Top players in mobile network gear market

BARCELONA, SPAIN: Wireless telecoms equipment makers are expected to see growth this year after two years when network operators cut back on spending to cope with the economic downturn. But competition for deals is set to remain intense.

Much of investment by the operators will be in mobile network gear to keep pace with data-hungry consumers who increasingly surf the web on the go from their smartphones and tablet computers.

Also Read: Ericsson demos 168Mbps over HSPA network

Analysts expect growth in the United States to remain strong for the second year in a row, while major rollouts will boost sales in India. Capital spending in Europe is expected to grow only slightly.

Here are the top players in the industry:

ERICSSON

The Swedish company is market leader for wireless networks with a 36 percent share, according to Bernstein Research. It has the fattest margins in the industry due to greater economies of scale.

During the downturn it suffered along with its rivals as operators cut back on spending, but saw a return to growth in the second half of 2010 and sees a strong 2011.

Ericsson bought Nortel's wireless unit in July 2009 for $1.13 billion after the Canadian group filed for bankruptcy, in an effort to expand in the United States.

It also is taking on its rivals in fixed networks through the 2005 acquisition of UK-based fixed-line communications maker Marconi. Telecom operators are increasingly offering bundled services of broadband, fixed-line and mobile services to users, so Ericsson felt it had to broaden its reach.

Ericsson had sales of $31.4 billion last year.

NOKIA SIEMENS NETWORKS (NSN)

The 50-50 joint venture of Nokia and Siemens has 22 percent of the mobile market.

It has struggled to make money since it was formed in a merger in April 2007 and announced a turnaround plan last year to cut thousands of jobs and reduce costs.

Nokia Siemens Networks (NSN) sees an underlying EBIT margin above break-even for this year, and says its sales will grow faster than the slight growth predicted for the overall telecom gear market.

Its parent companies, which are joined in a shareholder pact through 2013, have been considering how they might exit once the turnaround is complete. There have been talks with private equity players and an initial public offering is also seen as possible.

NSN is soon to close a deal to buy Motorola's wireless network business for $1.2 billion in a bid to bolster its position in the United States and Japan.

NSN had sales of 12.7 billion euros ($17.21 billion) last year.

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HUAWEI

China's top telecoms gear maker has embarked on an aggressive overseas expansion in recent years and has made deep inroads into Europe, Africa, and India. It holds a 14 percent market share in mobile network gear.

Huawei was initially known as a low-cost player which cut prices to gain a foothold in the market but has since earned a reputation for rapid innovation and deep R&D as well.

But it has not yet cracked the large U.S. market because operators there are more concerted about security, while the government has sent signals that it wants to keep the Chinese out of sensitive infrastructure.

Huawei's European rivals have also complained about Huawei and its smaller Chinese counterpart ZTE getting state support in the form of loans, which the vendors can pass onto operators as an incentive to buy their gear.

According to an EU Commission document, Huawei received a $30 billion credit line from the China Development Bank last year. The company argues that such credit lines do not grant it unfair advantage and conform with OECD standards.

Huawei had sales of $28 billion last year.

ALCATEL-LUCENT

The Franco-American group had a 10 percent market share in mobile equipment, where it has traditionally been strong in CDMA technology used in the United States and weak in the GSM standards used widely in Europe and elsewhere. In fourth-generation technology known as LTE the group has had some early successes, signing big contracts with Verizon and AT&T in the U.S.

Since Alcatel-Lucent was formed in a merger in 2006 the company has struggled to make money, burdened by a high-cost base and a broad product portfolio. In 2008 Chief Executive Ben Verwaayen was brought in to turn the group around and pledged to make it a 'normal' company with positive free cash flows by the end of this year.

Despite a rough start to 2010, the group ended the year with strong fourth-quarter results, sending its shares sharply higher as investors wondered if it has finally turned a corner.

Alcatel-Lucent had sales of 16 billion euros ($21.69 billion) last year.

ZTE

China's second-largest telecoms equipment maker shares the same home town, Shenzhen in southern China, with larger rival Huawei. It also enjoys close ties to local government, which has helped it expand, first in developing markets in Africa and South America, but of late in Europe and North America.

It controls 5 percent of the market.

CISCO

The U.S. group bought advanced wireless network equipment maker Starent Networks Corp for $2.9 billion in October 2009 to boost its product offerings and putting it in increasingly direct competition with the top equipment makers in enabling operators to handle increasing amounts of data traffic.

Source: Market share data from Bernstein Research.