Verizon Wireless on Monday said it has awarded a $5 billion contract to Lucent Technologies to help drive the adoption of Verizon Wireless' upcoming third-generation wireless networks.
Under the three-year agreement, the company said it will work with Lucent to deliver the first phase of its high-speed third-generation, or 3G, wireless networks beginning later this year. With Lucent's products, services and software, Verizon Wireless, a joint venture between Verizon Communications and Vodafone AirTouch, said it is aiming to quickly and cost-effectively release high-speed wireless Internet services.
News of the deal gave a much-needed boost to Lucent shares. At market close, shares of the company were up $1.98 to $11.97, a 20 percent jump.
3G wireless technologies are expected to enable high-speed, always-on Internet connections for a number of devices including mobile phones, handheld computers and laptops within the next few years. Estimates vary as to exactly when 3G systems will be readily available, but most analysts expect the new technology to be well received once it debuts.
The deal comes at a crucial time for telecommunications equipment maker Lucent. The company, based in Murray Hill, N.J., has been working to boost sagging sales and face other operational challenges.
Lucent recently began a huge restructuring plan, hoping to reverse substantial losses and cut expenses by as much as $2 billion. The seven-point restructuring plan, outlined in January, includes laying off about 10,000 workers.
A number of players in the communications sector have been pushing their 3G wireless efforts. Last December, Nortel Networks signed separate deals with Sierra Wireless and Xircom to develop high-speed modems for future 3G wireless networks. Lucent also last year formed a similar 3G wireless agreement with Sierra.
Like many wireless carriers, Verizon Wireless is on a trail to upgrade its wireless voice networks, aiming to provide customers with a service that could double its existing voice capacity and increase data transmission speeds tenfold. Bedminster, N.J.-based Verizon Wireless claims that the first phase of its 3G technology, dubbed cdma2000 3G1XRTT, will be the first commercial system introduced in the United States.
Last week, rival Sprint PCS said it plans to be the first to launch 3G services in the United States, with a limited offering at the end of this year, even as some competitors around the world announce delays. Japan Telecom, Telecom Italia and South Korea Telecom are among those that have delayed 3G wireless offerings.
Lucent and Verizon Wireless have partnered in the past. Earlier this year, Lucent said it plans to supply equipment to Verizon Communications to beef up the company's optical network. Under the pact, Verizon Wireless will buy equipment, software and services from Lucent to help build a network that will link New York with London, Paris, Amsterdam, Brussels, Frankfurt and Milan, and that will start operating by the second quarter.