Lucent Gets $1 Billion Wireless Equipment Deal With Sprint PCS - TheStreet

Lucent Gets $1 Billion Wireless Equipment Deal With Sprint PCS

It will provide gear to move the carrier toward third-generation networks.
Author:
Publish date:

Telecom-equipment giant

Lucent

(LU)

signed a $1 billion deal Tuesday to bring

Sprint PCS

(PCS)

closer to the 3G world.

Lucent will provide equipment to upgrade Sprint's wireless network, the largest in the U.S., enabling it to offer so-called third-generation, or 3G, mobile services in the future. The agreement includes base stations, switching gear and software that can all be operated in 3G.

Third-generation technology would allow faster data transmission using mobile phones, including broadband connections. Wireless providers are currently trying to offer such connections worldwide, but there still aren't any 3G devices ready for mass consumption. Sprint presently operates a slightly less advanced code division multiple access, or CDMA, technology developed by

Qualcomm

(QCOM) - Get Report

.

"This is a confirmation of a close ongoing relationship between the two companies and could represent sharper growth given Sprint would continue to order equipment from Lucent for future advances in 3G," said Greg Teets, analyst at A.G. Edwards & Sons, which does not make a market or have investment banking relationship with either company.

But Teets said he would wait for Lucent's fiscal third-quarter results Wednesday before he changes any perspectives on the company, even though "wireless counts for half of Lucent's revenue and Sprint is a significant customer." Under the contract, deployment of the equipment would start this quarter.

Lucent is expected to post a loss of 7 cents a share, narrower than the 16 cents a share it lost in the year-ago period, and revenue of $1.97 billion. The company recently postponed its profitability target by as much as one year.

Observers think Lucent would also be interested in similar deals with another customer:

Verizon Communications

(VZ) - Get Report

, the largest U.S. wireless provider in terms of number of subscribers. Besides Verizon, "they are always seeking out new plans, and they are close to sealing some decent-sized contracts in China and India," said Teets.

Sprint said the contract is part of an ongoing $4.1 billion capital spending budget for 2003 which does not affect other suppliers, such as

Nortel Networks

(NT)

and

Motorola

(MOT)

.

Shares of Lucent finished the day with a rise of 20 cents, or 11.6%, to $1.92, while Sprint shares gained 26 cents, or 1.8%, to $14.91.