Marconi and Nortel clinch £2bn BT optical network deal

Marconi, the telecoms equipment maker hived off from the former GEC, unveiled a £2bn deal with British Telecom yesterday to supply state of the art optical networking equipment.

Marconi, the telecoms equipment maker hived off from the former GEC, unveiled a £2bn deal with British Telecom yesterday to supply state of the art optical networking equipment.

The five-year pact is to supply BT with optical electronics equipment to upgrade the telecom company's European broadband network. Marconi clinched the tender in partnership with Nortel Networks seeing off rival bids, thought to have come from Lucent Technologies of the US and several European groups.

During the contract, Marconi will build and install optical equipment that will allow BT to improve the quality and speed of data, video and voice communications. BT is expected to begin using the new infrastructure in the second quarter of 2001.

Mike Parton, chief executive of Marconi's communications division, said: "I think the next 12 months is crucial to getting a really big market position. That's why this contract is such a big win."

Investors agreed. They pushed up Marconi stock 5 per cent, or 45p, to 1,025p. That values Marconi at £28bn. The calculation is relevant since telecoms equipment firms with key technology in optical networking have been the market's hottest takeover targets in recent months. That sentiment helped Bookham Technology gain a further 7.2 per cent yesterday to close at 5,302p - a fivefold gain since the group floated in April.

Up for grabs is pole position in the optical transmission market, which is exploding as demand for internet data transmission sky rockets. Sales of photonics equipment and processes is expected to be worth over £20bn per year by mid-decade. Optical-fibre technology employs glass threads to transmit data using light signals. Using various colours of light the same thread can carry infinitely greater amounts of data that copper wires, which use electrical signals.

"This is the beginning of the new technology," Mr Parton said. "People are trying to position themselves for that."

In May, Marconi expanded its Coventry factory for the expected boom. The deal with BT will bolster the 2,000 new jobs already created with several hundred new jobs likely to be added to service the new contract.