Carriers’ network investment strategies are changing in 2010, according to new research, and, among Tier 1s, that means capex has shifted toward mobile. Such news is more than welcome after two hard years in which operators throttled back network investment because the global economy tanked. Now, with the recession at an unofficially declared end, perhaps no one stands to benefit more than telecom equipment suppliers.
The capex prediction, from analyst Catherine Trebnick at brokerage Avian Securities, should come as little surprise – mobile data traffic is projected to soar over the next few years. For example, in one study, done by Cisco Systems Inc. (CSCO) last June, the number will hit 2 exabytes per month by 2013. Smartphones, e-readers and other devices, as well as machine-to-machine initiatives, will fuel the demand.
And the figures only will increase as, in the United States at least, AT&T Inc. (T) and Verizon Communications Inc. (VZ) kick the LTE and IP wars into high gear. Indeed, inside the red-white-and-blue borders, AT&T and Verizon will make up 61 percent of the spending that’s expected to total $57.8 billion this year, a jump of 1.5 percent year over year, Avian said. The forecast bodes especially well for Cisco, Juniper Networks (JNPR), Alcatel-Lucent (ALU), Ericsson (ERIC), Acme Packet (APKT) and others, and promises to translate into stronger balance sheets for said suppliers.
First, starting with the LTE races, Verizon has outrun AT&T. The operator says it will offer commercial LTE services in about 30 markets by the end of this year. Verizon also projects nationwide coverage by 2013. Meanwhile, AT&T has been planning to trial its LTE network this year, with a full launch scheduled for 2011.
Avian said equipment vendors Cisco (thanks to the Starent acquisition), Juniper and Ericsson should reap the real near-term benefits here, a forecast the companies undoubtedly welcome.
For instance, Cisco saw a nearly 19 percent drop, to $1.8 billion, in net income for 2010’s first fiscal quarter as compared to the year-ago period. And Juniper reported a 44 percent decline in revenue for 2009’s third quarter but still secured $83.3 million in net income. The bulk of its sales came from what Ticonderoga Securities termed “unexpected strength” in deploying the SRX series service gateways. To that point, Juniper has inked a three-year contract with Verizon for the SRX firewall hardware. And Ericsson, the No. 1 infrastructure maker in the world, could really use the business. Its third-quarter income plunged 71 percent on intense competition from Huawei and from the recession.
