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Facts-Figures-Forecasts For :
Wireless Infrastructure Trends and
Market Share UpdatePublished Date : Jan, 2012
Report Theme:
Wireless Infrastructure TrendsWireless Infrastructure Market Share
LTE Market Share Update
Wireless Infrastructure Trends
Key FactsWireless infra spending growth accelerated from 11% to 20% year-on-year fromQ4 to Q1 driven by North America up 59%. It is now a year since spending troughed in
both absolute and year on year terms. LTE reached $0.5bn of spending in Q1 according
to Infonetics, 4% of total and equaling WiMAX for the first time. WCDMA (41%) spending
remains about twice GSM while CDMA stubbornly refuses to die and has been stable
YoY. Infonetics forecasts 10% growth this year, but it looks set to be higher (we forecast
30% growth for Ericsson networks and ALU wireless, in dollar terms).
Growth was driven regionally by the Americas and the non W. European part ofEMEA. The US accounted for about two thirds of global LTE spend, and Verizonalso continued its CDMA EV-DO Rev A upgrade. China and some other developing
markets saw strong GSM upgrade/expansion activity and also GSM network
modernization in Europe driving GSM growth higher than WCDMA globally and a net
positive for profitability. In India the 3G rollout continues after delays in 2010. Quarterly
data cannot be extrapolated reliably so we look at 12 month trailing trends.
Ericsson and ALU both benefit from their North American strength, and ALU from its
relative absence in Europe (barring Orange-France and Vodafone Italy). NSNs share
has stabilized after its mid 2009 change of strategy. Chinese vendor share has stabilized
(Huawei) or fallen (ZTE) thanks to absence from the US and weak Chinese 3G spend,
though the announcement of its first major UK win (Orange/T-Mobile JV Everything
Everywheres GSM network modernization) points to likely continued share growth for
Huawei.
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The US is a perfect-wave of high growth and high margins. Europe should be a high
margin upgrade market even in the absence of capex growth, but network modernizationis spoiling the party. The developing markets are a mix of profitable captive 2G upgrades
and low margin rollouts of more recently competed for 3G rollouts and upgrades.
Western operators tell us pricing is fiercest where Huawei and ZTE go head-to-head.
We rate Ericsson under-perform on a travel-arrive basis into an FX headwind and
peaking growth, while Alcatel-Lucent is buy rated on the back of lower exposure to
commoditizing base-stations, higher exposure to data growth through its router and
optics divisions, the self-help cost-cutting story, and optionality from its disruptive
LightRadio cloud mobile technology.
Key figureFigure 1 : Revenues Contribution Technology wise
Figure 2: Market Share by Movement by Vendor
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Figure 3: Infrastructure Market by Technology
Figure 4 : WCDMA RAN Market Share
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Figure 4: Growth by Technology
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Figure 5 : Growth & Market Share by Region
Wireless Infrastructure Market Share
Key FactsWith network technology converging on 4G LTE over the next decade, current market
share is important as incumbents will be looking to keep business with existing
customers over the transition to 4G. Infonetics admits it may be underestimating Huawei
where pricing on bundled wireless/wireline deals is difficult to split-out. Huawei and
ZTE unit share is certainly 1.3-1.5x higher than value share.
Regional capex fluctuations also affect the short term explaining China-focused
ZTEs share peak in 2009-2010, recent Ericsson and ALU gains driven by US spending.
LTE just reached $0.5bn of sales, the same as WiMAX, in Q1 so we dont have
meaningful share history. US, Japan, and Korean spending drove Q1. ALU and
Ericsson share the US, explaining their high share. Other includes the Japanese
vendors supplying in that country, and Samsung which has 6% global share thanks to
Korean LTE investment. NSN supplies KDDI in Japan amongst others.
Ericsson has done a good job to maintain share over the 2G to 3G transition. NSNs
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share loss has abated since new management started a far more aggressive policy
towards new tenders. Huawei continues a steady rise and ALU has benefited from its
near absence from weak European spending and exposure to the US. ZTE share has
fallen off as China Unicom slowed spending.CDMA spending is focuses on the US (Verizon is the biggest CDMA carrier) and China
(China Telecom is the second biggest), plus some networks in India and Latin America.
Recent quarters are driven by the US spending bubble (ALU and Ericsson) and the
slowdown in China (ZTE, Huawei, ALU) explaining the shape of CDMA market share
over the last year or so. Motorola accounts for about half of other and supplies the US
and Japan NSN should complete its $0.9bn acquisition in Q2.
The declining GSM market is seeing a resurgence capacity build this year. Quarter-on-
quarter market share remains volatile depending on which particular carrier or reqion is
spening, and does not provide much of a clue to true long-term share progress.
Looking through the volatility, year on year share seems to be about stable for most
vendors. NSN is down, Huawei, Ericsson, and ALU very slightly up.Core is about
20% of RAN spend and has traditionally comprised the voice related core, and packet
data.Voice has seen Huawei take share in the move to combined voice-data gateways,
and from traditional mobile switching centres to soft-MSC.
In the packet core side traditional vendors dominate with the exception of CDMA core,
where Cisco has dominant share thanks to its Starent acquisition, and this makes up the
bulk of other. LTE evolved packet core is included in the LTE data above. There is no
voice element to EPC.
Figure 6: Market Share by Technology , Q3 2011
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LTE Market Share UpdateKey Facts
LTE is likely neutral to slightly negative for the basestation businesses of vendors
(Ericsson, Nokia-Siemens, Alcatel-Lucent, Huawei) because we do not see it changing
carrier capex/sales ratios and it likely stimulates a capex shift towards intelligence in
the core benefiting router and service provider IT spend. Basestation market share
dynamics are a bigger issue likely driven by cloud mobile initiatives than LTE itself.
LTE is a small positive for wireline capacity optics players, though mobile data traffic willremain tiny compared to fixed traffic.
4G LTE spending is tracking exactly like the ramp of 3G WCDMA a decade earlier,
and like WCDMA, will take many years to overtake the predecessor technology. 2G
revenues peaked in 2008, long after the appearance of 3G. The reasons are three-
fold. First there is a long tail of spend on existing infrastructure (Infonetics expects 2G
share of spend to increase this year on the back of capacity upgrades in China and
India). Second, for WCDMA carriers the HSPA+ upgrade path makes more sense until
more spectrum is released. LTE is no more spectrally efficient than HSPA+ at lessthan 20MHz channel width. CDMA2000 carriers (such as Verizon Wireless) do have
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an incentive to move because EV-DO Rev B does not have the spectral efficiency of
HSPA+.
Third, carriers around the world that are not yet rolling out LTE are engaging in whatthe industry calls network modernisation, meaning that the existing separate 2G
and 3G basestation boxes are combined into a multi-standard box. This has two
somewhat negative impacts on basestation vendors. What should have been a profitable
captive upgrade market for the 2G and 3G networks gets re-tendered to the market
and competitively bid for. Ericsson has noted for some quarters that this is impacting
profitability in Europe. The second negative impact is that when LTE comes, it is a card-
upgrade rather than a full new basestation sale. True, the card upgrade is likely higher
profitability but it will impact revenues.
The main benefit of LTE is that it allows larger spectrum bands to be used, which in turn
allows higher capacity (more users or more speed). It is also cheaper to run. A layer
of complexity is removed from the network (no basestation controllers, also known as
BTS or RNC) and LTE is designed to be a SON (self organising network) meaning that
adding new cellsites does not require many technical person-hours to rebalance the
network it does it automatically.
Again with maximum spectrum utilisation in mind, LTE is designed to run on both double
and single bands of spectrum (known as FD and TD discussed below), and with theCDMA operators help, it is also designed to have an upgrade path from both the GSM/
WCDMA operator camp (called 3GPP) and the CDMA camp (called 3GPP2).
The main benefit of LTE is that it allows larger spectrum bands to be used, which in turn
allows higher capacity (more users or more speed). It is also cheaper to run. A layer
of complexity is removed from the network (no basestation controllers, also known as
BTS or RNC) and LTE is designed to be a SON (self organising network) meaning that
adding new cellsites does not require many technical person-hours to rebalance thenetwork it does it automatically.
Again with maximum spectrum utilisation in mind, LTE is designed to run on both double
and single bands of spectrum (known as FD and TD discussed below), and with the
CDMA operators help, it is also designed to have an upgrade path from both the GSM/
WCDMA operator camp (called 3GPP) and the CDMA camp (called 3GPP2).
LTE Basestation Market Share
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The 2G-3G transition saw reasonably stable market share Nokia Siemens Networks
(NSN) and Alcatel Lucent (ALU) trending down, Ericsson stable, and Huawei the main
share gainer, though this was as much driven by a 2G landgrab in emerging markets
as 3G. The bubble of China spend in 2009-2010 can be seen in ALU and NSN sharetroughs and Huawei and ZTEs share peak.
In 2010, almost 70% of LTE spend came from North America driven by Verizon
Wireless and AT&Ts LTE roll out. Verizon needs LTE because of CDMAs end of-
roadmap, and AT&T needs it to compete with Verizon. Ericsson and ALU are lead
suppliers of radio equipment to both, and so are leading the market share table. Some
hope that ALUs early lead marks a possible step change in that companys market
share, but we would not assume this until ALU wins a major LTE deal with a non-
customer. Verizon and AT&T were both incumbent customers of both ALU and Ericsson(via its Nortel CDMA acquisition).
LTE EPC Market Share
EPC Supplier Market Share
Alacatel Lucent 31%
Cisco 24%
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Ericsson 17%
Nokia Siemens Network 10%
Others 16%
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