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Stefan Pongratz is a Senior Director at Dell’Oro Group covering the Mobile Radio Access Network (RAN) and Small Cells markets.  In addition, Stefan conducts our economics research on the top 50 network operators in the world.  In this edition of Industry Insights, he gives us a view into key trends in the Mobile Radio Access Network (RAN) market and what they mean for the vendor landscape.

1. What are the key factors at play in the Mobile RAN market right now?

We are seeing signs of recovery from the 2008-10 recession that took hold after the market peaked in 2008, but we are not back to pre-2008 levels.  Even though unit shipments have been trending upwards and market revenues were strong in 2011 and 2014, ASPs have trended downward offsetting any unit growth.

Operators are currently focusing on LTE coverage in up-and-coming LTE markets such as China, Europe, and Russia.  In advanced mobile broadband markets with comprehensive LTE coverage, we have seen a shift in focus from building out ‘coverage’, to increasing ‘capacity’.  The combination effect of strong unit sales in the coverage phase, and upgrades in the capacity phase, now means that, despite strong unit deployments in China, demand for mobile broadband has weakened overall, offsetting the revenue gains that have been made in advanced markets in other regions.

2. Where is the market heading?  What is driving consolidation?

As we look forward over the next five years, we expect service providers who don’t yet have wide mobile broadband coverage, to continue to deploy high unit numbers in those regions.  At the same time, we expect that the carriers which have already deployed advanced mobile broadband offerings will continue to improve capacity on current networks, while also placing greater focus on indoor and other high traffic areas.  This in turn will spur demand for Small Cells – however, we don’t believe this will change the general market trajectory of flat-to-declining revenues for the overall RAN market.

In general, Mobile RAN trends have been relatively flat, and vendors who previously doubled-down on mobile broadband, are now looking to diversify their portfolios beyond radio. This has also led to recent consolidation activity such as the NokiaAlcatel-Lucent merger.

3. What does all this mean for vendor positioning in mobile RAN?

We haven’t seen a changing of the ranks among the top three vendors in a long time—the top three being Ericsson, Huawei, and Nokia—the regional shifts in deployment, together with the focus on China and Europe has resulted in some western vendors losing some share.