Here's another reason
March 10, 1999
Dow Jones Newswires
European Carrier Testing Nor Telecom's DMS-250 Switches
By BEN DUMMETT
Dow Jones Newswires
TORONTO -- Northern Telecom Ltd. (NT) soon expects to announce that a traditional European carrier is testing its DMS-250 switching system, which would be another endorsement of the firm's equipment that allows telephone companies to convert circuit-switch networks into higher speed data networks.
In a telephone interview, Grahame Rance, vice-president of succession networks at Northern Telecom, Brampton, Ont., told Dow Jones the company expects to reveal the identity the European carrier in the next couple of weeks.
Earlier Wednesday, Northern Telecom announced that AT&T Corp. (T), the big U.S. carrier, is testing Northern Telecom's DMS-250 switching technology to adapt its long-distance network to a packet-switch transmission system from the older circuit-switch form of transmission.
Earlier this year, Northern Telecom announced U.S. carrier SBC Communications Inc. (SBC) is testing the DMS-250 switching system.
If AT&T ultimately chooses to use its equipment, then Northern Telecom would become a second supplier to AT&T after Lucent Technologies Inc. (LU), AT&T's traditional supplier, Rance explained.
For Northern Telecom Ltd. (NT), the AT&T Corp. (T) pact is strategically important for the company. In the past, Northern Telecom has been viturally shut out from selling switching technology to AT&T, which is seen by the industry as a prestigious account, and one that can potentially generate large amounts of business for equipment vendors, Grahame Rance, vice-president of succession networks at Northern Telecom, said.
An AT&T spokesman said the firm estimates it will spend $6 billion to $7 billion on its network this year. AT&T doesn't break out how much it spends on switching or other types of equipment.
According to U.S. broker BT Alex Brown, AT&T capital expenditure plans for 1999 are expected to be even bigger. In a Feb. 22 report, it estimated that AT&T will spend around $10 billion this year, of which an estimated $3 billion is targeted for the company's core long-distance network.
AT&T's interest in Northern Telecom's equipment is driven by its goal to use a minimum of two vendors for all types of equipment to ensure the delivery of better quality products at more attractive pricing.
The AT&T Corp. (T) spokesman couldn't say how long it would take to complete testing of Northern Telecom Ltd. (NT) switching equipment. However, he added that it's unlikely AT&T would look at similiar equipment of another vendor for its second supplier.
Assuming AT&T ends up using Northern Telecom's switching equipment, analysts say Northern Telecom won't likely make any signficant shipments until next year, at which time the deal would start to have a measurable impact on Northern Telecom's revenue stream.
-By Ben Dummett; 416-943-7807; ben.dummett@dowjones.ca
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