Alcatel-Lucent, which has seen greater competition from Chinese tech vendors such as Huawei Technologies and ZTE in the European networking market, is bringing its network virtualization products to the country's largest telecommunications operators.
The company, which is in the process of being bought by Nokia for $16.6 billion, signed separate deals with China Mobile and China Unicom that will be worth a combined $1.3 billion. The telcos are looking to Alcatel-Lucent to help them in their migration to cloud-based networks, and will leverage the vendor's network-function virtualization (NFV) capabilities and software-defined network (SDN) technologies from Nuage Networks, which is owned by Alcatel-Lucent.
The company also will bring its mobile and fixed ultra-broadband access, IP routing and optical networking technologies to the project, which will help China Mobile and China Unicom meet the demands of China's country-wide effort to increase broadband coverage to both cities and rural communities.
The deals also will help Alcatel-Lucent as it looks to expand its reach in the lucrative China market, according to CEO Michel Combes.
"This announcement is highly significant as it furthers Alcatel-Lucent's role as a key technology provider in China and aligns perfectly with our strategy of bringing high-speed ultra-broadband access to open up new opportunities for both service providers and their customers alike," Combes, who will leave the company after the Nokia acquisition closes, said in a statement.
Alcatel-Lucent and Nokia announced the deal in April, saying a combined company will be in a better position to challenge larger rivals likes Ericsson, Cisco Systems and Huawei. Combined, the two companies generated $27.5 billion in revenue in 2014 and $2.45 billion in profit, and have more than $5 billion in R&D.
The acquisition comes during a time of transition for the networking industry, which is dealing with the increasing demands being put on networks due to such trends as greater workforce mobility, big data analytics, the Internet of things (IoT), social software and the cloud. Telcos and enterprises are looking for networks that are more dynamic, agile, programmable, scalable and affordable than traditional infrastructures, and are turning to technologies like SDN and NFV to make this happen.
SDN and NFV essentially virtualize the network control plane and networking tasks—like load balancing and firewalls—which enable them to run on low-cost commodity systems.
China's Ministry of Industry and Information Technology, through the country's Broadband China initiative, is pushing to ensure full broadband coverage in both rural and urban areas by 2020. The agency wants all of the country's municipalities—and most non-urban households—to have access to 100M-bps fiber connectivity by 2017. Also by then, residents of major cities should have access rates of 30M bps, while 80 percent of administrative villages should have fiber connectivity. Urban and rural areas must have 4G mobile access.
Through the new deals, Alcatel-Lucent will deliver 4G TD-LTE and LTE FDD mobile ultra-broadband access, Gigabit Passive Optical Networks (GPON) and Ethernet Passive Optical Networks (EPON) fixed ultra-broadband access, optical transport network and private telecommunications network (PTN) data transmission, IP routing and switching products, voice-over-LTE capabilities and NFV cloud technologies. In addition, Nuage will provide SDN capabilities.
The partnerships expand what Alcatel-Lucent has been doing in China. The company has worked with China Mobile in the past around mobile and NFV technologies and, at the Mobile World Congress 2015 show, demonstrated the NFV capabilities. In October 2014, China Unicom was one of several Chinese service providers that were getting Alcatel-Lucent's 7950 XRS IP core router.