Wireless Providers Face Tough Times

Nokia-Siemens, Ericsson, Alcatel-Lucent, Motorola and other wireless infrastructure vendors should brace themselves for a difficult year, says ABI Research. A new report is predicting a 6 percent reduction in expenditures for 2009.

The cause for this is twofold, according to ABI. The first part is that 2G and 3G coverage is approaching maturity in the industrialised world. While there’s a lure for 3.5G and 4G, 3.5G upgrades, a statement from ABI says, “are more incremental in value.”

While upgrades to 4G will eventually be a boon, spending on that equipment is not expected to happen in meaningful numbers until the 2011 through 2015 timeframe.

The second contributing element is that incumbent providers such as Nokia-Siemens and the others listed above face big competition from the Chinese market, both in price and innovation.

Chinese vendor Huawei is particularly one to watch. In 2005 it held 5 percent of the market share, which by 2008 it grew to 12.5 percent, representing $18 billion (£13bn) in telecom sales for 2008—which put it in third place.

The bright side for these vendors is the potential for growth in developing areas. ABI sees opportunities for 3G growth in Asia, South America, the Middle East and Africa. Carriers are still very much expanding their footprints in these regions, and voice and messaging traffic are the main drivers.

Nokia, for example, recently released a new phone to “emerging markets.” The Nokia 5030—unlike the MP3-playing Nokia 5800 XpressMusic in the United States—features an FM radio. In the regions it’s intended for, Nokia said in a statement, radio is a “main source of entertainment and news.”