AT&T: Ericsson, Alcatel-Lucent Snag LTE Contracts

Wireless gear makers Ericsson (ERIC) and Alcatel-Lucent (ALU) will supply the equipment for AT&T Inc.‘s (T) new LTE network.

Both vendors already provide the infrastructure for AT&T’s 3G network. The value of the LTE deals was not disclosed.

AT&T said on Wednesday it chose to keep working with Ericsson and Alcatel-Lucent after testing platforms from a number of manufacturers. That’s because continued work with the two companies will let AT&T add LTE equipment while retaining compatibility with its existing 3G equipment, the carrier said.

“3G equipment delivered to AT&T by the suppliers starting this year will be easily convertible to LTE, enabling AT&T to upgrade existing equipment and software rather than install entirely new equipment in many cases as it deploys the next-generation technology,” AT&T explained in a press release.

The vendor selection comes as AT&T lags rival Verizon Wireless, by about a year, in building a 4G network. Verizon also uses Ericsson and Alcatel-Lucent as its LTE suppliers.

Meantime, AT&T just started upgrading its 3G cell sites; with the addition of better fiber-optic backhaul, the company plans to create “a considerable boost” in 3G speeds while constructing the LTE network, it said. That would be good news for 3G iPhone users, who have complained of slow downloads and spotty connectivity in high-use areas.

Overall, AT&T plans to spend between $18 billion and $19 billion this year on capital expenditures. The numbers include a $2 billion increase in the amount of money AT&T intends to put toward its wireless network and backhaul. That bodes well for both Ericsson, the No. 1 wireless equipment vendor in the world, and second-place Alcatel-Lucent. Even though Ericsson seems to be taking back its lead from cheaper suppliers – it recently beat out low-cost vendor Huawei for a presumably lucrative contract with TeliaSonera – it is having money struggles. Ericsson reported a 92 percent plunge in fourth-quarter 2009 profits and is laying off 1,500 workers as a result.

Alcatel-Lucent hasn’t fared much better amid the global economic recession. Still battling integration problems from the 2006 merger of Alcatel and Lucent, the company continues to hemorrhage money. It will report its latest earnings tomorrow.

All three companies’ shares were trading down at about 10:50 a.m. Eastern. AT&T’s shares dropped .71 percent to $25.08; Ericsson slid 1.8 percent to $9.83; and Alcatel-Lucent had fallen 2.15 percent to $3.19.