Telefonica Moviles’ Spanish and German UMTS networks. However the Canadian equipment supplier is also providing US$230 million in financing to Telefonica as part of their agreement and is not thought to have received any up front payment from the Spanish operator.

In what many industry watchers have viewed as a high risk strategy,since 2000 Nortel like other mobile equipment suppliers has provided vendor financing as part of a number of its European 3G contract wins. These loans include US$1 billion worth of financing for Telefonica’s Spanish rivals Xfera and AirTel.

With its core fibre-optic network business suffering badly from a severe downturn in demand Nortel has shifted its attention to the next-generation wireless equipment market. However here it faces stiff competition from the market leaders Nokia and Ericsson as well as Asian wireless network suppliers such as NEC, which are making a big play for the 3G market.

Some fear that vendors such as Nortel may be exposing themselves to unnecessary risks by lending large amounts to cash-strapped European mobile operators in an effort to secure contracts and speed up the deployment of 3G networks. With such uncertainty surrounding the future of 3G services vendor financing may simply be adding another layer to an already shaky house of cards.
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