Telecom Lead India: Samsung reorganized its
Telecommunications segment into the IT & Mobile Communications division, which
includes Mobile Communications, Telecommunication Systems, IT Solutions and
Digital Imaging. While Mobile Communications makes up the bulk of revenue and
operating profit due to the sizable handset business, Telecommunication Systems
continues to grow and profit from the sale of LTE equipment and related
services. TBR estimates Telecommunication Systems revenue grew 8 percent
year-to-year.
We believe Samsung’s Telecommunications Systems business
will benefit from the industry ramp up of LTE spend that will occur through
2012. With its end-to-end Smart LTE solution, Samsung is expected to win
contracts from leading operators alongside larger network equipment providers
(NEPS) such as Ericsson, Alcatel-Lucent, and NSN. While Samsung would like to
be selected as an exclusive equipment provider, it is typically selected as a
secondary supplier, ceding the top position to its larger rivals. Revenue will
continue to roll in from the company’s portion of Sprint’s Network Vision
contract, which will shift into high gear in 2012, as Sprint doubles capex
spend to $6 billion.
Although an acquisition would help Samsung compete with
the larger vendors, it is unlikely to acquire in the telecom infrastructure
space.
With major infrastructure players NSN and Alcatel-Lucent
struggling to grow revenue and make a profit, speculation is rampant that
Samsung will acquire one of the European vendors. This is an unlikely scenario,
as Samsung has stated that while it is open to acquiring, purchases would come
in the fields of healthcare and energy. The company would prefer to grow its
Telecommunication Systems business organically and not manage the integration
of thousands of European-based employees into its ranks.
Michael Soper, Networking & Mobility Research
Analyst
