Light Reading

Size Matters in 3G Wireless

LR Mobile Column
LR Mobile Column
LR Mobile Column
10/3/2006
50%
50%

A triumvirate of vendors – Ericsson AB (Nasdaq: ERIC), Alcatel-Lucent, and Nokia-Siemens – looks set to control almost 70 percent of the $56 billion global wireless infrastructure market, finds the latest report from Unstrung Insider.

The report, Vendor M&A Frenzy: What Happens Next, analyzes the impact of consolidation in the cellular network equipment sector and assesses likely growth segments in a market with modest overall revenue prospects.

The economic logic for consolidation has long been compelling. With too many vendors, fierce price-based competition, and the risk that this market could degenerate into a low-margin fistfight, a round of M&A was inevitable. Recent downward pressure on operating margins has accelerated the process.

Achieving greater scale is the key objective. Scale directly influences a vendor's ability to invest in research and development, optimize the supply chain and manufacturing processes, achieve greater geographic diversity, and ultimately to produce a profit.

Long-time market leader Ericsson shows why scale, when expertly managed, wins out. The Swedish vendor has been able to maintain higher profit margins than its smaller competitors while retaining, and even gaining, market share. As the only truly global vendor, it is well positioned for each regional uptick in spending. It also enjoys the local presence to begin creating what could become the world's leading professional services organization to fixed and mobile telecom operators.

The combination of Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE) is a wireless powerhouse in the making, and looks capable of challenging Ericsson for top spot in mobile network equipment. The one glaring gap in the company's portfolio is the U.S. market, which is set to boom following the recent spectrum allocations.

Alcatel-Lucent is dominant in CDMA2000 via Lucent Technologies Inc. (NYSE: LU)'s portfolio and established in GSM through Alcatel (NYSE: ALA; Paris: CGEP:PA)'s business, but it lacks a clear-cut strategy for UMTS. While the addition of Nortel Networks Ltd. 's UMTS division will enhance its combined product portfolio, the short-term challenge of integrating 3G equipment from four different companies looks formidable.

The current M&A wave could also be interpreted as evidence that the world got too big for the Euro- and U.S.–centric vendors that grew up as national or regional champions. They now must stave off hungry, Asia-based newcomers such as Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) in far-flung corners of the globe.

From this perspective, today's consolidation represents the old guard closing ranks and rallying around tried-and-trusted markets and technologies. But what if these new mega-vendors have yoked themselves to a falling star by concentrating on the cellular technologies of today?

Aggressive challengers that failed to gain a foothold in 3G, such as Motorola Inc. (NYSE: MOT), Nortel, and Samsung Electronics Co. Ltd. (Korea: SEC) are already looking to pre-position themselves for the next generation of all-IP broadband wireless systems.

— Gabriel Brown, Chief Analyst, Unstrung Insider


The report, Vendor M&A Frenzy: What Happens Next, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
More Blogs from LR Mobile Column
Mobile operators are coming to terms with their supporting role in the mobile apps world
Radio access networks are set for radical change
After a sluggish start, mobile banking will grow exponentially in the US market through 2015
LTE mobile device sales are expected to reach anywhere from 500,000 to 1M units in 2011
China's ranks of 3G subscribers will more than double this year, reaching 40M units
Flash Poll
From The Founder
Network architects aiming to upgrade their networks to support agile, open, virtualized services in the 21st century need to consider new criteria when choosing between technology suppliers.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Documentaries
PSA

7|6|15   |   1:38   |   (0) comments


A public service announcement calling attention to the perils of a hyper-connected society.
LRTV Interviews
Guavus Takes Analytics on the Road

7|6|15   |   4:09   |   (0) comments


Guavus CEO Anukool Lakhina tells Light Reading CEO and founder Steve Saunders how the analytics tools developed for telcos are applicable to the transportation industry.
LRTV Custom TV
Red Hat Demo

7|2|15   |   10:53   |   (0) comments


Red Hat's Nicolas Lemieux demonstrates how Red Hat is driving innovation through open source communities.
LRTV Custom TV
Red Hat's Approach to OpenStack Adoption

7|2|15   |   5:17   |   (0) comments


Red Hat's Radhesh Balakrishnan outlines his company's open source strategy for both enterprises and telcos.
LRTV Custom TV
The New IP Goes Mobile With vEPC

7|2|15   |   1:12   |   (0) comments


Heavy Reading's Gabriel Brown discusses results of a Light Reading survey sponsored by Brocade that shows a clear commitment by mobile operators to move quickly to virtual EPC deployment.
LRTV Custom TV
Making Business Sense of SDN

7|2|15   |   1:42   |   (0) comments


Results of a Brocade-sponsored survey show that CSPs have a clear sense of SDN use cases but are wrestling with the business case. Sterling Perrin of Heavy Reading looks behind the numbers.
LRTV Custom TV
NFV Will Be Here Sooner Than You Think

7|2|15   |   2:22   |   (0) comments


Forget the usual ten-year cycle for new technologies – NFV will be a core part of CSP networks in five years, based on results of a Brocade-sponsored survey, says Heavy Reading's Caroline Chappell.
LRTV Custom TV
The New IP Gains Traction With CSPs

7|2|15   |   1:42   |   (0) comments


Roz Roseboro of Heavy Reading analyzes results of a Light Reading survey sponsored by Brocade showing that CSPs are getting serious about making the transition to the New IP era.
LRTV Custom TV
It's (Real) Time for Analytics

7|2|15   |   1:42   |   (0) comments


Heavy Reading's Jim Hodges looks at how CSPs say they plan to use analytics to deploy new services in real time as part of The New IP, based on results of a survey sponsored by Brocade.
LRTV Documentaries
IoT in Action

6|30|15   |   1:39   |   (8) comments


Two co-workers discuss the benefits of IoT technology.
LRTV Interviews
Ericsson Opens Up on OPNFV

6|30|15   |   14:16   |   (1) comment


Martin Bäckström, VP and head of industry area Datacom at Ericsson, talks to Light Reading founder and CEO Steve Saunders about the emergence of OPNFV, the importance of standards and Ericsson's OPNFV plans.
LRTV Custom TV
NetNumber Founder Discusses NFV/SDN Impact on SP Networks

6|26|15   |   4:15   |   (0) comments


NetNumber Founder Doug Ranalli examines why SPs need a new network infrastructure for service agility. While NFV and SDN are the tools, the old ways of thinking about signaling control are inhibitors. Doug provides his recommendations.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
All Upcoming Live Events
Infographics
Equinix walks through the past four digital economy eras from computing to network to connected to today's interconneted world.
Hot Topics
Who's Feeding Fiber to LinkNYC Hotspots?
Mari Silbey, Senior Editor, Cable/Video, 6/29/2015
What's a Gigabit Good For?
Carol Wilson, Editor-at-large, 7/1/2015
Colt to Jettison Ailing IT Business
Iain Morris, News Editor, 6/30/2015
Eurobites: Activist Investor Takes Stake in AlcaLu
Paul Rainford, Assistant Editor, Europe, 6/30/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Casa Systems has been going from strength to strength over the last couple of years. In 2013, it became the first vendor to ship an integrated CCAP device -- the ...
Cedrik Neike, SVP of Global Service Provider, Service Delivery, at Cisco, talks to Light Reading founder and CEO Steve Saunders about solving service provider customer problems in a virtualized, DevOps world, including multivendor support and the future of network procurement.
Cats with Phones