By Fernando Donoso, 4Ggear Senior Analyst
With the acquisition of Motorola Solutions by Nokia Siemens Networks this April, the list of major 4G infrastructure vendors has now been whittled down to just six: Alcatel-Lucent, Ericsson, Huawei, Nokia-Siemens Networks, Samsung, and ZTE. Many people in the industry seem to regard further consolidation as inevitable. As part of Maravedis' 4Ggear Infrastructure report, I considered this question and came to the conclusion that with one exception, further consolidation is unlikely in the short to medium term, and in fact there are reasons to believe that more infrastructure vendors could actually enter the market.
All of the companies still active in mobile networks infrastructure are strong, technically sophisticated players with quite complete product and service offerings. Not all of them are profitable however. It's been a long time since Alcatel-Lucent reported a profit - never in fact, but it's getting close. Much the same can be said for Nokia Siemens Networks, the company under the Nokia umbrella which resulted from the merger of Nokia's and Siemens' network infrastructure businesses. But I don't expect to see either company disappear. Nokia Siemens has been substantially strengthened by its acquisition of Motorola, while Alcatel-Lucent is probably out of play due to its French roots, and due to the fact that it is still nominally one of the jewels of U.S. high technology - particularly its Bell Labs unit. Both companies have also done well in LTE, albeit in different ways: quality (accounts) in the case of Alcatel-Lucent and quantity in the case of Nokia Siemens Networks (with a fair bit of quality thrown in).
In the end though, it's most likely going to be global economic and technology trends that ensure both companies' survival. In effect, the most applicable description is simply "A rising tide floats all boats". As the world makes its way out of recession, spending on telecom infrastructure will start to grow again. And the booming demand for mobile broadband will mean that network infrastructure spending is almost bound to increase - whatever vendors say about new, more economical network architectures, we expect to see a rising tide of base stations in all form factors becoming more and more apparent in the coming years. All vendors reported strong Q1 2011 results, and these types of results are likely to continue for several years, in no small part helped by accelerating investment in LTE. For a time, vendors will benefit from something unseen until now: the parallel deployment of two network technologies by major carriers world wide - HSPA and LTE.
The one vendor which I believe could exit the industry is Samsung. Having come close to the big leagues with its successful WiMAX product line, Samsung executives must have watched in horror as LTE's astute and ruthless market launch sweeps WiMAX aside. Given Samsung's low profile in the worldwide telecom infrastructure business, and its sky-high profile as a consumer electronics company, exiting the cutthroat infrastructure business may appear like a reasonable decision. Moreover, Samsung could be acquired by any of the larger vendors without ruffling too many national security and national industrial policy feathers.
Will there be new entrants? Possibly, particularly given the fact that there is no U.S.-based vendor, which appears to me as an anomaly. We tend to forget nowadays that telecommunications infrastructure is critical national capability, and I can't think of any industry that's critical to national security where the U.S. does not have a "made in America" option. I don't think that a national-security driven program will result in a new U.S. based vendor; America's dynamic and agile high-tech sector is likely to handle this on its own. There are already signs; for example, Motorola Solutions' recent announcement that it will start to sell small-cell infrastructure to cable MSO's using technology from BelAir Networks. It's almost like Motorola went out the door but is coming back in the window. Another example is Cisco's emerging femto cell business. In this case, the base stations themselves are almost an adjunct to the real business of selling lots of Cisco core network gear to operators. But if this effort is successful, Cisco may feel confident enough to give mobile wireless another go.
More details on all the major LTE and WiMAX infrastructure vendors are available in the upcoming 4Ggear Infrastructure report, part of Maravedis' 4Ggear service, which covers R&D, products, markets, and financial performance.
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