Telco suppliers go from boom to bust

By Graeme Burton
06 Aug 2012 View Comments
BT red phone kiosk

When Huawei was confirmed as the world's largest supplier of telecoms networking equipment in the first half of this year, it marked the culmination of a challenging decade for all the other major suppliers that had, until the emergence of Huawei and ZTE, dominated the market.

Further reading

While Huawei and ZTE had prospered by offering aggressive pricing, first winning customers in emerging markets before moving in on the US and Europe, they alone were not the cause of the crisis among the venerable giants of the global telecoms equipment world.

A combination of standardisation and unexpected changes in customer demand, combined with a global slowdown in demand for new equipment, has caused a decade of bankruptcies, mergers, acquisitions and consolidation across the market – which has even rebounded to affect Huawei and ZTE.

A major part of the problem, according to Emir Halilovic, program manager, networking and infrastructure EMEA, at analyst group IDC, is that the industry did too good a job of driving through standardisation.

As a result, their once high-margin, proprietary products have become commoditised and the market has become price-driven rather than technology driven – and the industry's giants were ill-prepared to adapt to this shift.

"All those vendors agreed on a set of standards that opened the industry to competition," says Halilovic. "They are now in a situation where the telecoms providers, who are practically their only clients, are basically squeezing margins as much as they can."

"When you had only voice equipment, right up until the early days of GSM [the 2G mobile network standard], only a few people could make that. Nowadays, it's pretty much open for a lot of other parties and now it's a question of who can do it cheaper and on the largest scale; and, who can best fit their products to the requirements of the clients," he adds.

As a result, the price-driven strategies of Huawei and ZTE – unencumbered by a legacy telecoms business – has reflected this market shift, rather than driven it. They also pioneered the concept of multi-mode base stations, base station that could handle 2G, 3G and even 4G on a single platform, which were attractive to cost-conscious mobile operators.

[Turn to next page]

Reader comments
blog comments powered by Disqus
Windows 10 - will you upgrade?

Microsoft has made an early version of Windows 10 - its next operating system - available for download. The OS promises better integration and harmonisation across platforms, including mobile and desktop. Will your business be upgrading?

36 %
31 %
13 %
20 %