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Verizon Wireless, Lucent renew contract

Under $5 billion deal, Lucent will supply equipment, software and services for Verizon's next-generation voice and data network.

Lucent Technologies is still top dog at Verizon Wireless.

The telecommunications equipment supplier said Tuesday it won the renewal of a $5 billion contract to supply equipment, software and services for Verizon Wireless' next-generation voice and data network.

Verizon Wireless and its parent company, Verizon Communications, are important customers for Lucent, contributing a significant amount of revenue each quarter to the company. Verizon represented 29 percent of Lucent's combined revenue for the fourth quarter of 2003 and the first quarter of 2004, according to Steven Levy, an equities analyst with Lehman Brothers. Verizon Wireless likely accounted for more than 75 percent of that total, he said in a note to investors.

"Lucent has long been a key supplier and has helped us provide our customers the most satisfying wireless experience possible," Dick Lynch, chief technical officer for Verizon Wireless, said in a statement. "Going forward, we're going to count on Lucent as we roll out high-speed mobile data services nationwide and continuously improve the quality and reliability of our network."

Verizon Wireless will use a broad range of products from Lucent to expand coverage and increase capacity of its based on CDMA2000 1xEV-DO technology. Among the products that Lucent will supply are its Flexent Modular Cell 4.0 base stations.

The agreement includes the $525 million contract announced in March, naming Lucent as a key supplier for Verizon Wireless' high-speed data network. It also replaces the previous agreement the two companies announced in March 2001.

Wall Street analysts had expected the renewal of the contract, but they were encouraged by the amount, which could exceed $5 billion over a six-year period.

"While a $5 billion contract should normally be a big enough positive for any company, this contract is doubly so for Lucent, in our view," Levy said in his note to investors.

Compared with the first $5 billion contract signed in March 2001, Levy said, this new one will have much more of an impact on the company's bottom line. That's because total revenue for Lucent has declined by roughly two-thirds since the last contract was signed. In addition, the new contract covers a broader range of products and services than the original contract did.