Mobile Operators Enjoying a Buyer's Market for RAN and Core Network Equipment

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Mobile operator capital expenditure on key network items is expected grow a marginal 3% in 2010. Contributions to this 2010 growth are coming mainly from equipment spending on Radio Access Network (RAN) equipment but also Core Network (CN). RAN CAPEX should grow 3.5% while CN spending is expected to grow 8%.

"The long-term prospects for network infrastructure revenues are not rosy," says ABI Research vice president for forecasting Jake Saunders. "The consequences can already be felt in the marketplace as competition cuts equipment prices and forces equipment vendors to consolidate. ABI Research expects there to be a material shift in operator capital equipment spending patterns by 2012."

For the mobile telecoms operators it is very much a buyer's market. A number of mobile networks belong to multinationals such as Vodafone, France Telecom, Telefonica and MTN. These operator groups establish framework agreements to get the best terms from the equipment vendors. Vendors such as Ericsson and NSN have seen their margins squeezed by Huawei and ZTE. Motorola and Nortel have diversified their main infrastructure businesses. "There is a real possibility that one of the incumbent vendors might enter serious negotiation to merge with one of the upcoming Chinese vendors," says Saunders. "Political factors may prevent such a union but the business sense stands."

While the radio access network still takes the lion's share of equipment spending, operators are increasingly taking steps to upgrade their core networks. Traffic from multimedia streaming, social network access and messaging is growing exponentially. While 4G cellular services are still very much at the trial stage, equipment expenditure on 4G CN equipment is expected to outstrip 3G CN equipment spending by 2012. 3G and 4G CN equipment spending is likely to exceed USD12 billion in 2010. With the advent of 4G, spending on IMS and RCS equipment is expected to receive a boost as these technologies help operators to gain economies of scale in offering media-rich and voice-centric services.

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Worldwide Mobile Infrastructure Capital Expenditure: Radio Access Network and Core Network

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