Global Telecom Supplier Business Now Largely Shaped by China

Much of what has changed in the global telecom business over the last decade can be summed up in one word: China. It is the impact of Chinese mobile subscribers that is changing the subscriber side of the business, and it’s also the impact of Chinese equipment manufacturers that is shaping the fortunes of telecommunications equipment suppliers.

In a specific sense, most of the changes on the supplier side can be linked, directly or indirectly, to the rise of Huawei. In many of the industry segments, such as mobile devices, other names from China also are being important, including ZTE (News - Alert), for example.

In fact, one might also point to the disappearance of Nortel, and the “merger” of Lucent with Alcatel as other signs of big changes in telecom infrastructure over the last decade. It might be easy to say it was a transition from “big iron to more light weight processing, and that is partly correct. It might be logical to say that leaders in the time division multiplex and monopoly eras were replaced by others better adapted for IP networking, and that also is partly correct.

But the biggest observation might simply be that an older, high-margin telecom business has gradually been replaced by a new, highly-competitive business where profit margins simply are not what they used to be. And that has had implications for the entire business.

Ericsson (News - Alert), deemed to be at the top of market lists whether one looks at all telecom infrastructure or only mobile or GSM, saw its market share slip to  24 percent, down from 27 percent, in 2011. The decline is due to lower market share in the mobile equipment market, at 35 percent, down from 38 percent  in 2011, and was affected by the ongoing technology shift in China from GSM to other technology areas where Ericsson has limited presence.

In telecom services overall, Ericsson says its internal market data indicates that the company increased its market share  to 13 percent making it larger than any competitor in a fragmented market. Some might disagree, but everybody probably would agree that Ericsson and Huawei (News - Alert) sit at the top of the market share rankings, no matter how one counts.

Since 2007, the big changes in global telecom supplier market share are Huawei’s moves up the rankings, and Nortel’s (News - Alert) disappearance. In 2007, Huawei was ranked about number eight globally, and Nortel still existed as number 10, if one includes the larger information technology and telecom suppliers in a single index.

Looking only at suppliers of mobile infrastructure, by 2011 Huawei was number one, while Ericsson was second, Nokia Siemens Networks third, Alcatel-Lucent fourth, an ZTE fifth.

By Dell (News - Alert) ‘Oro Dell'Oro reckoning in 2011, and including both fixed network and mobile, Ericsson still was the largest firm and Huawei second. But it would be difficult to underestimate the seismic changes in the supplier side of the telecom business over the last decade.