Alcatel-Lucent sees buoyant U.S. market

By @ibtimes on

Telecom equipment maker Alcatel-Lucent is bullish about its prospects in the United States this year, after securing big contracts from major operators like Verizon and Sprint Nextel .

Robert Vrij, who heads Alcatel-Lucent's Americas business, told Reuters in an interview that the group was gaining market share in the U.S. and expected telecom operators' investments in network gear to grow this year.

The magnitude of what is happening in the United States, with three major operators rolling out new networks at the same time, is just amazing, said Vrij, referring to build outs at Verizon, Sprint and AT&T.

The driver of all this investment is the explosion of data traffic on the networks because of smartphones and mobile Internet.

Alcatel-Lucent posted 45 percent higher revenues in the Americas region in 2010, and the U.S. was key to the company's better-than-expected results for 2010.

Asked whether that growth rate was sustainable for this year, Vrij declined to comment saying only: We have momentum now in the United States. We continue to be optimistic and confident.

What happens in the U.S. could go a long way to determining the success of CEO Ben Verwaayen's turnaround plan for Alcatel-Lucent as it enters its third and final year. Verwaayen was brought in to rescue the Franco-American group in September 2008 after a value-destroying merger in 2006.

But the economic downturn led telecom operators to slash spending, complicating Verwaayen's efforts.

That is set to change this year as operators invest more to keep up as more consumers use smartphones and tablets to surf the web on the go.

Analysts expect anywhere from 1.5 to 3 percent growth in operators' spending on networks this year. Alcatel-Lucent has predicted it will be in the high end of the 0-5 percent range.

Vrij said: The U.S. will probably grow a bit faster than the overall market.

In the U.S., the mobile network market is dominated by Sweden's Ericsson and Alcatel-Lucent. That differs from Europe and Africa where Chinese low-cost players Huawei and ZTE <000063.SZ> have grabbed nearly a third of the market, and Nokia Siemens Networks is also a big player.

As a result of the Chinese absence, margins and profits are much better there for Alcatel-Lucent and Ericsson.

The Chinese have been trying to crack the U.S. market but haven't been able to win a major operator contract to date, in part because of national security concerns over key infrastructure.

Vrij said operators were hesitant to entrust a multi-billion dollar contract to the Chinese players because they were new and large cultural differences remained. But Huawei and ZTE are there on every major deal with compete for, he said, citing the Sprint Nextel deal as one they had fought hard for.

I don't know when, but eventually they will break in to the U.S. and we will be ready for them.

(Editing by Jane Merriman)

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