Wireless infra market at eight year low in 1Q12

SINGAPORE CITY, SINGAPORE: Wireless infrastructure equipment revenues hit an eight-and-a-half year low in the first quarter of 2012, and the second quarter is not looking much better, finds ABI Research.

“Total revenues for wireless network equipment reported by the vendors for 1Q2012 were only $11.4 billion,” says Jim Eller, principal analyst, wireless infrastructure. “This is the lowest amount that we have seen since 3Q2003. First quarter revenues were down 17 per cent from the previous quarter.”

The second quarter is not looking much better.  Ericsson’s second quarter results, announced this week, showed just a nine per cent increase in sales from the first quarter. Preliminary results this week from Alcatel-Lucent and ZTE also predict slight increases in revenues, but fall far short of expectations.

The big concern is profitability. Ericsson’s second quarter results showed a 63 per cent drop in net profit year-on-year. Both Alcatel-Lucent and ZTE have released profit warnings this week, with Alcatel-Lucent expecting a loss of around €40 million for the second quarter, and ZTE expecting a year-on-year decrease of 60 per cent to 80 per cent in profit for the first half of 2012.

“With continued economic uncertainty around the world, mobile network operators are holding back on investments in their network infrastructure,” says Aditya Kaul, practice director, mobile networks. “Instead of buying new equipment, many operators are choosing to upgrade existing equipment, which is less profitable for the equipment vendors. We expect wireless infrastructure spending to be weak for at least two more quarters, until operators might be able to see a light at the end of the tunnel.”