4G potential set to challenge infrastructure vendors: LTE, WiMAX and Chinese competitors could shape market in 2008

BARCELONA, Spain – The world’s largest network providers are jockeying for position in the race to build out fourth-generation networks in an increasingly uneasy market affected by intense competitive price pressures and worries of an economic downturn.
Nokia Siemens Network CEO Simon Beresford-Wylie reiterated earlier guidance that the No. 2 infrastructure vendor expected the telecom market to grow slightly in 2008 amid fierce competition. NSN expects that by 2015, 5 billion people will be connected – 4 billion of them over broadband. While that presents opportunity for NSN, Beresford-Wylie warned that his company “will not chase deals that do not make sense” financially, most likely a reference to price competition from Chinese manufacturers.
Both NSN and L.M. Ericsson, the world’s largest network vendor, introduced end-to-end solutions based on LTE technology, a fourth-generation protocol expected to be adopted by many entrenched GSM operators.
Much of the buzz around the show centered on the movement to LTE technology. China Mobile’s announcement that it too would test LTE likely will drive more investment to the protocol if vendors think the world’s largest cellphone market could adopt the technology.
Indeed Alcatel-Lucent and Japan’s NEC Corp. announced an independently managed joint venture to focus on delivering LTE solutions. The move comes on the heels of disappointing 2007 financials for Alcatel-Lucent; the one-year-old company posted a $3.74 billion loss in the last quarter and more than $5 billion for the year.
Research firm UBS said it expects Chinese manufacturer Huawei to overtake Alcatel-Lucent this year as the world’s third-largest infrastructure supplier.
“Almost all of the growth in wireless industry revenue in the next three years is being driven by Huawei,” UBS noted. “Huawei is aggressively pushing for market share gain at the cost of margin erosion. However, being privately held and with easy access to cheap and skilled labor, Huawei can afford to be more aggressive than the other vendors.”
While LTE technology got most of the attention at Mobile World Congress, the alternative WiMAX protocol was acknowledged. Vodafone Group plc CEO Arun Sarin suggested that WiMAX could be integrated into LTE, but warned that wireless operators do not want two competing protocols, which happened with the launch of second-generation digital technology.
Meanwhile, back in the United States, speculation grew that Motorola Inc. might combine its wireless infrastructure business with embattled Nortel Networks, which has sold much of its networks business. The two manufacturers have WiMAX solutions that could complement each other.