The timing of the depressed global economic outlook could not have come at a worse time for Alcatel-Lucent. The situation only confounds further the technology company’s efforts to turn the corner of a post-merger era that has resulted in an underperforming share price and integration challenges. With a new CEO, a new strategy, and a strong focus on technology leadership, Alcatel-Lucent is looking to emerge from the economic downturn a leaner, more responsive and cohesive organisation than before

Alcatel-Lucent’s new CEO, Ben Verwaayen has a cool, approachable demeanour that his predecessor at the French/American technology company never had. Even Alcatel Lucent employees openly talk about the impression of hardness and rigidity they associated with former CEO Patricia Russo, who tried and failed to have the many different cultures, nationalities and operations that comprise the merged Alcatel-Lucent pull in the same direction.

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It has been suggested that rising political tensions between India and Pakistan over the Mumbai attacks at the end of November may spill over into the economic arena, and that companies such as Telenor and Etisalat that have investments in both countries may be barred from operating in both markets.

In 2006 Etisalat concluded the acquisition of a 26 per cent stake in Pakistan Telecommunication Company Limited (PTCL). The UAE operator also has a management agreement in place in Pakistan and at one point was even rumoured to be looking to double its equity stake in the Pakistan operator.

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Oman’s ministry of finance has cancelled the sale of 25 per cent of Omantel, citing the decline in world financial markets. The sale would have reduced the ministry’s stake from 70 to 45 per cent.  

The ministry received expressions of interest in July 2008 and had planned to complete the process by the fourth quarter of last year.

“Despite the solid progress we have made with the sale process to date, and the continued strong interest shown by the bidders, the unprecedented market volatility and economic conditions that we are seeing globally has led to the government taking the prudent decision to stop the sale process,” stated the ministry’s secretary general, Darwish Esmail Al Balushi.

Saudi Arabia’s STC and the UAE’s Etisalat had both expressed interest in acquiring the strategic stake in the Omani operator. At the time the bids were received in July, 100 per cent of the company was valued at US$4.4 billion, but now the operator is worth considerably less.

Omantel is the sultanate’s incumbent unified operator providing fixed-line and Internet services under the parent company, and mobile services under the brand Oman Mobile. However, the provider began a process of reintegration in February last year, and plans to launch a new brand and unified corporate identity in the first quarter of 2009.

Motorola yesterday reiterated its strategic plan for 2009, stating that the continued interest in broadband technologies would see the company continue Long Term Evolution (LTE) work, as well as the expansion of WiMAX and Fibre-to-the-home (FTTH) deployments in line with the projected expansion of broadband in 2009. During the course of 2008 Motorola demonstrated the industry’s first CDMA to LTE network handoff, as well as a number of WiMAX and FTTH deployments and products.

Dan Moloney said the company is looking forward to carrying its commitment in LTE into 2009

Despite the current economic landscape, Motorola believes the demand for media mobility points offer the company a myriad of opportunities for its products and services.

“Motorola is committed to broadband and 4G development and made significant gains in 2008, particularly with LTE to address the mobility demands being driven by consumers looking for personalised media experiences,” said Dan Moloney, president, Motorola’s Home and Networks Mobility business. “We’re looking forward to carrying this commitment into 2009 and leading the market in further development and deployment of LTE technologies.”

With respect to WiMAX, Motorola believes it is well-placed in both the nomadic and fixed versions of the technology. The company reported that it already has 25 contracts for commercial WiMAX systems with customers in 20 countries, and has shipped more than 5,000 multi-sector access points (powering more than 17,000 sectors) and hundreds of thousands of CPEs and PC cards as of Q308. The company’s WiMAX business for contract deployments, trials, and other customer engagements is currently engaged in 49 countries.

Motorola’s global WiMAX gains include a US$165 million contract with Saudi Arabia’s Atheeb. Wateen Telecom in Pakistan placed one of the world’s largest WiMAX device orders in 2008, with 198,000 units.

Despite Motorola’s bullish forecasts for the year ahead, the company continues to face significant challenges in the short-term. Earlier this month it announced additional actions to further reduce costs amid continuing global economic challenges.

As part of the overall cost reduction programme, Motorola is revising its employee compensation and benefit programmes. Effective March 1, 2009, to better align with industry norms, Motorola will permanently freeze its US pension plans, preserving vested benefits accrued by employees and retirees but eliminating future benefit accruals. Motorola intends to continue to provide funding to meet its pension obligations to present and future retirees.

Effective January 1, 2009, Motorola also will temporarily suspend all company matching contributions to the Motorola 401(k) Plan. US employees may continue to contribute to the plan but will not receive matching contributions from Motorola.

The company also announced that employees in many of the markets in which it operates will not receive a salary increase in 2009. In addition, Motorola co-chief executive officers, Greg Brown and Sanjay Jha will voluntarily take a 25 per cent decrease in base salary in 2009.

Greg Brown will voluntarily forgo any 2008 cash bonus earned under the Motorola incentive plan. Sanjay Jha’s employment contract provides for a guaranteed cash bonus for 2008. His bonus will also be voluntarily reduced by an amount equal to Greg Brown’s forfeited bonus and the remainder will be taken in the form of restricted stock units.

These actions are expected to lead to cost savings in addition to the US$800 million that was previously announced on October 30, 2008.

Etisalat is reported to have topped the bidding for the third mobile licence in Iran. The concession will be ratified upon confirmation from Iran’s communications minister.

  The UAE-based company is reported to have beaten consortia fronted by Omantel and an unspecified Malaysian company, to win the licence.

Etisalat is believed to hold a 49 per cent stake in the winning consortium, the remainder being held by Iranian Tamin Telecom. The country’s second mobile operator MTN Irancell has a similar shareholder structure, with the South Africa operator MTN holding a 49 per cent share in the mobile operator and the remainder being held by the Iranian government.

Tender documents for the licence went on sale on September 6, though details of when the process officially closed and what the licence terms and conditions were remained murky. Earlier advice from the Ministry of Communications and Information Technology (MCIT) noted that the new licence would include access to 3G spectrum for an exclusive period.

The third entrant will compete with the state-backed Telecommunications Company of Iran (TCI), which operates both a fixed-line and mobile network. The second operator is MTN Irancell. Mobile penetration in Iran stood at over 50 per cent end-June, with TCI serving 24.6 million subscribers and MTN Irancell having been able to garner 11.6 millions customers at that time, having launched commercially late in 2006. Thus MTN Irancell enjoyed a market share in excess of 30 per cent.

For the quarter to end-September, MTN reported that subscriber numbers in Iran had risen 13 per cent to 13.14 million.

While the new entrant is only expected to come to market in the second half of 2009, the incumbents look determined to continue building their own business strategies in order to remain relevant in the market. MTN Irancell has been extremely successful so far in capturing market share within two years of operation. This success has been partly attributed to an aggressive ‘buy one, get one free’ campaign, competitive SIM pricing, strong branding and promotional tariff plans.