Nortel nets new contracts in China

Nortel Networks announces a $44 million deal to provide optical equipment to three phone service companies in the country.

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Nortel Networks announced a $44 million deal Tuesday to provide optical equipment to three phone service companies in China.

The deals are with three regional carriers operated by China Telecom, the largest chunk being a 12-month, $34 million agreement with Hebei Telecom to connect cities in the Hebei province. Nortel expects the equipment, which moves data at 10 gigabits per second, to increase Heibei Telecom's network capacity by 50 times.

Nortel is one among several network equipment companies to focus on the young China market. Others, like competitors Cisco Systems and Ericsson, have been laying a business foundation in the country, which is expected to undergo a telecommunications boom given its size.

"If you look at optical gear, there are only so many people you can sell to in the states," said Maribel Dolinov, a senior analyst at technology consultant Forrester Research.

Dolinov believes that Nortel and other equipment makers will continue to expand to more fiber-starved markets in Asia and South America where optical networks have just begun to root.

Nortel will provide equipment for long-haul cables that run between cities using DWDM (Dense Wave Division Multiplexing) technology, which allows information to be sent over fiber-optic cables in different colors and frequencies so that more data can fit into an optic pipeline.

"Nortel pretty much dominates the long-haul market," said Michael Jung, an analyst at SG Cowen.

According to recent figures compiled by market researcher Dell'Oro Group, Nortel generated 60 percent of worldwide revenue in the long-haul market in the fourth quarter of 2000. Ciena came in second with about 12 percent of the market.

Nortel's lead is more slim in the metropolitan markets, where it won 55 percent of the market compared with ONI Systems' 19 percent and Ciena's 18 percent. Metro networks are scaled-down versions of long-haul networks and need to be designed specifically to power urban networks where space is limited.

Dell'Oro predicts that the long-haul market will grow to $33.4 billion in 2005 from $7.02 billion in 2000. The metro market is predicted to explode to $3.1 billion in 2005 from $383 million in 2000.

Including Tuesday's agreement, Nortel has announced $172 million worth of contracts in China over the last month.