Alcatel-Lucent, the lossmaking telecoms equipment supplier, will significantly step up its investment in fourth-generation Long-Term Evolution mobile technology - in a clear signal it intends to remain in the wireless market in spite of investor pressure to quit.

Ben Verwaayen, Alcatel-Lucent's newly appointed chief executive, yesterday sought to end rumours that he would announce a withdrawal from the wireless market in an attempt to help restore the group to profit. "It's not true that we're going out of mobile," he said in Paris.

Mr Verwaayen insisted that Alcatel-Lucent would be ready with competitive products when the market was ready to move to 4G. "I am sure I am going to be able to meet the needs of the market [on LTE]," he said.

Alcatel-Lucent confirmed that "we will invest a lot more in LTE". One of Mr Verwaayen's first acts on arriving as chief executive in September was to scale back significantly its LTE joint venture with NEC of Japan.

Alcatel-Lucent's bet on the next generation of mobile phone networks is likely to soak up a greater share of its €1.5bn ($1.9bn) a year research and development budget than in the past.

This is likely to mean that the group will have to make tough choices in other areas, which Mr Verwaayen is expected to set out in detail next week when the company reveals its strategic plan. For example, investment in LTE is now likely to take priority over Wimax, the rival technology also supplied by Alcatel-Lucent.

But Mr Verwaayen's decision that Alcatel-Lucent should retain a presence in both its traditional heartland of fixed line and the newer wireless sector remains controversial. Its third generation WCDMA business is heavily lossmaking and investors have pushed for this business to be sold.

The ambition to move strongly forward on LTE - which will deliver greater speed and capacity - was equally misguided, given the big advance held by Ericsson in the technology, said one person who has worked with the group for many years. "They just cannot compete. They will never catch up on Ericsson in LTE," he said.

Alcatel-Lucent believes that it cannot afford to be left out of the market. The first 4G networks are expected to be launched in early 2010 by Verizon and T-Mobile and competition is fierce to supply the technology.

However, as was the case with 3G, operators may be reluctant to invest in difficult times and deployment could still face long delays.

Source:ft.com