Results of a new study show that the telecom infrastructure market will continue to be compelling to watch in the coming year.
Asia-based giant Huawei is expanding further into Europe, Ericsson is after more market share via acquisitions, and Samsung is growing in LTE. Those are just three of the companies on the move, Technology Business Research notes in its "3Q12 Telecom Vendor Benchmark."
Traditional players Nokia Siemens and Alcatel-Lucent are in the midst of restructuring, with decisions that impact their equipment, services and software businesses. Al-Lu is planning to sell assets, while NSN has already taken steps to do so, including the unloading of its BSS and optical segments.
“At an aggregate level, the infrastructure market is going through a rough patch as legacy technologies are seeing steep declines in demand; however, vendors are seeing sustained growth in LTE sales," said Chris Antlitz, an analyst in TBR’s networking & mobility practice. “One of the biggest beneficiaries thus far has been NSN, which saw gross and operating margins expand in 3Q12, thanks to large-scale LTE deployment contracts with SoftBank and KDDI in Japan and operators in South Korea."
Nokia Siemens secured more than 60 commercial LTE contracts by the end of the third quarter. Ericsson is also capitalizing on LTE demand, TBR noted, as it owns LTE deals with all four Tier 1 U.S. operators, and will continue to outperform other vendors as the Sprint Network Vision contract continues during 2013 and T-Mobile’s LTE contract ramps up, the researcher said.
TBR says European operators that delayed investing in LTE will need to pick things up over the next two years to keep pace with smartphone adoption. The next wave of LTE deployment, however, will be TD-LTE in Asia. China Mobile, the world's largest wireless operator, is backing the proliferation of TD-LTE and has used equipment from all Tier 1 vendors for a massive trial network that is bigger than most live commercial build-outs. Overall, the trial calls for the initial deployment of 20,000 base stations, with commercial rollout of 200,000 base stations by the end of 2013.
A transition out of commoditized services, such as field maintenance and operations, and up the value chain to attain better margins is underway, said TBR. NSN and Alcatel-Lucent are concentrating on high-value services, such as consulting, which they can tie in to infrastructure offerings, as both have had difficulty competing against ZTE and Huawei, which hold a competitive advantage in local delivery of field maintenance as well as other network services. In managed services, ZTE and Huawei have been boosting capabilities and gaining experience through contracts with smaller, emerging markets operators, enabling them to better compete with incumbent telecom services providers.