Alcatel: Partnering for profits

With literally millions of kilometers of cable, satellite and network infrastructure wrapped around offices across the world, Alcatel is a household name for telecommunications. With the ambition of building next-generation networks and developing next-generation products and services for the Internet, Asia Pacific Vice President Jean-Herve Leger believes that the world is moving from wired to wireless in a big way.

Jean-Herve Leger With literally millions of kilometers of cable, satellite and network infrastructure wrapped around offices across the world, Alcatel is a household name for telecommunications. With the ambition of building next-generation networks and developing next-generation products and services for the Internet, Asia Pacific Vice President Jean-Herve Leger believes that the world is moving from wired to wireless in a big way.

What are some of Alcatel's telecom milestones?
Alcatel is always at the forefront of mobile technologies. We were the first to demonstrate WAP over GPRS in Telecom 99 in Geneva. Our leadership position has been illustrated by TMN’s (Portugal Telecom’s mobile company) commercial launch of GPRS in Portugal – the first GPRS deployment in Europe – in November 2000. As another example, Alcatel also supplied tele.ring in Austria with a complete GPRS end-to-end solution (radio access, core and applications) with commercial operations starting in January 2001.

The mobile business is particularly strong in the Asia Pacific: the more developed economies of Hong Kong, Singapore, Korea and Taiwan have already seen mobile penetration outpace that of fixed line, while this is also true of developing countries with less extensive fixed line networks.

We have set up a joint venture named Evolium SAS with Fujitsu. The company combines Alcatel’s expertise in the fields of GSM, GPRS ATM and IP technologies with the W-CDMA experience of Fujitsu as one of the two key suppliers of NTT DoCoMo, operator of the hugely-successful i-Mode service in Japan. We are confident that Evolium will leverage the unique and complementary strengths of the two companies to offer credible 3G solutions that offer easy scalability from their existing 2G systems, as well as provide first-mover advantage to operators.

What do you think of the market potential for wireless services in Asia?
The market potential for wireless services in Asia Pacific will be huge. With the advent of 3G, people will increasingly use their mobile phones to access data services instead of using it mainly for voice applications.

Alcatel is paving the way for real value-added mobile applications via Nextenso, a wholly-owned subsidiary of Alcatel, The company is developing a suite of modular applications and services with location-based features.

Going forward, we foresee that location-based services will offer mobile service providers a new, potentially lucrative business model. With these services, an operator’s network can detect where its customers are and alert them that a cinema nearby will be screening a blockbuster movie in 15 minutes’ time, and that there are still tickets available. This will result in win-win partnerships for both the operators and the commercial establishments, who can generate more business.

We are also actively forming partnerships for the development of innovative 3G services in e-entertainment. We have announced partnerships with UGC (a European cinema chain) and Kalisto (a world leader in interactive video games) to develop interactive cinema applications and multi-player games for 3G mobile users on new generation GPRS and 3G mobile networks respectively.

What is the outlook for Alcatel in the wireless mobile arena?
We see immense business opportunity in the mobile market in the Asia Pacific, which we estimate will grow at a compound annual rate of over 20 percent in the next five years. Migration of mobile networks to 3G to meet the demand for mobile multimedia services will see this market taking off in the next few years.

We also expect the number of 3G operators in Asia Pacific to be more than 30 in 2002. They will have to deploy end-to-end broadband capabilities in the entire mobile network: core, radio access, network management, applications and terminals. This demands solutions providers to have technical competence in more than just one part of the mobile network.

We believe that the advent of 3G will accelerate the take-up of new mobile voice and data applications around the world. One of the key features of 3G is that it offers an “always-on” connection yet users are billed only for the actual duration that they use such data services.

Our aim is to grow significantly our 3G/UMTS market share and we believe that we offer operators a compelling 3G solution. We have already been selected as 3G network supplier by NTT Docomo via Fujitsu in Japan, Orange and SFR in France, TMN in Portugal and WIND in Italy, among other mobile operators.

What are some of Alcatel's main focus points currently?
Currently, one of our key business focuses in Asia Pacific is to provide high-level, broad service input throughout the whole telecom network life-cycle. Nowadays, operators are looking for ways to increase their market share and generate more revenues while optimizing investments and minimizing their operating expenses. To achieve this, they need to deliver better services to end-users within ever-shorter time frames.

With green-field operators and MNVOs (Mobile Virtual network operators) starting mobile operations in Asia, the need for high-value professional services such as project planning, solution design, turnkey network deployment and network operation and maintenance is ever increasing.

There is also an increasing trend for both incumbents and the new market players to outsource the entire management of their networks to experienced suppliers such as Alcatel, who have professional services and consulting skills, to concentrate their efforts on their core business to maximize positive financial results.

Independent sources valued the worldwide professional services market in 2000 at about $26 billion for carriers and operators and $10 billion for large enterprises. Approximately two-thirds of the carrier market was made up of high-end professional services. In the coming years, professional services are expected to grow faster than basic services, while the overall annual market increase is projected at 20 to 25 percent.

To meet this service challenge, particularly from the new MVNOs, Alcatel is widening and refining its solutions offerings far beyond basic installation and maintenance. In the years to come, we will continuously evolve value-added software offerings in two main areas, namely operation and business support systems (OSS and BSS) and value added pre-packages of applications. Alcatel OSS Solutions able to better manage the network, commission and bill services to end-users and support service providers in managing their business and collecting revenues. The latter helps our customers to differentiate themselves from the competition and to generate more revenues.

One of the products we launched recently and will be promoting over the next 12 months, is our integrated Core Node solution. This brings together some of our best products across our business divisions, to offer telecom operators scalable bandwidth on demand – meaning that they can increase bandwidth in a matter of minutes if necessary, unlike the weeks or months that they traditionally had to wait. Internet service providers, for example, will be able to quickly provide additional bandwidth if there is an unexpectedly high number of hits for a live web-cast.

We will also be looking to cement our worldwide position as leader of high speed, broadband Internet access – both wired (ADSL) and wireless (LMDS) – as well as the submarine and terrestrial cables that provide connectivity between countries and continents. We also plan to launch our Next Generation Network (NGN) solution for mobile networks.

How does the Asia Pacific region compare with the rest of the world?
The outlook for the Asia Pacific region in terms of infrastructure and mobile take-up is very promising. Starting with China, the number of mobile subscribers will continue to grow at a pace of 45 percent a year in the next two years. When 3G is deployed from 2003, it will further stimulate market growth.

Mobile take-up in Asia Pacific outside China will also be very impressive. Analysts forecast that mobile subscribers in Asia Pacific will grow at 26.5 percent CAGR over the next five years. The number of mobile subscribers in Asia Pacific will reach 303 million and equal that of Europe by end of this year, and more than double to 712 million by 2005. This figure will be more than the combined total of mobile subscribers in both North America and Europe then.

Overall, many parts of the Asia Pacific region are still in the early stages of developing a fully-integrated fixed line and mobile network for voice, data and video communications, unlike parts of the United States and Europe. In this respect, they have a golden opportunity to lower their operating costs in future by planning ahead.

The region is now also experiencing rapid deregulation in the telecommunications sector, further stimulating growth as incumbents and new operators alike race to get their networks up to date to offer the most advanced services to customers.

More about Top 20 Telecoms' Outlook.