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

To: Ian@SI who wrote (3140)	3/21/2001 6:02:33 PM
From: zbyslaw owczarczyk	Respond to of 3891

ALA to Supply China Telecom With High-Speed Internet Tools public.wsj.com March 22, 2001 Alcatel to Supply China Telecom With High-Speed Internet Tools By H. Asher Bolande Staff Reporter of The Wall Street Journal France's Alcatel SA is expected to sign a long-term agreement Thursday with China Telecommunications Corp. to supply China's dominant telephone operator with more than 50% of the equipment it needs to deploy high-speed Internet access, according to officials close to the deal. The multiyear deal could be valued at between $70 million and $225 million in the first year, with most of the business to follow in later years, based on market research and prevailing market prices. The two companies are scheduled to sign what Alcatel officials call a "frame agreement" at a ceremony in Beijing. It will be attended by senior Chinese government officials along with a visiting delegation of French business leaders, led by former French President Valery Giscard D'Estaing, according to an Alcatel official who asked not to be named. The vendor also is expected to sign a $180 million contract to expand the cellular telephone infrastructure of Jiangsu Mobile, a provincial branch of China Mobile Communications Corp. But the China Telecom deal -- for digital subscriber line, or DSL, technology -- potentially dwarfs the other in significance. The company is one of the largest telecommunications operators in the world and is also in the driver's seat for any mass-scale rollout of new technology in a fast-growing market. China currently has between 17 million and 18 million Internet users; however, only an estimated 300,000 subscribers enjoy broadband access, of which one-third rely on DSL technology. Yet, the country is forecast to add a total of 25 million DSL subscribers between 2001 and 2005, according to a report released earlier this month by UBS Warburg. That amount would account for 17% of global demand for related equipment, second only to the U.S. Because China Telecom owns some 99% of China's installed telephone lines, it accounts for nearly the entire DSL market in the country. Service providers currently pay between $175 and $250 to equip each subscriber with DSL. Analysts caution, however, that a long-term deal is difficult to value because prices drop steadily. The benefit of the deal for China Telecom is that it secures enough supply to fuel fast planned expansion of broadband services without the carrier having to lock in prices for the duration of the contract at a time when prices are falling, according to the officials close to the deal. That is an important factor. In South Korea, for instance, broadband-service providers were caught off guard last year when global supplies of DSL modems couldn't meet exploding demand in their market. Angry customers who signed up for the high-speed services had to wait weeks for installation. Arguably the most mature of several technologies used to connect homes and small businesses to the Internet at high speed, DSL makes use of existing copper phone wires. That means it allows phone companies to inexpensively deploy it without having to replace today's installed infrastructure. But the technology is unsuitable for rural areas and can't match the access speeds offered by other technologies that are emerging. Alcatel's agreement with China Telecom covers both DSL infrastructure, such as switches, and devices installed on the customer premises, such as modems. It comes on the heels of a contract for 1.26 million DSL lines that Alcatel announced last week with Chunghwa Telecom Co., the incumbent carrier of Taiwan. That deal is valued at an estimated $220 million and is sizable, given that only 5.7 million DSL lines are forecast to be installed across Asia this year. Alcatel has an early lead in the nascent global DSL market, with a nearly 50% share, but it faces stiff competition from other infrastructure vendors, including Motorola Inc. and Siemens AG. Write to H. Asher Bolande at hyam.bolande@awsj.com