Nortel: Not drowning, waving the LTE flag

Nortel, which supplies optical equipment to Optus, filed for bankruptcy protection in the US and Canada in mid-January after posting consecutive losses.

Nortel’s president of carrier networks Richard Lowe told iTnews that the Canadian company, which has service contracts with Telstra and serves Australian enterprises, is making the right bets to recover from its financial difficulties.

It transferred its WiMAX customers to joint-venture partner Alvarion and discontinued investment in the technology. Lowe said the decision was weighted on “the size of the WiMAX market, it’s timing and the profitability of WiMAX relative to the core evolution path of the majority of our customers”.

Most carriers are moving toward LTE as a successor to 3G networks, he said.

“Our LTE (Long-Term Evolution) technology is moving along nicely,” Lowe said. “It is getting very close to a commercial state.”

He said Nortel customers such as T-Mobile, Verizon and China Telecom, have “explicitly or implicitly” committed to migrating to LTE, also known as "4G".

Lowe said he has met with Nortel’s tier-one and tier-two customers and some tier-three customers to discuss the maker’s financial problems and direction.

“Our customers in the US and Canada are comfortable with creditor protection and have shown a willingness to stay with us,” he said.

North American companies such as MCI, Air Canada and Texaco have bounced back from creditor protection, he said.

It has taken a little more effort for Lowe to win over customers in Europe and Asia.

“Some customers in Europe and Asia are asking whether we are liquidating our assets. They were asking, what about my network? But after these discussions with our customers, our install base is still pretty intact.”

He said that creditor protection is not always the last step to winding down a company.

“Creditor protection essentially means that from now on, aside from the management team presenting our plans to the board for approval, we also have to put forward our plans to creditor committees to opine on.”

“Should we get approval from all three creditor groups in the US, Canada and the UK, we go forward and execute from there. The good news is we fully intend to have a plan approved by creditors by May. Most of our biggest customers aren’t making decisions about major investments until then.”

Lowe said Nortel has lost only five suppliers out of several thousand since filing for protection.

“I just keep saying to suppliers, keep supplying and I’ll keep paying. The only debts I am not able to pay are those from prior to filing for creditor protection – for those debts there will be some kind of settlement when the company exits restructuring.”

Lowe said that LTE “will still take a few years to take hold” in terms of profit, but he that Nortel still has enough installations of existing wireless technologies to generate cash until LTE is a mainstream technology