Europe's telecoms equipment makers look set for an
unpredictable year because of consolidation among their operator customers and
a slowdown of buildouts of faster mobile networks, known as 4G, in the United
States and China. Nevertheless, overall spending on mobile and fixed
networks is expected to grow for a second consecutive year, as operators
worldwide seek to improve coverage and add capacity to keep up with rising data
traffic from video and smartphones.
While construction of 4G networks is largely complete in the
United States, Japan and Korea, the technology is just arriving in
much of eastern Europe, Latin America and Africa. Market research firm Gartner
predicts operators' spending on mobile infrastructure, including traditional
radio base stations and newer gear like small cells, will increase 8 percent
this year to hit $43.36 billion.
Investment in fixed networks is set to rise 7.7 percent to
$10.33 billion, driven by fiber broadband rollouts. Analysts at brokerage
Bernstein Research meanwhile predict wireless equipment spending will rise 5
percent, though fixed network equipment will be largely flat.
In a rare development, Europe looks set to be a growth
driver for telecom gear companies this year, with leader in mobile gear
Ericsson, as well as number two China's Huawei and number three Nokia set
to benefit from any uptick in spending.
DEAL FRENZY
Vodafone's 7 billion pound investment push dubbed
"Project Spring" to improve its networks, part of an explicit plan to
put pressure on rival operators, could spur the likes of Deutsche Telekom and
Telefonica to up their own capital spending to avoid being left behind.
Clouding the picture in Europe is a deal-making frenzy in
which Britain's broadband leader BT Group is in talks to buy mobile leader EE;
Hutchison Whampoa Ltd has agreed to buy Telefonica's British mobile unit O2 for
up to 10.25 billion pounds ($15.4 billion); while Altice is buying Portugal
Telecom.
Such deals often lead operators to review contracts with
equipment vendors as they merge their networks, so spending can be slowed or
put on hold.
Meanwhile Alcatel, more exposed to the United States than
rivals with about a third of sales coming from there, will have to cope with
planned cutbacks at AT&T and Verizon, since both have finished
building 4G networks. But the Franco-American group will get a boost to revenue
from the weakening euro, which may prove a boon to Chief Executive Michel
Combes in the last year of a turnaround plan.
Alcatel will also benefit from its strong portfolio of IP
routers and optical products, analysts said, which operators need to strengthen
networks' ability to carry heavy data traffic. Huawei and Cisco Systems Inc are
also strong in those areas.
India is also set to be a bright spot with up to 5
percent growth, analysts say, with carriers expected to invest in both voice and
data networks after regulatory uncertainty on mobile licenses lifts. Activity
in India's sector had ground to a near halt in recent years because of a
government corruption probe on the award of mobile licenses.
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