Telecoms Infrastructure Industry “in turmoil”

A new report by consulting firm Arthur D. Little says that telecoms suppliers must “radically rethink their business models” as infrastructure shifts towards a buyers market. 

The report, titled Are Suppliers Poised for a Turnaround?, says that established names in the telecoms infrastructure supplier market are increasingly losing market share to Asian vendors and IT companies.

“The turmoil in the telecom supplier market is best illustrated by the rapid ascent of Huawei to become number two in terms of revenue through both organic growth and the demise of Motorola,” the report states.

Citing the introduction of 3G into China, and the companys reputation as an innovator as key to its growth, the report says Huawei is now close to Ericsson on a market share revenue basis, and sits at number two in a top three that also features Alcatel Lucent in third. 

A global analysis of telecom operators spending, which directly impacts supplier revenues, indicates that overall capital expenditure will remain stable at 0.7 per cent CAGR between 2010 and 2014, with growth primarily coming from spending on equipment, says the report.

Wireless access infrastructure, already accounting for 43 per cent of total telecom infrastructure capital investment, will increase its overall share as spending continues to shift away from fixed infrastructure. The report also says that emerging markets now outpace mature markets in all infrastructure categories, and are expected to account for 56 per cent of overall revenues by 2015.

“The challenges faced by telecom operators open a number of new opportunities for suppliers, but will require a radical rethinking of their business models and offerings,” says Klaus von den Hoff, global head of Arthur D. Littles TIME practice. 

The report concludes: “Suppliers and operators will need to work together more closely to manage the transition from growth to efficiency while maximizing growth from emerging opportunities. Operators models will change dramatically and suppliers must respond to this.”

The reports key recommendations for suppliers to capitalise on the changing telecoms market include mastering all wireless generations (2G, 3G, and 4G), and being equally strong in fixed and mobile core networking technology. 

It also concludes that helping operators deploy HSPA+ versus LTE and push solutions to offload and prioritize traffic on wireless networks will be a key area of expertise for telecoms suppliers. 

The full report can be downloaded from the Arthur D. Little website