Ericsson Maintains the Lead in Telecom Infrastructure Services

­Claiming more than 300 managed services contracts in place by the end of 2Q09, including its first win in Africa, Ericsson continued to lead the market for telecom infrastructure services, according to TBR's 2Q09 benchmark report. Although its TIS revenue declined 3.7% year-to-year, in terms of market share Ericsson's $2.5 billion result for 2Q09 placed it ahead of Alcatel-Lucent, NSN, IBM and HP-EDS - all of which posted results between $1.5 billion and $2.0 billion.

TBR attributes Ericsson's success in 2Q09 to the company's steady deal pipeline as well as growth in the number of its managed subscribers, half of which are located in emerging high-growth markets. Additionally, the announcement of a five-year outsourcing deal with Sprint in May indicates that Ericsson is making progress in the North American market. Meanwhile, newly partnered Alcatel-Lucent and HP-EDS came in at No. 2 and No. 3, respectively, in market share. The strategic partnership should allow both companies to expand their reach in the TIS market and provide a differentiator in an increasingly crowded marketplace.

In terms of year-to-year TIS revenue growth, Huawei led among Tier 1 suppliers during 2Q09, though from a much smaller base than its competitors. The company's growth was largely the result of deployments with new operators; however, Huawei also won a three-year managed services deal with Saudi Arabia's Mobily. HP-EDS and IBM were the only other Tier 1 suppliers to join Huawei in posting year-to-year growth in TIS revenue during the quarter, as the economic recession continued to delay operators' next generation deployments and capacity upgrades.

Regionally, the merger of North American operators is causing consolidation among suppliers and creating new integration and outsourcing opportunities for a few large suppliers. HP-EDS, for instance, was able to derive $622 million in TIS revenue from North America during 2Q09, as it continued to expand the large outsourcing and professional services base that resulted from the integration of EDS. In Asia Pacific, suppliers' investments in India and China paid off in 2Q09, driving revenue and positioning them for future growth. Ericsson's rollout and turnkey services for developing markets positions the company favorably in China and India, and TBR expects it to continue to achieve significant regional growth in 2009 and beyond. Meanwhile, Nokia Siemens Networks expanded its emerging markets operations and moved its services headquarters to India during 2Q09, and continues to compete aggressively for regional business on price, localization and expertise. IBM led in year-to-year growth from Asia Pacific, but faces the challenge of adapting its large project strategy to the low cost competition and finds its market position threatened in the region.

Looking ahead, a continued decline in equipment revenue from major vendors is putting additional focus on services. "With Nokia Siemens promoting the former head of its Services unit, Rajeev Suri, to the CEO position and Ericsson moving its Services head Jan Frykhammmer to the CFO position, it is clear that growing TIS business is going to be a front-and-center priority for many vendors in 2H09 and 2010," said TBR's NBQ Director John Byrne. "And with Huawei increasingly shifting from an equipment company to a solutions provider, services margins are likely to face severe pressure in the near-term."

In addition to analyst inquiry time, custom projects and industry benchmarking, TBR's NBQ quarterly reports provide an in-depth view of the leading equipment vendors and service providers in the network, telecom and mobility value chains, including Accenture, Alcatel-Lucent, AT&T Wireless, Cisco, Ericsson, HP-EDS, Huawei, IBM, Motorola, Nokia, Nokia Siemens, Nortel, Sprint Nextel, T-Mobile USA, Verizon Wireless, and ZTE. TBR NBQ covers key segments such as telecom infrastructure services, network equipment, software and enabling platforms and wireless terminals. We analyze how companies' strategies, actions and results change each quarter, and what might be expected in coming quarters. TBR puts the information in context by presenting how the company has performed historically, along with how it fares when benchmarked against competitors.

Posted to the site on 24th November 2009