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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (2284)	8/26/2000 9:30:22 AM
From: shotski1	Read Replies (1) \| Respond to of 3891

Alcatel mentioned near end Friday 25 August 2000 Nortel plays its China card As Chinese Internet demand explodes, the world's telecom giants lock horns KATHY WILHELM DJ Call it the battle for the China telecom market, Part 2. The world's leading telecom's network suppliers are stepping up their marketing and investment in China after a lull of several years. Now, Internet fever is spurring demand for their fibreoptic cables, high-capacity switches, routers and other gear. The end of China Telecom's decades-old monopoly and the emergence of competition, albeit limited, is also helping. China's four national fixed-line carriers - China Telecom, China Unicom Ltd., Jitong and Netcom - have announced plans to spend a total of more than $1 billion this year alone on Internet-related infrastructure. Nortel Networks Corp. has taken the bait. The Canadian company is the world leader in sales of high-capacity optical systems, which transmit data in the form of light rather than electrical signals, and are key components of Internet networks. It announced plans on July 31 to make in China one of its most advanced products, 10-gigabit optical systems, the fastest currently on the market. Such a system can carry 130,000 voice calls or 192 television channels simultaneously. Nortel also said it will invest $25 million over three years to expand its research-and-development centre in Guangzhou. "We think we can produce the equipment here just as cost-effectively in the long term as we can in North America," said Robert Mao, Nortel China's president and chief executive. Nortel is transferring the technology to an existing joint venture, Guangdong Nortel, which already makes equipment for the China market. (The company won't disclose how much it's spending to give the joint venture this added capability.) Mao said sourcing 10-gigabit systems out of Guangdong is part of a long-term plan to turn the facility into a production base for the Asia-Pacific region. Such pledges are music to the ears of the Chinese authorities, and show that the rules of engagement have not substantially changed since Part 1 of the battle for Chinese telecom sales. During the early and mid-1990s, China's economy was growing at a double-digit clip and every multinational wanted a piece of its mythical 1.2 billion consumers. Nortel and its competitors - Alcatel, Lucent Technologies, Ericsson and others - competed for favour by localizing production and transferring technology, and poured millions into joint ventures and research centres. Sales were brisk but profits never met expectations because intense competition, and the surprisingly rapid rise of domestic suppliers, drove prices down. Domestic companies now supply most network digital switches, for example. Foreign manufacturers' investment slowed in the late 1990s as the Chinese economy cooled. Part 2 of the market battle might play out more lucratively for Nortel and the others if China were to fully liberalize its telecom industry, allowing more operators to jump in and loosening government controls on the pace of network-building and the price of services. Chinese businesses have barely begun to use the Internet and yet networks are already overstrained. Nortel knows how telecom liberalization can pay off for a supplier from its experience in Europe since Jan. 1, 1998, when national barriers to competition were removed. New players emerged who were more savvy to the Internet's potential than the older state-owned operators; they became Nortel's best customers for high-capacity optical and Internet-based systems. "Nortel was zero in Europe as far as transmission goes as recently as three or four years ago," Mao said. "We had no relationships. Then things opened up." Now, he boasted, Nortel systems carry half of Europe's Internet traffic. The same opening will happen in China, he predicted. Then Mao added a qualifier: "It will happen, but maybe not as fast, and it will happen maybe with a different twist." Asked how soon China will see real competition, even Nortel's Mao said: "Not less than five years." That's not to say that without a Big Bang, China is a desert for Nortel. During the past 18 months, Nortel has begun or completed installation of four 10-gigabit optical networks, three for China Telecom and one for challenger China Unicom, using imported equipment. So far, Nortel is the only supplier to announce plans to make 10-gigabit systems in China, but Lucent is installing an imported system in Beijing. Alcatel said it's selling smaller- capacity 2.5-gigabit systems, but it too expects the market to move toward the bigger transmission pipes. "By next year, probably 30 per cent of China's optical-transmission market will be 10-gigabit," Mao said. The lines are drawn. Let battle begin. montrealgazette.com