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World Markets Analysis
February 02, 2006
By Julian Watson
From LexisNexis

Nortel Networks and Huawei have announced a joint venture to target the global high-speed broadband access market. This is a segment that Nortel moved away from in 2001, but where Huawei would like to expand its international reach and product portfolio.

The joint venture, in which Nortel will have a majority stake, will be based in Ottawa (Canada). Under the deal, Nortel will sell Huawei products, but the two companies will also develop new products to deliver ultra-fast broadband and target opportunities in the convergence of voice, video, data and wireless services onto IP-based copper, fibre and fixed wireless networks.

The companies have already started work on joint products, and plan to seal the joint venture and launch new products by the third quarter of 2006. 

Significance: While Nortel has been building up its capabilities to provide infrastructure for IP-based services such as IPTV and VoIP, the deal with Huawei will give it direct access to the IP-DSLAM segment. Huawei will also likely benefit from Nortel's expertise in the optical networking segment to deliver FTTx-based solutions to operators worldwide. Competition from Alcatel and Lucent, both of which have picked up major contracts to deploy FTTx-based networks in the United States, will be intense.