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Telecom gear suppliers bank on spending boom

Equipment makers salivate over prospect of more spending from carriers, but not everyone will get an equal slice of the pie.

Spending on next-generation telecommunications gear is expected to rise over the next year, as carriers announce big projects to increase speed on landline and wireless networks.

On Tuesday, SBC Communications announced plans to spend between $4 billion and $6 billion over the next five years on a fiber-optic network that will provide video, Internet and telephony over an Internet Protocol network. It could begin trials this summer.

The carrier plans to work with Microsoft to develop IP digital television services. But one of the biggest beneficiaries of this build-out will likely be the French telecommunications equipment maker Alcatel. SBC selected the company as a primary supplier of fiber-optic infrastructure gear back in February. But analysts say that other companies, such as Advanced Fibre Communications, also may get a cut of the spending.

On Wednesday, Alcatel shares jumped 83 cents, or 6 percent, to close at $14.88. On Thursday, the stock was still climbing. It was up 31 cents, or roughly 2 percent, to $15.91 at midday.

Previously, Verizon Communications announced similar plans for a new fiber network to provide higher-speed services to customers. Increased attention on these network build-outs has spread optimism throughout the networking market. Stocks from several other companies, including Ciena, Cisco Systems, Sycamore Networks and Juniper Networks, posted gains on Wednesday.

Wireless equipment vendors also have gotten a boost from good news from Sprint. The carrier said this week that it will accelerate spending on a planned upgrade of its wireless network to increase data speeds. The company is upgrading its network to a CDMA (Code Division Multiple Access) based technology called Evolution-Data Optimized.

Although this news was not a surprise, Sprint's previously discussed plans called for a more eventual migration that would evenly spread the $1 billion committed to the project between 2005 and 2006. The revised plan calls for the bulk of the money to be spent in 2005.

The upgrade requires adding software and circuit packs to existing base stations. Because the upgrade makes use of existing equipment, vendors already selling gear to the company should benefit. Lucent Technologies is the largest wireless vendor to Sprint, followed by Nortel Networks, Motorola and then Samsung. Analysts are optimistic that other carriers will follow suit with aggressive spending on higher-speed wireless networks.

"Now that Sprint has followed Verizon with high-speed wireless data, we would watch Cingular and AT&T Wireless for a more aggressive migration to an upgraded wireless network," Simon Leopold, an equities analyst for Morgan Keegan, wrote in a research note published this week.

The announcement is also good news for wireless component suppliers including Qualcomm and Sierra Wireless.

But Sprint's plans could be viewed as a setback for companies focusing on a competing technology, EV-DV, which supports both voice calls and wireless data applications. Steven Levy, an analyst with Lehman Brothers, said in a research note that Nokia, Texas Instruments and Samsung could take a hit.