In the last two weeks, Nortel Networks shored up its presence in Asia, forming not one, but two joint ventures with Asian wireless vendors. While Nortel already has resources in Asia, the Canadian company and many other vendors are opting to penetrate further into the market, not through committing more dedicated sales teams and manufacturing to the region but through partnerships.

The joint ventures — with China Putian and LG Electronics — give Nortel access to the hottest markets in the world: China for its sheer size and South Korea for its technological innovation. While its deal with LG is more general, the Putian joint venture is geared specifically toward 3G technology sales in China, opening avenues for new sales of Nortel's UMTS gear and combining the two companies' time division-synchronous CDMA (TD-SCDMA) technology — a 3G variant that has gotten the stamp of approval from the Chinese government.

“A lot of companies are racing to establish a presence in China,” said Alan Pritchard, vice president of global marketing and product development for Nortel's GSM/UMTS lines. “We've had a presence in China since 1982, but this joint venture gives us an exclusive relationship with — if not the number one vendor in China — definitely one of the top three.”

Nortel, however, isn't the only company that has seen the benefits in partnering instead of expanding into Asia. Alcatel has partnered with Fujitsu to bring its UMTS line to market there. NEC and Siemens struck a similar deal in 1999, and since then have come out with three generations of UMTS infrastructure. West/East partnerships don't just apply to infrastructure. When Ericsson abandoned its handset division, it formed a joint venture with Japanese consumer electronics giant Sony to tackle the high-end global cell phone market. Though slow getting out of the gate, the partnership has rapidly been increasing market share over the last year.

According to consulting firm Ovum, 3G equipment sales will be a $250 billion industry over 10 years, with China accounting for half of those sales, making it critical for vendors to find some entry point into the Chinese market. While Nortel has relationships with China Unicom and China Mobile — most recently winning a $220 million CDMA 1X network expansion deal with Unicom — the TD-SCDMA sector is a bit cloudier. TD-SCDMA is a technology that — at least for now — is unique to China; its development has been spurred on by the Chinese government. The smart antenna CDMA technology is just coming off trials and the first commercial networks aren't expected until a year from now, but the market promises to be huge. The government has indicated it would issue special licenses for TD-SCDMA deployment, giving it an edge over wideband CDMA and CDMA2000, and even though sales of the gear might be limited to one country, that country is the largest market in the world with a population approaching 1.3 billion and with no traditional ties to wireline telecom.

While Nortel has invested millions in China and expects to invest more, partnering made much more sense because of the organization and channels that Asia vendors already had on the ground, Pritchard said. It's simply a weighing of costs versus benefits — to build separate sales and manufacturing support operations on par with that of Putian and the other Asian vendors would be far costlier to most vendors when there are numerous opportunities for partnership, Pritchard said.

“These are smart partnerships, not desperate ones, by any stretch of the imagination,” he said.

East/West Joint Ventures

Mobisphere — Siemens and NEC 51:49 joint venture based in the U.K., tasked with the joint development and sale of wideband CDMA/UMTS equipment

Evolium — Alcatel and Fujitsu 66:34 joint venture combining Alcatel's GSM/GPRS/EDGE technologies with Fujitsu's wideband CDMA technology and early experience deploying NTT DoCoMo's FOMA.

Sony Ericsson Mobile Communications — 50:50 joint venture that combined both Ericsson and Sony's handset operations into one global company.

China Putian/Nortel Networks Telecommunications Equipment — Announced Jan. 20, the 51:49 joint venture leverages China Putian's leading TD-SCDMA technology and Nortel global UMTS line.

LG Electronics and Nortel Networks — Announced Jan. 24, the 50:50 joint venture is more a marketing and sales channel deal across all telecom technology sectors.