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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Palmberg who wrote (4828)	10/27/1998 6:17:00 PM
From: Wigglesworth	Respond to of 21876

Big Deal! Lucent Brazil Contract With Telefonica Seen As Big Win By MARGARITA PALATNIK Dow Jones Newswires NEW YORK -- In its first major deal in Brazil, Lucent Technologies' (LU) has won a contract to supply Spain's Telefonica SA (TEF) units in Brazil with wireless technology. The deal is seen as a big win for the U.S. supplier as it links Lucent to a dominant player in Latin American telecommunications. The deal also strengthens the entrance of a U.S. backed technology into the developing Latin American telecom sector. Lucent said Tuesday that it will build a wireless network in metropolitan Rio de Janeiro for up to one million users. Although the companies didn't release the terms of the contract, market observers place its value between $200 million and $500 million. "Rio is the largest cellular market in Brazil," said Lucent spokesman Virgilio Freire. "Telefonica handles three more companies in Brazil, and it is the largest phone operator in Latin America," Freire added. In the race to supply new Brazilian telephone companies after this year's privatization of the former state-run monopoly and the recently awarded rival cellular licenses, Lucent is going against entrenched companies such as Sweden's Ericsson (ERICY), Canada's Nortel (NT) and Japan's NEC Corp. (J.NEC). It has bet big, setting up a manufacturing facility in Campinas, in the state of Sao Paulo, with a staff of 600. Analysts think Lucent is coming in with a splash. "Strategically, (the contract) is pretty good, because Lucent hasn't been a big supplier for Telefonica," said Chris Cona, vicepresident for telecom project finance at SG (F.SGE). And there may be more contracts coming soon. A spokesman at Telefonica said that other deals may be announced for other cellular firms controlled by the Spanish firm, which include companies in the states of Bahia and Sergipe. "Telefonica has a new partner in Lucent," said Telefonica spokesman Ivan Macetti in Sao Paulo. "And it's highly likely that we'll close other deals." Lucent is expected to announce another contract with the Sao Paulo cellular firm Telesp Celular SA (E.TSP) - controlled by Portugal Telecom, a frequent partner of Telefonica, which also holds a small stake in Telesp. A Telesp contract would bring the total to $1 billion for Lucent, said Salomon, Smith Barney analyst Alex Cena. Telefonica's contract lends credence to Lucent's aspirations in Latin America. "Not only is this Lucent's first entry into the South American wireless market, but it also highlights that Lucent's expectations of continued market share gains in a fast growing wireless market are sustainable," Cena said. Lucent's contract with Telerj, the Rio cellular unit of Telefonic, adds to an existing one with Japan's NEC, for up to another one million lines. Observers said that Lucent's relationship with Telefonica represents a victory for the Code Digital Multiple Access standard, known as CDMA. The technology is patented by U.S.-based Qualcomm Inc. (QCOM), and jostles for market share with rival technologies - known as GSM and TDMA - which dominate Latin America and are backed by European firms like Ericsson. Although Brazilian telecom companies had committed to CDMA prior to the privatization of holding Telecomunicacoes Brasileiras SA (TBR) in July, some analysts wondered whether the predominantly European new owners would revert to TDMA. "Telefonica has usually gone TDMA, so this is huge victory for the (CDMA) standard," said SG's Cona. Salomon's Cena agrees: "It's a victory for the U.S. technology because of the expectation that CDMA would be locked out of Brazil, and here they are, with the two major cities." And with most European firms refusing to manufacture CDMA equipment, "once Telerj and Telesp decided they were going to go with CDMA for the digitalization of their networks, the contract was basically up to the U.S. companies," Cona said. -By Margarita Palatnik; 201-938-2226; margarita.palatnik@cor.dowjones.com