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Network Market on the Rise?

The latest Unstrung Insider report, "Financial Health Check: Top Ten Wireless Equipment Vendors," may highlight an 18 percent slump in wireless network equipment revenues last year, but our latest poll on the current state of the market indicates that signs of improvement are starting to emerge (see Wireless Equipment Vendors).

Despite the industry’s recent troubles, a sanguine 46 percent of Unstrung readers reckon the market will stabilize in 2003 and start to improve through 2004. An additional 7 percent bring extra cheer to the likes of Nokia Corp. (NYSE: NOK), LM Ericsson (Nasdaq: ERICY), and friends by claiming that the market has bottomed out and the only way forward is up, up, up!

That’s the good news. The downside is that a pessimistic 37 percent fear the market will decline another 10 to 15 percent this year before finally reaching bottom in 2004. And lest we forget, the really cynical 10-percenters still think the worst is yet to come. Sadly, such doom and gloom is in line with recent market forecasts from Nokia and Ericsson (see Finns Flummoxed, Flopping and Ericsson Spirals Downward).

A clear plurality of readers cites the massive Chinese wireless market as the most attractive geographic region for network vendors. Fueled by recent speculation that the government will opt for a split of two W-CDMA (Wideband Code Division Multiple Access) and two CDMA2000 contracts -- rather than favoring a CDMA2000 majority, as was originally anticipated -- 42 percent of you mark the country as a potential network vendor hotbed (see Chinese 3G: Open to All? and What's Up With Chinese 3G?). Europe and North America fare surprisingly poorly, notching up just 13 percent of votes apiece.

Unstrung’s attempt to pick out the most attractive wireless technology for 2003 and 2004 also produced a surprise: Despite being the 3G technology of choice in Europe, W-CDMA won only 29 percent of the vote as the revenue savior for network vendors. Archrival CDMA2000 stole the limelight with 38 percent of the votes, while the remaining third of you say existing GSM/GPRS networks are where the money’s at in the short term (see the air interfaces page of A Wireless Taxonomy for definitions of these technologies).

Such results are a poke in the eye for global carriers, the majority of which are attempting to foist new multimedia services on an apathetic market. Indeed, concerns over the marketability of next-generation networks also dominated readers' choices for "the biggest drag on the market": 36 percent of respondents fear that Joe Public isn’t actually going to want any of these all-singing, all-dancing services. A further 33 percent believe carrier debt is the industry's biggest handicap.

In light of deep cuts in carrier capital expenditure, how can equipment vendors help boost their profit margins from wireless sales? The issue of vendor consolidation has reared its ugly head once more, just as some rumored acquisition targets have begun to get their businesses back on track (see Nortel Results Foster Hope and Alcatel Losses Down) -- 41 percent of you believe that vendors should be participating in industry consolidation via partnerships and mergers. Meanwhile, 27 percent are screaming for more investment in R&D to develop better, cheaper products, while only a handful (7 percent) agree that further staff cuts are the best way forward.

Thankfully, the industry seems to have learned its lessons from the finger-burning of previous vendor financing debacles, as only 3 percent of you claim that vendors should be offering easier financing terms to their carrier customers (see Telsim Urges Arbitration and Telsim Cheers RICO Dismissal).

Following its lackluster showing here, now is your chance to give W-CDMA a real grilling in Unstrung’s latest poll (see W-CDMA: What Chance Success?). Readers, do your worst...

— Justin Springham, Senior Editor, Europe, Unstrung

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