Dell’Oro: Mobile gear revenue to drop this year

Mobile carrier investment in networks worldwide will drop significantly this year but begin a recovery next year that will continue through at least 2007, according to a report announced Thursday by market research company Dell’Oro Group Inc.

Mobile infrastructure spending, measured as revenue coming in to equipment vendors, will fall 10 per cent this year from the previous year’s total and then grow three per cent in 2004, according to Greg Collins, a director at Dell’Oro, in Redwood City, Calif. Revenue will increase six per cent in 2005 and 10 per cent in 2006 before slowing to an eight per cent gain in 2007, he said.

Declining prices for some network equipment over that period will partly offset growth in capacity, Collins said. Prices will be driven lower by competition as well as by the fact that much of the infrastructure build-out will occur in developing countries, such as China and India, where mobile operators want lower priced networks because they can’t charge as much for their services as do operators in areas such as North America and Europe.

While operators in the developing world concentrate on adding subscribers – in China, operators are gaining about 5 million subscribers per month – those in the developed world are looking to data services that can bring in higher revenue, Collins said.

Along with significant subscriber growth in developing countries, infrastructure spending growth will be driven by expansion of coverage in the U.S. and construction of 3G (third-generation) overlay networks for high-speed data services in Europe, Collins said.

Dell’Oro estimates revenue from sales of equipment for WCDMA (Wideband Code-Division Multiple Access) 3G networks reached US$2 billion in 2002, up from US$700 million in 2001. Revenue will approximately double to about US$4 billion this year and grow to US$6.4 billion in 2004, Collins said. Most of the growth this year will be due to European investment, along with some in Japan, South Korea and Taiwan. Most WCDMA build-outs in the U.S. will fall into 2004, he said.

Meanwhile, investment in GSM/GPRS (Global System for Mobile Communications/General Packet Radio Service) and EDGE (Enhanced Data rates for GSM Evolution) will taper off over the next two years, he added. GPRS and EDGE can provide high-speed data services in advance of the faster 3G technology. Revenue in this area totalled about US$17.6 billion in 2002 and will fall about 20 per cent this year and another six per cent in 2004, according to Dell’Oro.

Wireless LAN (WLAN) hot spots, which offer much higher data rates than cellular networks, probably will complement rather than cut into investments in high-speed services such as 3G, Collins said. Although users want very high speeds when possible, they want data services everywhere, he said.

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