According to the latest market study by Technology Business Research (TBR), most of the growth for telecom vendors is coming from China during the third quarter of 2015 (3Q15), where network operators are deploying 4G LTE, optical fiber, fixed-access and IP equipment.
More growth is also coming from infrastructure deployment in India, where there is selective 4G LTE investment as well as 3G mobile network build-outs and managed services deals. This Capex spend is fueling growth for vendors entrenched firmly in those markets -- particularly Huawei and ZTE in China, and Ericsson in India.
"LTE investment in China continued to drive Huawei's peer-leading telecom revenue as well as strong growth for ZTE,” said Michael Soper, telecom analyst at TBR.
Outside of China, network operator spending is variable, reflecting the impact of post-peak LTE spend in North America, Japan and South Korea and economic issues in certain emerging markets, such as the Caribbean and Latin America.
TBR expects the significance of the Indian market will rise throughout 2016, supported by higher vendor investment in technical staff and R&D within the country. India-based network operators are leveraging spectrum for additional 3G deployments and initial LTE deployments. This growth will primarily benefit Ericsson and Huawei.
Vendors consolidation continued during 3Q15, particularly in the software and services sectors, which is partly due to the shift away from proprietary hardware toward lower-cost commodity open platforms.
TBR expects the fast pace of mergers and acquisitions in the telecom space to continue in 2016 as vendors capitalize on low interest rates, seek more consolidation to unlock operating and cost synergies, and strengthen their Information and Communications Technology (ICT) transformation capabilities.
During the quarter, Ericsson remained the dominant supplier in the telecom infrastructure services (TIS) space, but TBR believes that it's not immune to the broader trends affecting the global markets.
Ericsson's TIS revenue continued to decline due to the impact of the strong dollar and shift in North American network operator investments -- from broader LTE coverage to urban cellular density.
In contrast, Huawei experienced strong growth due to LTE and fixed deployments in China and ongoing expansion in Europe. Huawei also continues to close the gap with Ericsson, regarding total TIS revenue.
Alcatel-Lucent and Nokia Networks experienced further revenue declines, due to the downsizing of their managed services businesses and the impact of the strong dollar. Regarding the market outlook for all vendors, wait and see results from the final quarter of 2015.