BT Taps Nortel, Marconi for US$5B IP Upgrade

LONDON (07/25/2000) - British Telecommunications PLC has contracted Nortel Networks Corp. and U.K.-based Marconi PLC to upgrade its core national network to an optical Internet system that works over data and IP (Internet protocol) networks, the companies announced today.

The modernization of the network, which is still subject to final approval, should begin in September and be completed by the following year, said Nortel spokesman Simon Pope.

"It'll be worth about US$2 billion over the next five years. About $3 billion for Marconi and $2 billion for Nortel. I can tell you that we're each receiving about .5 billion up front to start," Pope said.

The network is being expanded with 10G-bit optical products from Nortel in order to expand BT's bandwidth and Internet services.

"You need 10G for wireless networks or you're going to get your lunch packed," Pope said.

A number of other telecommunications companies have also begun planning core network upgrades, including Fujitsu Ltd., Lucent Technologies Japan Ltd. and NTT Communicationware Ltd. The three telecommunications companies announced earlier this month that NTT DoCoMo Inc., Japan's largest mobile telephone operator, will begin testing an experimental IP-based network later this year.

[See "NTT DoCoMo Taps Fujitsu, Lucent for Future Network," July 19.]According to Pope, switching to the all IP-based optical Internet network may be radical restructuring, but going to the open platform is worth it due to the fact that it has "99.999 percent guaranteed reliability" for users and is the first step for telecommunications companies building next-generation broadband wireless networks supporting a range of voice, data and multimedia services.

"BT is one of the first telecommunications (companies) in Europe to take on this modernization. France Télécom SA will probably be your next company to go 10G, and others will soon follow. But you won't see anything go live for at least a year," Pope said.

A total of 14 companies submitted bids to BT to upgrade the network, including Lucent, but Nortel secured the project due to its commitment to optical technology, according to Pope. Nortel plans to invest $1.9 billion in doubling its production capacity for its optical components and optical Internet systems production business, the company announced on Monday. [See "Nortel to Invest US$1.9B in Optical Business," July 24.]Nortel estimates that its pro forma earnings for its global optical components business will reach $2.5 billion in 2000, an increase of 200 percent from 1999 earnings. Additionally, the investment will create 9,600 jobs in North America, the U.K. and Australia, according to Nortel. "The deal with BT is going to create 2,500 new jobs in the U.K. alone," Pope said.

BT, in London, can be reached at +44-207-356-5000 or at http://www.bt.com/.

Nortel, in Brampton, Ontario, can be reached at +1-905-238-7000 or at http://www.nortelnetworks.com/. Marconi, in London, can be contacted at +44-207-306-1329 or at http://www.marconi.com/.

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