Consolidation Hits Infrastructure Vendors
By Carlo Longino, Fri Mar 25 19:00:00 GMT 2005

While the competition in many markets is hitting mobile operators hard and other markets see carrier consolidation, the knock-on effect hits makers of network gear.

Full-service operators in many countries are under attack from MVNOs and bigger rivals, putting the squeeze on, while waves of consolidation sweep other markets with carriers taking out rivals not only to increase their bulk, but to make it easier to jack up prices. But network equipment manufacturers get caught in the middle.

These companies generally had strong 2004s, capitalizing on increased capital spending by operators looking to build out and upgrade their networks -- quite a turnaround from the previous few-years-long downturn. But with the consolidation, there's less customers, and with companies now looking to make back something on their network investments, it's hard to see spending continue to grow at high rates. Those aren't the only problems, either: Chinese vendors like Huawei are a growing threat as well.

But maybe those pesky MVNOs offer some hope. The general idea was that operators would sell what's essentially excess network capacity to their virtual cousins on a wholesale basis. If MVNOs continue to succeed, it's not unforeseeable there would come a time when their traffic could cause a problem for the physical operators by filling up all that excess capacity. Operators could be loathe to cut off the virtual networks, losing low-cost revenues and sending them to a rival. choosing instead to beef up their networks. But should this happen, the push is likely to be for added voice capacity, given how MVNOs are driving down call costs significantly, and some are showing little enthusiasm for 3G data.