Telecom firms' spending on network gear seen picking up in 2013

Thu Jan 24, 2013 2:39am EST
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By Leila Abboud

PARIS (Reuters) - Telecom network operators are expected to increase their spending on equipment this year, giving a boost to vendors like Ericsson and Alcatel-Lucent after economic weakness caused a sharp market contraction in 2012.

Industry executives and market researchers give varying forecasts for the size of the jump ahead, but all expect equipment demand in the United States, Brazil, and China to fuel growth as operators step up their investments in faster fourth generation (4G) wireless broadband networks.

Europe is expected to stagnate again this year after the debt crisis and economic woes caused operators to sharply cut network spending last year. Although groups like Vodafone and France Telecom are building 4G networks, they are more cautious than U.S. counterparts such as Verizon and AT&T because of fears that the extra investment won't pay off in Europe where mobile prices are lower.

The trends have led market research group Gartner to predict sales of network equipment to carriers to rise 2.3 percent to $79 billion in 2013, after falling 6.6 percent to $77.3 billion last year. North America and Latin America will grow by 4 percent, while Asia excluding Japan will be up 3.6 percent.

Infonetics Research is far more bullish - forecasting up to 13 percent growth this year after a flat 2012 - because analyst Stephane Teral expects to see significant catch-up spending by operators who delayed network investments last year.

Huawei Technologies, the second-biggest equipment vendor by sales after Ericsson but effectively shut out of the U.S. over security concerns, said the overall network equipment market will grow by 5 percent this year.

Other vendors may give their own predictions when they report annual results, with Nokia Siemens Networks (NSN) due to report on January 24, Ericsson on January 31 and Alcatel-Lucent on February 7.

"The trend of telecom operators being prudent about their overall capex envelopes is here to stay. I don't think the major equipment vendors will get a lot of relief in terms of top-line growth this year," said Deborah Kish, analyst at Gartner.   Continued...

The logo of Alcatel-Lucent is pictured at the entrance of its Paris headquarters December 12, 2008. REUTERS/Charles Platiau