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Pyramid Research sees the global mobile infrastructure market entering a new cycle of contract awards, a phase we refer to as the “NGN contract cycle.” As examined in Pyramid Research’s new report, Mobile Operator CAPEX: Charting the Transformation of Mobile Carrier Spending, mobile operator spending cycles have different characteristics and offer distinct opportunities for infrastructure suppliers. Each cycle carries implications for vendor-carrier relationships, service provider demand and the positioning of their solutions. We look at the three key phases in detail.
The first major phase was a 2G cycle, characterized by large deployment and network expansion contracts. The 2G cycle was the biggest; from the mid-‘90s through 2003, mobile service providers spent upwards of US$200bn to roll out their networks and expand coverage to suburban and rural areas. In emerging markets, this phase is ongoing, owing to relatively low penetration levels. This phase is the one in which relationships are created and built and in which vendor market share is developed; carrier focus is on quick deployment of good solutions; and, in turn, vendors develop preferred relationships with carriers that make it difficult for others to win contracts from these carriers (unless they substantially bring down their price points).
The second phase started around 2000 with the first 3G deployment contracts. This phase ushered in the rollout of the world’s first cellular packet networks, either as part of intermediary upgrades (with GPRS and EDGE, for example) or as part of rollouts of brand new radio infrastructure. The 3G contract cycle continues today and will arguably continue for several more years as adoption of mobile data picks up. This cycle will be smaller in spending volume than the first phase; since 2001, operators have spent around US$20bn (cumulatively) in deploying 3G networks, an amount we are forecasting to treble over the next five years.
We are now entering the NGN phase, one characterized by the gradual migration of mobile networks into fully IP environments. The IP phase, largely driven by investments in core networks, will also see an increased focus on applications and an expansion of the vendor opportunity from mere CAPEX and increasingly towards OPEX. Owing to the need for open platforms in an IP environment, this phase is characterized by strong interoperability of vendor solutions and a focus on best-of-breed; for those vendors that have missed out on phases 1 and 2, phase 3 is an opportunity to create new relationships.
This article is from the Pyramid Research reportMobile Operator CAPEX: Charting the Transformation of Mobile Carrier Spending. You may purchase this at our online store or by writing info@pyr.com.
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