Lucent Technologies rose higher Monday after the company said it garnered a coveted wireless-equipment pact with AT&T valued at $1 billion over four years.
AT&T's (T) wireless network is facing increasing strain amid a surge in customers, who've been attracted by its national "Digital One" plan, which eliminates unpopular "roaming" charges. It said last week it was spending $2 billion to improve its network.
Contracts with AT&T, formerly Lucent's parent, are vitally important to equipment makers for financial and symbolic reasons. As the biggest phone company in the world, AT&T buys more equipment than any other. In addition, contracts with Ma Bell are often seen as a seal of approval, which can draw in other business for equipment makers.
Lucent shares (LU) rose 2 11/16 to 104 3/4 in recent trading.
Lucent beat out rivals such as Ericsson (ERICY) and Northern Telecom (NT) for the right to supply the wireless equipment, which will be used to beef up AT&T's network and help it expand into lucrative markets for overseas customers and high-speed data services.
AT&T's network is based on a standard called TDMA, or time division multiple access. It's one of three standards used throughout the world. Lucent is working to develop equipment, however, that will help TDMA networks handle so-called "next-generation" wireless phones capable of working with any standard.
"Lucent and AT&T have a common vision for how we can evolve TDMA to take advantage of the new features offered by third-generation wireless technology," said Jim Brewington, an executive at Lucent, in a statement. "This new technology will enable AT&T to offer its customers enhanced high-speed data services and international roaming."
Last Thursday, Merrill Lynch analyst Joseph Bellace predicted, in a report to clients, that Lucent would win the contract.
Lucent, the world's largest maker of telecom-equipment, was spun off by AT&T in 1996. Ma Bell still accounts for about 13 percent of Lucent's overall sales.
Written By Jeffry Bartash, CBS MarketWatch