Analysis: China's 4G bonanza to shake up mobile gear vendor market

Mon Apr 29, 2013 1:32am EDT
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By Simon Johnson and Leila Abboud

STOCKHOLM/PARIS (Reuters) - Chinese telecom operators will start awarding contracts for super-fast mobile networks this year, kicking off the third wave of a global investment cycle that is reshaping the competitive landscape among telecom equipment makers.

China, the world's biggest mobile market with 1.1 billion subscribers, is likely to further alter the picture at the expense of European suppliers by giving a huge boost to Huawei and its smaller Chinese rival ZTE.

Huawei already took a chunk of Europe's fourth generation mobile contracts last year, so another big win for it could be especially tough for middle of the pack gear makers like Nokia-Siemens Networks and Alcatel-Lucent. Both have struggled to combat Chinese competition and generate steady profits since being formed in mergers in 2006.

"China will blow everything else away in terms of volume this year," said David Geary, head of Alcatel-Lucent's wireless division.

Sweden's Ericsson currently has the biggest slice of the global mobile equipment market with around 35 percent, while Huawei has 17 percent, NSN 15 percent and Alcatel-Lucent 12 percent. The first wave of 4G investments that began in 2010 in Japan and Korea favored Ericsson and NSN, and saw the arrival of newcomer Samsung, while the second in the U.S. went largely to Ericsson and Alcatel-Lucent.

But even vendors that have done well in 4G so far need a China boost given the weak outlook for network gear this year.

Research firm Gartner sees network equipment sales up 2.3 percent to $79 billion in 2013 after a contraction last year.

China's three mobile operators - China Mobile, China Unicom and China Telecom - plan to spend a combined 345 billion yuan ($56 billion) this year on network upgrades. That includes investment in 4G, which multiplies mobile broadband speeds by up to five times for users of Apple Inc's iPhones or Samsung Electronics' Galaxy phones.   Continued...

A man walks past an advertisement board showing the logos of Huawei and ZTE on it, outside a mobile phone repair shop in Wuhan October 11, 2012. REUTERS/Stringer