US/EU: Fewer Lines, Ample Opportunity
Graham's totally correct: The market for basic infrastructure gear has shifted away from North America and Europe and it won't shift back. But the connection-oriented ITU data doesn't take into account two dynamics linked to emerging next-generation telco services.
First, much of the growth in Asia and other regions relies on investments from some of the European and North American carriers whose growth, as Graham said, comes from developing economies. And that growth requires capital investments. Telia Company is building capacity outside the Nordic/Baltic regions in Russia, Turkey, and Eurasia (e.g., Azerbaijan, Moldova, and Uzbekistan). Salt SA has stretched into Jordan, Bahrain, and parts of Africa. Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY) is spreading into diverse areas of Southeast Asia. And AT&T Inc. (NYSE: T), whose AT&T India subsidiary received India's first license allowing a foreign company to own the bulk of a local carrier, will spend more than a billion dollars this year making sure its network provides globally consistent services.
Current and future customers of those North American and European telcos expect access to identical capabilities no matter where they are or what device they use. Therefore, the equipment that telcos buy for their domestic and global networks must integrate seamlessly. Incumbent equipment manufacturers – such as Alcatel-Lucent (NYSE: ALU), Ciena Corp. (NYSE: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), and Nortel Networks Ltd. – that enjoy longstanding relationships with these carriers may have a leg up over Huawei and its ilk, because they have the know-how to create seamless global networks.
Secondly, North American and European carriers that need converged and integrated infrastructure to support network-based applications and solutions will opens their wallets to non-traditional equipment and services suppliers. To deliver globally consistent services and applications, carriers need best-in-class service delivery platforms, next-generation OSSs and BSSs, as well as customer relationship management systems.
Just as basic infrastructure demand started in North America and Europe and then migrated to other regions, next-generation services will also start there and then expand globally. Transmission-focused opportunities will abound in China and other developing markets for years. But the global carriers will influence purchasing decisions wherever they have customers and financial interests. And they will buy a much wider range of gear than the ITU tracks.
— H. Paris Burstyn, Senior Analyst, Heavy Reading