Analysts said the industry's latest large-scale deal, between Nokia and Siemens puts the pressure on Nortel to add more market heft, either through a merger or an acquisition.
"In an industry that is consolidating, with customers that are consolidating, you have to find scale," said Inder Singh, an analyst with Prudential Equity in New York.
"The Nokia-Siemens merger really makes it challenging for the rest of the players in the industry who have not found a merger partner," he said in an interview.
Nortel, Motorola and Ericsson are the three major equipment providers that have not taken part in the deal making to date, although Ericsson has said it is not looking to do a large merger.
Analysts believe that there now remain only two likely partners for Nortel, namely Motorola and Ericsson. Motorola could be the only likely partner if an Ericsson-Nortel tie-up would be blocked by European regulators on concerns that market concentration in 3G wireless would be too high.