Infrastructure spending will contract 6 percent in 2009, to $49 billion, as infrastructure upgrades decline and competition hits prices, according to market data collected by ABI Research.
The research firm attributes the slump to two underlying trends, which are independent of the global economic crisis. Deployment cycles for 2G and 3G coverage are approaching maturity in industrialized nations. Though 3.5G and 4G infrastructure spending remains attractive to carriers, 3.5G infrastructure upgrades are incremental in value and 4G deployments won’t meaningfully contribute to equipment spending until around 2011.
The intense rivalry between incumbent vendors such as Ericsson and Alcatel-Lucent and price-competitive Chinese vendors like Huawei and ZTE has increased pricing pressure. Huawei held just 5 percent of the market in 2005 but moved into third place by 2008 with $18 billion in telecom sales and 12.5 percent of the market, says ABI senior analyst Nadine Maniaro.
Despite the market contraction, 3G penetration in Asia is still comparatively low and South America, the Middle East and Africa are still growth markets. Chinese vendors have benefited from new 3G licenses in China, and incumbent vendors have received substantial contracts from operators in India. Ericsson assisted Indian operator BSNL to deploy 3G infrastructure in 400 towns and cities as the carrier sought to expand its footprint and improve coverage.
Filed Under: Infrastructure