Network market undergoes shakeup

2009 saw the beginning of a changing of the guard in the mobile network infrastructure space, in part reflected by the astonishing demise of one-time giant Nortel Networks. Traditionally a sector dominated by incumbents Ericsson, Nokia Siemens Networks (NSN) and Alcatel-Lucent, this year will be remembered as one where China's Huawei and ZTE established themselves as more than just cheap kit suppliers but serious top three challengers with innovative offerings. Huawei in particular has cemented its position as a major contender for tier one operator honours, having ousted Ericsson and NSN from a lucrative Telenor deal, following earlier success at Vodafone and TeliaSonera.

Market leader Ericsson has not been immune to the economic downturn and is embarking on a US$1.4 billion cost-cutting programme led by incoming chief executive Hans Vestberg. However, we believe the Swedish vendor is well-placed to maintain market share in 2010, especially in light of the company's strong track record in the high-profile managed services arena (witness its US$5 billion win with Sprint announced in July). Alcatel-Lucent is beginning to turn itself around following the disastrous trans-Atlantic deal between both companies in 2006. An early LTE win at Verizon underscored the US operator's confidence in its ability to deliver on such a massive scale, and CEO Ben Verwaayen appears to be moving the company in the right direction with one eye on services. A bigger question mark hangs over the fate of NSN. The vendor is undergoing a major restructuring and remains insistent it is in the business for the long-run. But rumours concerning a potential takeover by a rival have dogged the company all year (Huawei is a likely candidate), and only last week senior execs of Siemens and Nokia were moved to send a joint letter to operator customers affirming their support for its future. Consolidation in the network vendor market is expected in 2010, and NSN is a favourite to be swallowed.

As well as the threat from China, we expect the 'big three' vendors to face strong competition in 2010 from some less prolific players. NEC will pose a challenge for network business in Asia Pacific (following an LTE deal with Japan's KDDI), whilst Motorola - recovering from a disastrous 3G network contract campaign - could yet turn out to be a dark horse of the LTE market. Like NEC it has also scored a deal with KDDI for LTE deployment and will be desperate to ensure it does not repeat its 3G failure. It has embarked on an aggressive marketing campaign touting its LTE credentials and is also strongly pitching for China Mobile's TD-LTE business. A commercial win at China Mobile would be the catalyst it needs for global growth.

(This article is part of a series of predictions for 2010 from the GSMA Intelligence team.)