Leaders and laggards in the LTE gear market

15 Apr 2014

LTE network deployments have accelerated at an unprecedented rate since the first commercial networks were deployed by TeliaSonera in Stockholm and Oslo in December 2009. The strong interest in LTE is being driven by consumers’ seemingly insatiable appetite for data services that is buoyed primarily by the proliferation of smartphone devices. As this occurs, infrastructure vendors are feverishly competing for market share and incumbency. Traditionally, this incumbency is important for a variety of reasons. In particular it:

  • Provides market scale needed to fund research and development costs.
  • Enables continued prosperity as legacy networks are retired
  • Creates downstream revenue opportunities for software and services. For example, annual revenues from after-sales support services and software upgrades commonly equate to 15 to 20 percent of capital expenditures. These annuity revenues accumulate with expanded market incumbency.

Commonly LTE infrastructure vendor share is quantified by the relative number of contracts for each vendor. However we believe that this approach is prone to misinterpretation since it does not account for the relative size and quality of the contracts that a particular vendor has won. In Tolaga Research’s LTE Market Monitor, we use two approaches to estimate vendor market share, which are shown in Exhibits 1 and 2. In Exhibit 1, we show the market share when reflected in terms of the number of contracts held by each infrastructure vendor. In Exhibit 2, a weighting factor is applied to each contract to reflect its relative scale. This weighting factor is based on the total service revenues of the contracted operator.

Exhibit 1: LTE network infrastructure market share based on the relative number of commercial contracts

Source: Tolaga Research 2014

Exhibit 2: LTE network infrastructure market share based on the relative number of commercial contracts weighted by their estimated market potential

Source: Tolaga Research 2014

Amongst the top three vendors (Ericsson, Huawei and NSN), Huawei has grown its market share between 2010 and 2013 fastest. When measured in terms of relative weighted contract value, Huawei increased its share from 8.3% to 22.1% between 2010 and 2013. NSN increased its share from 14.6% to 21% over the same period, and attained this share with larger average contract size relative to Huawei. Ericsson’s relative weighted contract value decreased from 36.9% to 25.7% between 2010 and 2013, but still has the largest LTE infrastructure market share. On this basis Ericsson and Huawei hold number one and two market share positions, with 25.7% and 22.1% market share, closely followed by NSN in third place with 21% market share.

While market incumbency is important, its value is being diluted as networks evolve to embrace IT centric design philosophies, overlaid technologies like small-cells and software centric operational models. As this occurs, infrastructure vendors are vulnerable to increased competition and shrinking market opportunities, and must continue to broaden their reach into adjacent opportunities, such as customer experience management, support for digital services and complementary business and operational support systems.

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