As the industry undergoes a transformation, telecom vendors are trying to reinvent themselves and capture new market opportunities. They are investing in higher-value offerings, such as software and integrated solutions that enable new business models and help operators reduce costs. Vendors that evolve their strategies and models to embrace this changing environment early will fare far better than industry laggards.
The telecom equipment market continues to be dominated by four players, Huawei, Ericsson, Nokia, and ZTE. Their combined global revenues in 2015 were 764,763 crore, an increase of 23.09 percent from 621,297 crore in 2014. An additional estimated combined 15–20 percent market share is contributed by Cisco Systems, Juniper Networks, Samsung, HPE, IBM, and Accenture.
Among the top four, globally, Huawei continued to lead the market in revenue at a 51.17 percent share in 2015, up from 45.95 percent in 2014. It took market share from Ericsson, which slipped from 27.22 percent in 2014 to 23.95 percent in 2015 and Nokia, which fell from a 13.74 percent share in 2014 to 13.02 percent in 2015. ZTE continued to be in the 13 percent vicinity.
In India, the scenario was somewhat different. Among the top 4, Ericsson gained market share from the two Chinese players, Huawei and ZTE. Ericsson climbed from 29.52 percent in 2014 to 35.72 percent in 2015. Nokia continued to be steady at a 28 percent market share. Huawei slipped in a miniscule manner, from 33.06 percent to 32.39 percent, whereas ZTE lost ground falling from 8.61 percent in 2014 to 3.21 percent in 2015.
Additionally, Nokia and Alcatel-Lucent finalized their merger, and the integration is progressing smoothly to create a new super vendor in the market with an end-to-end portfolio and economies of scale. The power shifts and market trends unfolding in the telecom market will likely prompt additional acquisitions and alliances as vendors try to stay competitive and segue into growing areas of the broader market.
Vendors also engaged in consolidation, particularly in the software and services spaces, due to the acceleration of hardware commoditization. Ericsson acquired OSS/BSS C&SI firm Icon Americas; Huawei acquired OSS company Amartus; and Alcatel-Lucent bought Mformation, an Internet of Things (IoT) platform company.
A slowing RAN market drives telecom vendors to restructure and focus their portfolios around software, services and cloud enablement to help operators evolve into digital service providers.
Some operators are already pressing ahead with early commercial deployments of network functions virtualization (NFV) even though industry standards have yet to be adopted. While cost reduction and the ability to offer services more quickly are the main drivers behind the deployment of NFV and software-defined networking (SDN), some operators also view them as critical for long-term survival. The European Telecommunications Standards Institute (ETSI) is the main driver in terms of setting NFV standards for the telecom sector, but there are growing indications that vendors and operators want to move ahead now rather than wait until standards are in place.
Globally, vendors recognize that telecom CapEx will be subdued until the 5G cycle ramps up in 2020 and technology suppliers increase their focus on adjacent markets, such as the cable industry, where CapEx investment is growing. Providers target other customer segments for expansion, particularly cable, where DOCSIS 3.1, CCAP, and fiber investment are growing. Leading benchmarked vendors such as Huawei, Nokia and Cisco, along with optical suppliers, are best positioned to capitalize on these trends.
The fast pace in the telecom space is expected to continue in 2017 as vendors capitalize on low interest rates to obtain financing, embrace acquisitions to unlock operating and cost synergies, and strengthen their information and communications technology transformation capabilities.
In 2015, Ericsson India's turnover amounted to 9927.61 crore, a 74 percent increase since 2014, constituting a 5 percent revenue share in its global operations. Segment Networks dominated with a 60.41 percent share, Global Services were at 34.15 percent, the balance 5 percent being contributed by Support Solutions.
Sales growth was driven by increased operator investments in mobile broadband infrastructure and professional services. Increased focus on network quality and cost optimization continued to drive strong sales growth for managed services. Support solutions sales showed significant growth, driven by OSS and BSS.
In India, the delayed spectrum auctions led to a slow, JAS 2016. The Jan-Sep 2016 sales at 5717.22 crore were 25 percent lower than Jan-Sep 2015, the largest dip being in Networks.
Global. Ericsson's global turnover in 2015 amounted to 183,194.5 crore. Ericsson has customers in more than 180 countries. The company has been present in many countries, such as China, Brazil, and India, for more than 100 years.
In 2015, on a global level, net sales increased by 8 percent mainly due to sales growth in India, North America and Mainland China, as well as higher IPR licensing revenues. All three segments showed sales growth. Both operating income and margin increased compared to last year despite significantly higher restructuring charges. The increase is mainly related to higher IPR licensing revenues, lower negative currency hedge effects, and lower operating expenses, excluding restructuring charges. In the year, the US dollar strengthened toward a number of currencies including SEK, impacting sales and operating income positively.
The strategic direction is to: excel in core business-Radio, core and transmission and telecom services; establish leadership in targeted areas-IP Networks, Cloud, OSS and BSS, TV and Media, and Industry and Society; and Expand in new areas with future possibilities and growth.
Bharti Airtel. In September 2015, the vendor was awarded a four-year, 3G network expansion contract for eight telecom circles. A contract for roll out of FDD-LTE-based 4G network in the Delhi circle, along with four other circles was also signed. In October 2016, the vendor signed a 3350-crore, three-year contract for managed services, for the telco's 2G, 3G, 4G, and LTE networks across the country. Under the agreement, Ericsson is responsible for field maintenance, network operations, network optimization and passive maintenance for over 150,000 physical sites and 150,000 logical sites owned by Airtel.
Idea Cellular. In February 2016, a two-year, 4G network deployment and 2G and 3G networks transformation contract covering the telecom circles of Maharashtra, Madhya Pradesh, the Northeast, and Himachal Pradesh was awarded. As part of the deal, Ericsson is transforming the telco's existing mobile radio access and core network infrastructure across nine circles for 2G and five circles for 3G. The vendor already provides managed services to the operator in five circles.
Vodafone. In February 2016, a three-year managed services contract to manage its optical fiber cable network in 10 telecom circles was awarded. The new agreement covered operations and maintenance of its optical fiber network across east and west India, spanning a distance of approximately 45,000 km.
Reliance Communications. In March 2016, Ericsson was selected to manage the operator's Wi-Fi network along with Ozone Networks. Ericsson's small-cell-as-a-service network will enable RCom to utilize the existing Ericsson/Ozone Wi-Fi infrastructure and launch Wi-Fi services for a seamless end-user experience using the carrier-grade small cell network.
Aircel. Ericsson is providing managed service to Aircel in six circles in India
Since May 2016, the vendor is in dialogue with the service providers that are looking to digitize their operations.
The year 2015 marked the 150th anniversary of the company, being yet another year of fundamental change as it took a major step forward as a company shaping the revolution in connectivity and digitization in the Programmable World. Transformation continued as it announced the acquisition of Alcatel Lucent in a deal that, in early 2016, made it the leading player in multiple technology categories, including 4G ("LTE"), 5G, IP, optical and fixed networks.
In 2015. Nokia also sold HERE digital mapping and location services business to a German
The two main businesses in 2015, were Nokia Networks, providing mobile connectivity infrastructure and services, and Nokia Technologies, the driver of future innovation and licensing.
Business performance. For financial reporting purposes there were three operating and reportable segments in 2015: Mobile Broadband and Global Services (both within Nokia Networks), and Nokia Technologies.
In 2015, Nokia's profit before tax from Continuing Operations increased more than 50 percent to EUR 1.5 billion versus 2014 on EUR 12.5 billion in net sales, which were 6 percent above the year-ago period.
Nokia Networks recorded a 2015 net sales increase of 3 percent, and kept its focus on delivering strong profitability despite market conditions. In that vein, Nokia Networks' gross margin in the final quarter of the year was an excellent 39.6 percent, a third consecutive quarter above 39 percent.
Nokia Technologies' net sales for the year increased 77 percent to EUR 1.02 billion as a result of revenue stemming from the positive outcome of a multi-year patent arbitration process with Samsung, with operating profit similarly increasing 110 percent versus 2014.
Nokia reportable segments in 2016. The vendor has five business groups: Mobile Networks, Fixed Networks, IP/Optical Networks and Applications & Analytics; as well as Nokia Technologies. For financial reporting purposes, from the first quarter 2016, it has aligned its financial reporting under three reportable segments: Ultra Broadband Networks comprising Mobile Networks and Fixed Networks, IP Networks and Applications comprising IP/Optical Networks and Applications & Analytics, all within our Networks business, and Nokia Technologies.
Nokia in India
In India, Nokia has been at the forefront of partnering with telecom operators in India from launching and enabling the rapid growth of 2G/GSM technology in 2000, to bringing high quality 3G services from 2011 onwards, to being the pioneer of 4G/LTE technology in India since 2012. Today, Nokia offers a complete end-to-end portfolio of products and services across five business groups: Mobile Networks, Fixed Networks, IP/Optical Networks, Applications & Analytics and Nokia Technologies. Its presence in India is marked by:
Regional Customer Operations. Close to one-third of India's mobile subscribers are carried by networks supplied, installed, and managed Nokia for telecom operators in India. 257 million subscribers in India via 200,000 sites are served by our equipment. In addition, Nokia is the key telecom infrastructure suppliers to Indian Defense and strategic telecommunication partner for GSM-Railways technologies to the Indian Railways, including Kolkata Metro Railways.
Domestic Manufacturing. Nokia is one of the leading telecom equipment manufacturing companies in India. This facility manufactures and ships the complete gamut of telecom products (2G, 3G, LTE & Core Networks) for domestic and global markets with close to 50 percent of the finished radio base station products being exported. In 2016, Nokia has been recognized amongst Top 25 innovative organisations in India for its Chennai manufacturing operations by CII Industrial Innovation Awards 2016.
Research & Development. Nokia's Bangalore Technology Center is one of the four main global R&D sites for the company, undertaking research on various advanced global telecommunication technologies like WCDMA, Small Cells, CDMA, Radio Platforms, LTE, Operational Support Systems, Voice & IP Transformation, Packet Core, and more.There have been over twenty papers published in prestigious technology forums like IEEE/ACM and several contributions in multiple standards bodies covering a range of technologies including 3GPP, HSPA Home program.
Global Delivery Center. The combined facility, located in Noida and Chennai, is responsible for the delivery to operators of high quality services across the complete network lifecycle including planning, implementation, system integration, managed services, care and optimization to operators globally. It provides services to over 275 telecom operators in 85 countries, managing over 310,000 base stations with millions of subscribers.
Bharti Airtel. In June 2015, Nokia was selected for 3G network roll-out in 5 new circles and expansion in 3 existing ones. In October 2016, a 4G deployment and expansion contract in nine telecom service areas was closed. The new agreement would expand the deployment of 4G technology in three new circles in addition to six circles it already serves – this includes the regions of Gujarat, Madhya Pradesh, Bihar, Rest of Bengal, Odisha, Mumbai, Maharashtra, Kerala and UP East. In November 2016, a pan India contract to implement voice-over-LTE (VoLTE) calling technology was finalised.
MTNL. In August 2015, MTNL placed an order to install equipment which would enable MTNL to expand and modernise 2G and 3G networks in Mumbai and Delhi as well as improve quality of various services with Nokia having unconditionally complied to the APO, including the security agreement. The investment outlay is about 400 crore. It would add 1,080 number of 3G sites and 800 number of 2G sites in Delhi and 1,080 number of 3G and 566 number of 2G sites in Mumbai to its network.
Vodafone. Nokia also secured a three-year 4G network deployment contract for three of its most lucrative circles, Mumbai, Kolkata and Punjab. These three circles were new wins for Nokia, where Ericsson had deployed the technology network for Vodafone India. The vendor wouldinitially deploy limited 4G sites in these circles.
In September 2016. Nokia completed the world's largest modernization of a home location register (HLR) database for Vodafone India SuperNet. The modernization entailed consolidating subscriber databases across 17 circles covering over 200 million entries. The number of database hosting nodes was also reduced from 46 to 12, improving efficiencies, enhancing performance, and optimizing costs. As part of the project, Nokia implemented its subscriber data management (SDM) solution, which features Nokia's One-NDS (network directory server), thereby consolidating network-related subscriber data into a single unified platform to be shared across multiple applications. Nokia's systems integration services team seamlessly migrated the HLR database without disruption to Vodafone India's network and its 200 million subscribers, efficiently meeting a challenging deadline with the highest quality.
Idea Cellular. In April 2016, the service provider closed a 4G network rollout deal for Kerala, Andhra Pradesh and Haryana circles, alongwith network modernization ones across six circles for 2G and four circles for 3G. It would deploy Nokia's single RAN technology, which enables simultaneous 2G/3G/4G operations on one platform.
Reliance Jio. In August 2015. The vendor was awarded IMS deployment deal It is considered as the world's largest IP multimedia system deployment, which will enable best in class VoLTE in line with the company's aggressive LTE rollout plans. IMS allows voice calls to be made on IP network, a basic requirement for voice over LTE or VoLTE.
In 2015, Huawei's global revenue reached CNY 395 billion (USD 60.8 billion), an increase of 37 percent YoY. Its carrier, enterprise, and consumer businesses all met the sustainable growth targets set by the board of directors at the beginning of 2015.
In the carrier business, 4G equipment was widely deployed around the world and is now being used in the capital cities of over 140 countries. The vendor recently launched its 4.5G solution to meet consumer demand for a better experience while protecting carrier investment in 4G. It has built over 280 commercial networks with 400G core routers. Having implemented its Product+Service strategy, it now supports the operations of over 1500 networks globally in over 170 countries and regions.
In the enterprise business, the guiding principle is business-driven ICT infrastructure to lead the transformation of enterprise IT toward cloud architecture, and the transformation of enterprise networks toward SDN. Many Fortune Global 500 companies, such as the Industrial and Commercial Bank of China, the China Construction Bank, Deutsche Bahn, Mercedes-Benz, and Volkswagen have selected Huawei as their partner. The company has participated in the construction of over 660 data centers, including 255 cloud data centers.
In the consumer business, annual revenue grew by over 70 percent, securing a position for Huawei among the top three global device companies in terms of market share. This revenue growth is attributable to the robust growth of its mid-range and high-end products, rapid development in high-end overseas markets, and the strides made with the Honor business model. Following the success of its premium Mate 7 and P7 smartphones, the P8 and Mate 8 further solidified its position in the mid-range and high-end consumer markets. Owing to its approachability and vitality, Honor brand doubled its revenue in 2015.
Huawei India. Due in large part to infrastructure build-out in markets such as India, the Philippines, and Thailand, Huawei maintained its momentum in the Asia-Pacific region to achieve CNY 50,527 million in revenue, up 19.1 percent YoY. In 2015, its revenue in India amounted to 9000 crore, an increase of 40 percent from 6400 crore in 2014.
Telenor India. In September 2015, the vendor was awarded a Rs-1200 crore contract to modernize its entire telecom network across six circles, thus making it a managed services partner. All 24,000 base stations of the service provider are being replaced with new equipment that are modern, efficient, and future ready. It is now able to offer advanced Internet services and 4G technology to its customers. The project is spread over a period of three years and modernizes the carrier's existing network with Huawei's new architecture, platforms, and equipment.
Vodafone. In February 2016, the vendor was awarded to deploy the 4G network for Vodafone in the Delhi-NCR region. Huawei is also deploying base stations and other equipment for Vodafone's 4G networks in Karnataka and Kerala circles. In October 2016, it was awarded a managed services contract including network operations in Kerala, Tamil Nadu and Chennai, and Odisha circles, replacing Nokia. The order is estimated at 1200 crore for a period of three years. It would also offer network operations in Andhra Pradesh and Delhi, where Nokia continues to provide a part of managed services to Vodafone. It had also awarded a 1000 crore pan-India deal to Huawei to upgrade and augment the capacity of the wireline network so that it would be able to handle increasing data traffic.
Bharti Airtel. In October 2016, the service provider awarded a contract for upgrading the wireline network with vectoring, GPON, and G. Fast technologies which helped the carrier in launching 100 Mbps broadband services in 87 cities.
Idea Cellular. Huawei also bagged a 4G contract from Idea for deployment of 4G equipment in Punjab, Tamil Nadu, and Orissa circles.
In August 2016, the vendor launched its largest global service center (GSC) in India with an initial investment of 136 crore. The facility handles the highest number of projects compared to its other three GSCs in China, Romania, and Mexico. The GSC is co-located with Huawei Research and Development Center in Bengaluru.
ZTE Corporation's operating revenue for 2015 amounted to RMB 100.19 billion, representing a YoY growth of
23 percent, while net profit attributable to holders of ordinary shares of the listed company amounted to RMB 3.21 billion, representing a YoY growth of 21.8 percent.
Basic earnings per share amounted to RMB 0.78, improving by 21.9 percent as compared to the previous year. For 2015, the Group's operating revenue from the domestic market and the international market amounted to RMB 53.11 billion and RMB 47.08 billion, respectively.
Business Development. The growth trend of equipment investment in the global telecommunications industry continued in 2015. Benefitting from the integration of ICT industries, rise of new business types and expectations for information upgrade under the global wdigitized strategy, the telecommunications sector welcomed enormous opportunities for innovation provided by Industry 4.0, Smart City, informatization of the medical sector, informatization of the education sector, mobile e-commerce, agricultural modernization, and other developments.
In 2015, the Group worked proactively in the domestic market in support of the network construction and application requirements of domestic carriers and government and corporate clients. In the international market, the Group continued to take the implementation of its strategy of focusing on populous nations and mainstream carriers to further depths by forging more extensive partnerships with mainstream carriers in the global market to help these carriers add value through Internet applications.
ZTE Telecom India
ZTE Telecom India Private Ltd. reported YoY decline in net profit by 656.33 percent which was mainly attributable to the decrease in gross profit and the increase in impairment provisions for trade receivables.
Reliance Jio. The service provider procured an order for200 smartphones in December 2015 for its 4G services.
BSNL. In March 2016, ZTE bagged Mobile Phase 7+ project to install 21,000 BTS in FY 2016-17. In Phase 7, BSNL has plans to install 25,000 BTS of which 23,000 BTS are already in place and this order was executed by ZTE. ZTE will execute Mobile Phase 7+ Project for northern, southern, and eastern zone whereas for western zone.
Other Major Contracts
Vodafonde-Cisco. In January 2016, Vodafone deployed Cisco's Self Optimizing Network (SON) technology on its networks. The company expects it to deliver a better mobile experience for its customers by improving voice call quality and reduce dropped call rates. It will also provide better network service when many people use their devices at the same time. In addition, Cisco SON will reduce operational costs through automation of many of the engineering intensive tasks associated with running the network.
Bharti Airtel-Cisco. Bharti Airtel is in dialogue with Avaya Corp. to renew its call center technology contract. The two had signed a five-year deal in 2012, under which Avaya was to handle the IT requirements of customer care partners for Airtel across 80 locations in India and Africa. It would bring video and social media capabilities at their operations. The contract could include a robust software-backed analytics platform.
Vodafon-IBM. Vodafone India renewed its agreement with IBM to manage its IT services support for IT infrastructure and applications. The contract, which has been signed for another five years, is an extension of an eight-year relationship between the two companies. Vodafone India plans to launch a new hybrid cloud platform. IBM will support Vodafone India's IT environment transition into IBM hybrid cloud, allowing the company to leverage and integrate existing IT resources and data assets with private cloud environments. It will support Vodafone India's speed to improve efficiency of its network and IT operations.
In April 2015, Reliance Jio Infocomm Limited placed an order on for 100 ElectraGen-ME fuel cell backup power systems to be deployed in its wireless telecom network in India. Subsequently in July 2015, it also placed a
7-million order with Saft for its technologically advanced Evolion lithium-ion (Li-ion) battery systems.
BSNL-Aptilo Networks. In October 2016, BSNL selected Aptilo Networks to enable wireless services. Its Service Management Platform (SMP) is a scalable platform supporting BSNL's rapid growth to deliver and manage carrier-class wireless services. Earlier in January 2016, BSNL renewed its three-year deal for its ring-back-tone offering with OnMobile Global. This is applicable in southern and eastern zones with an option to extend for the fourth year as well.