Telecom Infrastructure Service vendors are being advised to prepare for a subdued market through at least 2020, with new figures from Technology Business Research revealing the sector has declined in all regions for the first quarter of 2016.
According to the analyst firm, the decline in the APAC region was largely due to slowed revenue in China.
“The slowdown in China has been widely anticipated and is now at the industry's doorstep,” remarks TBR Telecom senior analyst Christ Antlitz.
“Spend in China, which has propped up the TIS market for the past two years, is expected to continue slowing through 2017, posing significant growth challenges to the vendor community,” he explains.
“With the macro base transceiver station deployment cycle post-peak worldwide and NFV/SDN threatening product-attached revenue and profit pools, vendors need to align with areas in the broader TIS market that are expected to continue growing, namely densification, 5G, Internet of Things, cloud, and professional services associated with NFV/SDN and digital transformation,” Antlitz says.
According to TBR, Ericsson lost its longtime leadership position in the TIS market to Huawei in 1Q16, a key milestone for the China-based vendor.
“Additionally, Nokia and Alcatel-Lucent finalised their merger, and integration is progressing smoothly to create a new super vendor in the market with an end-to-end portfolio and economies of scale,” Antlitz adds.
“The power shifts and market trends unfolding in the telecom market will likely prompt additional acquisitions and alliances as vendors try to stay competitive,” he says.
Antlitz says vendors closely aligned with the aforementioned growth areas will be best positioned to increase revenue in coming quarters and years, while vendors tied closely to hardware will struggle.
Vendors will also focus on driving cost savings through automation and diversification to adjacent industries, including cable operators, alternative network providers and enterprises to offset lower spend from telecom customers.