Telecom equipment makers such as Huawei, Ericsson, Nokia, HPE, IBM, Cisco, Samsung, Accenture and Juniper Networks reported lower revenue in Q3 2016, says TBR.
The decline in revenue of main suppliers to telecom operators was mainly due to lower capital expenditure (Capex) in the Americas and EMEA, in comparison to APAC.
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Telecom network majors such as Ericsson and Nokia have faced challenges in growing revenue in the third quarter because they had strong positions in both the North America- and Europe-based LTE markets.
Revenue declines will persist because the LTE market shift from coverage to densification in Europe and North America is expected to continue through 2017.
Telecom equipment suppliers have accelerated restructuring and rightsizing initiatives to stabilize margins and to align costs with revenue expectations.
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“China-based suppliers Huawei and ZTE outperformed rivals due to continued LTE, optical and fixed access investment in China and Southeast Asia,” said Telecom Analyst Patrick Filkins.
While Capex outlays in APAC will eventually normalize within other regions, opportunities to deliver RAN at scale in this region will persist in the short term, providing an advantage to China-based suppliers such as Huawei and ZTE.
As sales tied to RAN coverage will represent a smaller portion of telecom network supplier revenue, benchmarked vendors with fixed-access and/or optical transport portfolios, such as Huawei and Nokia, are best positioned to weather the structural decline in the LTE market.
Telecom infrastructure suppliers will cut headcount or divest underperforming businesses to address the growth issues.
The objective of telecom gear and software makers will be to enhance margins while providing time for growth initiatives tied to cloud, IT and eventually 5G to deliver new growth.
Baburajan K
editor@telecomlead.com
