The increasing strength of the Asian market was identified as the primary threat that telecom suppliers face, due to its expanded reputation, innovation and consistent delivery of quality.
For example, the Chinese telecoms provider Huawei has already achieved more than 10% of the global market share for investments of fixed and mobile network infrastructure, while the expansion rate for investments in fixed and mobile networks in industrialized countries is stagnating. Affected components manufacturers will see a one-digit expansion rate in the next few years, a significant downward shift from the recent two-digit figure trend.
Klaus von den Hoff, a partner at Arthur D. Little, stated: “Given the pressure on their market shares and margins, large, well established companies such as Ericsson, Nokia Siemens Networks, Alcatel-Lucent, Nortel and Motorola have to prepare for a completely new competitive environment. There are three main drivers bringing about this change. Firstly, neither the national nor the international consolidation of telecom network operators is complete, and moreover, every instance of consolidation leads to a new system standardization that will increase the buying power of the operators.
“Secondly, the pressure felt from new Asian competitors has increased in all markets,” continued von den Hoff. “Finally, traditional telecoms suppliers face growing pressure from IT suppliers who have aggressively gone to market with their equipment for telephony. Behind all of this is a change in networks’ IP requirements that will once again see a shake-up of the entire sector. This trend will open up the formerly proprietary systems and technologies.”
According to Von den Hoff, innovation will be the key differentiator between established and new participants on the market.
Dr. Karim Taga, partner at Arthur D. Little and head of the technology economics competence centre, added: “The fact that providers such as Cisco are looking for innovations outside their usual business arena makes the situation that much more complex.” Based on this background, Arthur D. Little surveyed leading global managers to establish the position of telecoms suppliers in various fields of technology.
While Motorola and Nortel were characterised as ‘technology followers’ by CTOs, the big four - Ericson, Huawei, Alcatel-Lucent and Nokia Siemens Networks – are seen as the leaders of technology within the industry.
In particular, Huawei appears to have made an impressive impact on the market, von den Hoff commented: “Even if established suppliers defend their market share through aggressive pricing policies and network operators rethink their supplier switch-over due to the billions invested in infrastructure, the Chinese heavyweight can still gain more share through massive innovation investments and cost advantages tailored to meet specific customer solutions.”
The survey’s emphasis was on the performance of three main operating areas of telecoms: access network infrastructure, core switching networks and network-oriented operating services, which have increasingly been provided by network operators. The results highlight how CTOs rate companies very differently.
Alcatel-Lucent and Motorola have perceived strengths in WiMax, whereas Ericsson and Huawei are regarded as being particularly strong in 3G and LTE; Cisco however continues to shine in IP routing. Despite the individual skills of these network operators, they still get the choice of between three and five suppliers that are seen as particularly reliable.