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Mobile Network Infrastructure Vendors Starting to Feel the Heat

Nortel’s share price recently dipped to about 40 cents. While ABI Research in no way singles out the beleaguered network equipment vendor as worthy of particular criticism, according to senior analyst Nadine Manjaro Nortel’s low fortunes are symptomatic of several current industry trends.

A recent study from ABI Research, “Mobile Network Vendor SWOT Analysis,” examined the strengths, weaknesses and strategies of the world’s major wireless infrastructure providers. It provides insights into why bad economic times affect some companies more than others.

“Nortel is strong when it comes to the enterprise,” she says, “but recently they have made a lot of investments aimed at winning business from service providers, efforts that have not really taken off because of an unclear strategy and changes in operators’ technology choices. That was an ominous situation, which the global recession has now made more serious.”

In contrast, Alcatel-Lucent was doing poorly too, but is now improving its performance and gaining higher ratings from financial analysts after a corporate revamp and a change of top leadership. Motorola’s share price is on the rise too due to re-structuring and shifting focus into stronger segments.

Does the recession mean that network operators are cancelling or delaying infrastructure projects? Not necessarily. Telecoms are actually faring better than many other industries, and while operators may cut spending, so far the cuts have mostly been operational rather than on infrastructure.

“It’s about decisiveness and execution,” Manjaro concludes. “Take a company like Ericsson: they’re not doing great business, but their share price is still around $8.00. Their strategies are clear, and they benefit greatly from their emphasis on providing managed services as well as hardware. All vendors are struggling, but some more than others, and this market will weed out the weaker players.”

“Mobile Network Vendor SWOT Analysis” offers analysis of the strengths, weaknesses, opportunities and threats facing a number of leading network infrastructure vendors. It presents an analysis of the companies’ financial results, including investments in research and development, product line diversity, geographic sales distribution, and long term strategies. [ABI Research]

2013: Mobile Network Energy OPEX to Rise Dramatically to $22B

Over the next few years the growing cost of bulk diesel fuel, coupled with wholesale electricity price increases, are likely to offset significant gains in cellular base station power efficiency. This will result in a collective network OPEX of $22 billion in 2013, according to a new study from ABI Research. Starting in 2012, however, the benefits of power consumption and efficiency advancements should start to rein in the spiraling operating expenditures.

Infrastructure vendors are focusing intently on reducing power consumption in their products through hardware integration, the use of remote radio heads, and software-based solutions that provide dynamic network dimensioning. These measures seem likely to reduce the average base station power consumption level by 43% between 2007 and 2013, a development that is eagerly awaited by the carrier community.

ABI Research vice president Stuart Carlaw says, “Although reducing power consumption provides good ecological credentials for carriers and vendors alike, the real driver for improving power consumption is financial. It is imperative that carriers do everything possible to negate rising energy costs in an environment where network traffic and ARPUs are diverging.”

There are significant opportunities to integrate traditional power sources with fast-improving renewable energy sources. Solar power remains the front-runner but hybrid solutions including wind and increased use of battery power will become ever more viable. Other solutions such as fuel cells and compressed air are also on the long-term radar.

Carlaw also notes that environmental consumerism could be a powerful force in this area as it has been in other markets: “It is only a matter of time before carriers begin to market services under the green banner.”

A new ABI Research study, “Mobile Networks Go Green” examines the mechanisms being put into place by carriers and infrastructure vendors to reduce power consumption, ranging from network optimization to hardware integration, power amplifier efficiency, and software-based dynamic asset dimensioning. It also considers the opportunity to integrate renewable energy sources into the primary power sources for cell sites, focusing on solar, wind, and hybrid solutions combining renewable cells, grid-based electricity, diesel generation and battery banks. [ABI Research]

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