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Service Providers Invest in Mobile Core Gateways

Demand for new smartphone-related applications is driving the continued investment in mobile network infrastructure. This is a global phenomenon that few analysts anticipated, due to the current worldwide economic downturn.

In fact, despite the trend of cut-backs in network equipment spending by most telecom service providers this year, purchases of mobile core gateway equipment -- specifically for packet core networks -- are set to increase 19 percent from 2011 to more than $1.2 billion in 2012, according to the latest market study by ABI Research.

"Although the 1Q 2012 spend for mobile core gateways only shows a 0.1 percent growth compared to 1Q 2011 we expect the last two quarters to be stronger as spend gets pushed towards end of the year," says Jim Eller, principal analyst for wireless infrastructure at ABI Research.

The main driver for the increase in mobile gateway spend is the deployment of fourth-generation (4G) LTE networks, which require Evolved Packet Core (EPC) equipment.

Mobile gateway spend for 4G networks will account for approximately 60 percent of the total in 2012.

Aditya Kaul, practice director of mobile networks says, "The recent network outages seen at O2 in the UK, Orange in France, T-Mobile and Verizon in the U.S. market are all related to issues in the mobile core."

The insatiable demand for mobile broadband data and smartphones is putting pressure on the scalability and reliability of mobile core elements, which will ultimately drive mobile network operators to upgrade their mobile core.

The LTE EPC spend consists of P-Gateway, S-Gateway, MME, and eHRPD equipment, which account for LTE EPC deployments in both WCDMA and CDMA networks.

The vendors benefiting from the increase in EPC spend include the five major wireless network equipment vendors (Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens Networks, and ZTE), as well as router vendors such as Cisco Systems and Juniper Networks.

The Big Five will continue to dominate, although Cisco is gaining some new market share.

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