Another Blow to CDMA

By Mark Evans | Published: October 11, 2008

This does not come as a surprise but Bell and Telus, which operate CDMA wireless networks in Canada, are going to jointly spend $1-billion to do a network overlay using GSM and HSDPA technology.

Over the years, Bell and Nortel have been die-hard Nortel customers but with Nortel out of the GSM game, Bell and Telus will use Nokia Siemens Networks and Huawei Technology.

The move by Bell and Telus was seen as inevitable so they could compete with Rogers Wireless, which operates a GSM network and, as a result, gets earlier access to many of the cool, new wireless devices such as the iPhone and Blackberry.

In a statement, Bell said the investment “also confirms the company’s migration path to the global Fourth Generation (4G) Long Term Evolution (LTE) standard”. You have to wonder if Nortel has a chance to get some of the LTE action or whether it’s not shut out from Bell/Telus.

As someone noted in the comments in an earlier post, Nokia Siemens’s North American president is Sue Spradley, who used to be president of Nortel’s global services and operations unit.

GSM overlays of CDMA networks is becoming increasingly common. The only market where CDMA really shines is China. (Addendum: CDMA is pretty popular in the U.S. and Korea).

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  • Carlos

    This does hurt NORTEL…BIG time! Some how NORTEL is somewhat shutting the doors on itself. All the changes internally done by NORTEL seem to be a waste of time…., and MONEY! NORTEL is hoping that LTE will carry them through…but, as stated on this article….will NORTEL have a chance now that the TELUS, and BELL have chosen another vendor. This will be VERY hard to accomplish….they may throw a cookie at NORTEL….but NORTEL will not be their to go company anymore.

  • Nortelhand

    Mike Z has been setting Nortel up for the future, but can Nortel live long enough to see the future? It is not looking good for the home team.

    MZ hope you can pull a rabit out of your hat.

  • Another Nortel Hand

    It sometimes seems that Nortel is trying to grow the business without considering what the customer needs or wants. This current management team must think they can control what the customer will buy and it doesn't seem to be working.

  • yes4aapl

    ! NORTEL is hoping that LTE will carry them through…but, as stated on this article….will NORTEL have a chance now that the TELUS, and BELL have chosen another vendor.
    ======
    re
    4G , leapfrog, WiMax and LTE, exiting UMTS!
    all combined it was the worst mistake one would make.
    Nobody with brains would do what Mike Z and Nortel did. /CTO?/
    Betting on 4G when 4G was just a Buzzword!
    How customers reacted to that?
    I saw customers replacing Nortel's 3G gears with gears from other vendors, right away.
    Why Telus and BCE would ever consider Nortel in LTE in few years from now when buying 3G solutions /is it 3.5 G?/ from SI and Huawei?
    Lets see the article again.
    Telus and BCE will finish upgrading to 3.5G in 2010 using SI HW?
    When Telus and BCE would start replacing that with 4G?
    in 2015?
    Will SI be around in 2015?
    Will NT be around in 2009?
    I don't think so.
    Nortel needs cash badly, that's what Nortel said, and that's why Mike wanted to sell the best part of Nortel first _monetize MEN!!
    It looked like there were monkeys running the business.
    Nope,
    It was Mike Z who tried to sell MEN behind the closed door /my assumption/ and did not find a buyer.
    so
    Mike advertised sale of MEN publicly with lower expectations /I assume again/ on Sep 17 2008
    All who think Mike did not explore “Normal Way” to find a Buyer for MEN are wrong /in mho/
    Will Nortel find a Buyer for MEN?
    That's the question Mark Evans published in another tread.
    There is no sense to repeat all of that here.
    I believe that Mike Z was talking about CH11 before XMas.
    Sooner is better in that case. /again MHO/
    Why anyone in power would leave Mike with $3 bill cash on hand? It's too much to waste and to little for business operation!
    It's just enough for new bonus payment for improved Operational _management Margins before BK! None GAAP numbers…btw
    No shame at all!
    related article
    http://disqus.com/people/44e7dbbe2df4baa253b75c…

  • Novice Investor

    Bombardier has been in financial trouble a few times over the years and the government came to their rescue. How would the government assist Nortel ?

  • Nortel'erForLife

    many insiders were saying that Bell and Telus would bo LTE by 2011….Rogers is doing LTE by 2011 (I've heard from a prominant exec's mouth at Rogers). This is a huge blow to the Nortel but its been known for a long time. I met Mike Z a year go and I asked him what kept him up at night; he said 'the prospect of Telus and Bell going GSM/UMTS'…..well…it happened but they knew about it a while back. I am sure that LTE will put Nortel back in the game with Bell and Telus (they are already trialing if i'm not mistaken) but the problem will be that it is going to be a commodity market for LTE (like wimax) with low margins..especially compared to the cash cow that CDMA is. The fact that Huawei is in the canada game is scary…..they are penetrating and will continue to erode margins.

    UMTS sale was a big mistake; AT&T signed recently with Alcatel for the Nortel UMTS equipment which was a big deal…and now Bell and Rogers….unfortunate. I'm sure UMTS would have been a profitable division of nortel by now. The problem with nortel is as follows….they always have the innovative technology…they just always mis-time the markets. I wonder if its a problem with Product management. For example; Optera terabit router in early 2000's, Equinox OC768 early 2000s etc…..Canning MPE (neptune) was another mistake in my opinion…..

    I love nortel…and there is a part of me that will always have a soft spot for it…but i'm thinking that its going to be a slow and painful death under this management team….turnarounds should not take more then 18 months….3 years is a bit long. There is no revenue growth in sight and the profit margin increases are likely the product of deferred revenue (which should count) but I think that most of the deferred revenue is coming from deals 5 years ago (which i don't think should count)…….especially in the Enterprise division. They are making the enterprise division revenue growth look great by putting increased effort on unlocking deferred revenue from 4 years ago…..this is building the case for Joel Hackney (president of enterprise) to take the company in that direction….enterprise isn't a bad move and they can defintely use some judo strategies (like green initiative) to gain on cisco market share….i think nortel is going to try and sell MEN, Wireless and aquire a prominant enterprise company…maybe try for Avaya again?

    my two cents

  • SaveNortel

    totally agree with the Bombardier comment. The gov't should step in with aid similar to what they did with Bombardier. Nortel is 40% of Canada's public R&D spend. Canada's global innovation and reputation as a mutlinational contributor to technology is heavily based on Bombardier, RIM, and Nortel. What is Canada without these three innovators? Noone wants to help Nortel for obvious shareholder hate issues, but Canada would be at a huge loss if they let this company go under. Over 200 companies have spun off or can trace their roots to Nortel in Ottawa alone including JDS, Newbridge (now alcatel), Corel, Mitel, Cognos and many many others. Canada should help clear the nortel balance sheet, take it private and let it become great again.

  • Another Nortel Watcher

    Unless government aid comes with a requirement to change out the board and the leadership team, it would be pointless. Without a sound growth strategy, Nortel would end up right back in the position they're in now.

  • exnt

    UMTS would never have been profitable for Nortel:

    1. Very high fixed R&D costs with a lot of engineering done in France.
    2. Miniscule market share compared to Ericsson, Nokia, Huawei.
    3. Very very low market prices – no one is making money in UMTS today as pricing is about half of CDMA
    4. Very poor UMTS management team with Biston, Jezouin, et al. Their main goal was job preservation for al French employees, not profit for Nortel.
    5. Lost almost every deal: AT&T, Softbank, CHT, Orange, …

    They were lucky to get some cash for it. Let ALU try to make it profitable…good luck….

  • exnt

    Let me correct a few points.

    1. Sue Spradley is ex-Nortel but she was never a strong leader and definitely had no relationship with Telus or Bell. There are definitely some ex-Nortel people in Huawei with Bell and Telus relationships.
    2. CDMA shines in USA, China, Korea. There are over 75 million CDMA subs in USA alone.
    3. LTE will not appear until 2011 or 2012 as a data technology. Like EVDO and HSPA it will be slow to start due to high costs and lack of terminals.

  • protosphere

    Interesting they announced Bell using their 40G technology a week or 2 ago and now we hear Bell using others for GSM.

    This saga has never failed to keep investors and employees on the edge of their chair.

    Customer exodus may be suddenly catalyzing now but this is certainly not a new development, correlated to its slower decline in stock price over the last few years.

    It is scary to consider one analysts comment in that customers can go on strike all at once if they believe they won't be around next year. He also anticipates Nortel will be sold or severely restructured by Christmas.

    In Canada, in their very own backyard, HBC uses Cisco, BMO ripped out NT gear and replaced it with Cisco's, Sprint Canada used others and now Bell is using others… the trend has not been their friend for a while

    Their last large order was BSNL which lost a bundle as they set specs against growing companies like Huawei requiring a decade international experience yet they later wanted to partner with, even long boasted Putian went with Noika restricting NT to field trials. This international pro blaming local supply chains with BSNL where they even replaced faulty product with an other vendor. Jinxed seems like an understatement amid endless comedy of error like buying PEC for $448M and lucky to get 200M so recently thereafter, blowing a whopping $20B in acquisitions during the bubble when when they had a 400B cap relative to under 1B today and with a history of fraud allegations to boot with so many still there….endless fascinating saga

    Now, their aging CDMA which accounts for ALMOST ALL EARNINGS termed “gravy train” /'”cash cow” suddenly goes into steep decline after already losing money for a decade. WOW.

    They already exhausted so many assets like manufacturing, headquarters, and anything not nailed down, UMTS, ongoing layoffs, printing a whopping $4B in Nortel paper (2B bonds with pension deficit as footnote and 2B dilutive notes, then B3 rated as Moodys warns now, and they need to sell MENs to pay for even more layoffs to live another day, etc… There is sooo much. Too much. Amazing they lasted this long.

    Sprint one of their largest customers used others for WiMax, a long boasted area NT partnered out as it is looking to do with 4G-LTE now, given they sold their UMTS to migrate 3G customers from. Sold UMTS for around what SAP software costs $300M, and where did cash from Flextronics with endless untransparent with intent ammendments deal go.

    Their largest customer Verizon announced belt tightening who NT is no longer their largest supplier and their dire straights is catalyzing at this stage reflected in the exrteme presplit 14 cent stock price for endless reasons.

    What do they have with all this debt, cash burn. and declining outlook to salvage even after restructuring. Another gamble as a smaller company in an increasingly competitive sector?

    No lack of cost cutting pros but business development is in the gutter short of growing or maintaining increasingly losing revenues. Perhaps the premise of how revenues are generated has been flawed from the onset, riding their past gravy train and fruiltless acquisitions with their crazy levels., now calayzed to a green keystone team of exorbitantly paid and enthusiastic juniors challenged at turning anything around.

    CEO had MOT contracts history from day one after, provided the ultimatum in settlement followed by downplayed mega revisions that doubled tanking settlement shares, calling buying 20 buck buying opportunity last August 2007 as it trades 1.40ish now, promoted than terminating inexperienced pals to employees horrors while cutting benefits and ongoing layoffs etc… good people working for a bad company or just a bad car accident /train wreck ruining thousands no matter who runs it?

    With Nortel's enormous politically and economically powerful people's contacts, from finance to what Currie termed “their friends at the SEC” , the regulating bodies even acting contrary to what they are there to do to, adding insult to injury. Now look.

    One almost wonder how much all of this could have been circumvented should better heads have prevailed than a green team risking careers. I don't think all the trustees horses and all the trustees men can put Nortel together again at this point.

  • Tongue.In.Cheek

    Stop and understand one other motivating factors here, the 2010 Winter Olympics. With tens of thousands of visitors coming to Canada, many of which will be HSPA users in their home country, now Bell (and Telus) as the Olympic Network Provider can capitalize on International Roaming Fees that until now Rogers would have locked down.

  • Mr Real

    At this point it would be very difficult to find a company in the business that doesn't have “former NT” people working for it.
    If you know of any, name it :)
    So trying to bring that up and use it in some kind of a “connect the dots” logical thinking argument doesn't sound all that logical.

  • many

    Mr. Real,

    This is exactly the problem. Most of the people out there working for other companies now do not feel too kindly toward nortel or it's management. This really hurts them when those people are working for customers in a decision making capacity.

    Nortel has never come clean about the royal screwing they gave a lot of employees who had worked there a long time and had been the ones that grew the company to the market share and potential it had in the mid 1990's. IMO there were a few greedy execs that took way more than their share and despite being in positions of leadership, were asleep at the wheel making very bad choices.

  • ex-Nortel

    Sue Spradley was a very competent leader and was close with the Gary Daichendt and Gary Kunis. When Mike Z came on board, Sue told him that she disagreed with his ideas / proposals on turning Nortel around. She did not think they would succeed as they were simply not dealing with the myriad of problems and issues facing Nortel.

    Sue thought that Mike Z was actually clueless about the business he was about to run, did not understand the problems that Nortel faced in the market place, and that 6 Sigma programs were going to be a distraction away from what was necessary to fix Nortel.

    And the rest is history.

  • notafan

    might i add that cdma is also “pretty popular” in japan as well. gsm is not deployed in japan and korea and there would be more cdma subscribers in these two countries than in us.

  • South of the Border

    To the Folks up North, Happy Canadian Thanksgiving!!!
    Down here South of the Border we are stuck with Columbus Day, ugh!!!

    http://www.greenleft.org.au/2006/688/35712

  • exnt

    Yea, Nortel people everywhere. However, some ex-Nortel people had links to Bell and Telus, and some did not. In this case, the Huawei people like their CTO Charles Martin, had links. Mike Reiter, an NSN salesperson, used to work for Nortel as the Telus wireless salesperson. These two companies won the Telus business.

    Ericsson has few or no ex-Nortel people. ALU has few. NSN has many. Huawei has very many.

  • exnt

    I respectfully disagree that Sue was a very competent leader.

  • Nortel investor

    Thanks Good Neighbour… A lot of turkeys have made the ultimate sacrifice for today… CHEERS and Enjoy Columbus Day…
    Even Nortel is having a good day as it is up about 18 cents.

  • ex-executive

    Good people are moving to completion, and the dead wood stays with Nortel.
    There was a VP in CDMA that during his ‘career’ with Nortel managed to screw up whatever he touched. His last screw-up; support and production control move to China is a disaster, but instead of being fired he's being moved to VoIP.
    Good on you Mike – keep dead wood floating.

  • Clint

    Oh yea.
    I've made this point many times.
    Management from the cab driver on down has ruined this company. I could give you fifty examples like the one you noted above.
    China, Vietnam..and especially Mexico…All disasters.
    Check out the quality and competency you get from Mexico.
    A total Disaster.

  • CDMA

    CDMA is rapidly losing its popularity even in Korea as the major carriers here move their subs to UMTS and LTE when it becomes available. There is one smaller carrier who are still only CDMA only, but even they are seriously thinking about going to LTE. Since LTE is rooted in UMTS both in standards and customer base, I wonder if Nortel has a chance in their LTE effort. Their niche would be going after CDMA customers going to LTE, but unless they have a product platform that migrates from CDMA to LTE, it's more likely to be an opening for major UMTS/LTE players to just come in and take over the market share (like in the case of Bell/Telus)… It seems like an uphill battle for Nortel and I wonder if there is any justification for Nortel to keep trying in LTE. Anyone?

  • AcrimoniousAl

    “It looked like there were monkeys running the business.”
    I thought we agreed to adhere to a “certain standard of behavior” and stop insulting monkeys.
    Don't forget all the positive attributes assigned to monkeys in the Chinese zodiac

  • yes4aapl

    Thank you for pointing it out.
    Yes, I apology for using that Comparison.
    I have just checked YouTube searching for Nortel+scandal
    I see some politicians are asking the same questions as me.
    When Government empty jails letting out some small petty cash “criminals” and start arresting white collar criminals responsible for defrauding billions$$?
    here it was
    http://www.youtube.com/watch?v=QIE3f9RUKoQ&NR=1
    http://www.youtube.com/watch?v=-E7og6Rcsf8&NR=1

  • yes4aapl

    Thank you for pointing it out.
    Yes, I apology for using that Comparison.
    I have just checked YouTube searching for Nortel+scandal
    I see some politicians are asking the same questions as me.
    When Government empty jails letting out some small petty cash “criminals” and start arresting white collar criminals responsible for defrauding billions$$?
    here it was
    http://www.youtube.com/watch?v=QIE3f9RUKoQ&NR=1
    http://www.youtube.com/watch?v=-E7og6Rcsf8&NR=1

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