Telefónica Spain is expected to announce that Alcatel-Lucent is to provide the company with a nationwide LTE network, according to a Bloomberg report.
Sources close to the negotiations say that Alca-Lu is ahead of rival LTE infrastructure suppliers, with a formal decision anticipated when Telefónica unveils details of its future network strategy at the Mobile World Congress trade show in Barcelona, Spain. The companies didn't comment to Bloomberg.
Rumours of the deal, speculated to be worth around €300 million to provide LTE coverage to 65 per cent of the Spanish population, boosted Alca-Lu's share price €0.085 to €1.85 in Paris, valuing the company at €4.3 billion.
Commenting on the suggested contract award, Robin Bienenstock, an analyst at Sanford C Bernstein in London, noted that Telefónica needs to deploy LTE in an effort to regain subscribers that have been lost to fixed and mobile operators providing faster broadband services.
"LTE will be important, especially in rural areas" where download speeds may be limited to about 2 Mbps, Bienenstock said. "In the absence of significant cable coverage, Telefónica's wireline customers are threatened by faster speeds available through LTE, hence the company has to build LTE to prevent further revenue declines in these areas."
Last September, Telefónica announced that Alca-Lu had been selected to help the telco test LTE services for business users in Madrid and Barcelona. Huawei has been providing LTE dongle modems for use in the trial.
Data compiled by the market research firm Dell'Oro Group has Alca-Lu holding 30 per cent of the LTE market as of September 2011, trailing Ericsson's estimated 44 per cent market share.