Magic Quadrant for LTE Network Infrastructure
As yet, only about one-quarter of communications service providers have launched Long Term Evolution networks commercially, but this number is set to multiply. Gartner compares 10 vendors of end-to-end (core and access) infrastructure for LTE networks to help CSPs find the right one for their needs.
Long Term Evolution (LTE) network infrastructure products for communications service providers (CSPs) include radio access infrastructure (eNodeBs), located in base station sites, and core network equipment, which is where switching and radio resource management are handled (see Note 1). The core network equipment for LTE, a 4G technology, includes new elements not found in 2G and 3G networks, such as the Mobility Management Entity, a packet data network gateway and a signaling gateway.
This Magic Quadrant evaluates vendors of "end to end" LTE infrastructure — we use this term to denote radio and core network LTE infrastructure — for CSPs wanting to deploy LTE technology, whether as an overlay or with partial integration with, and some reuse of, existing network equipment.
The worldwide market for end-to-end LTE network infrastructure includes 10 vendors. We forecast that it will grow from $10.8 billion in 2013 to $33.6 billion in 2017, to account for over 72% of spending on mobile network infrastructure (see "Forecast: Carrier Network Infrastructure, Worldwide, 2010-2017, 2Q13 Update"). We also forecast that LTE network infrastructure will show a compound annual growth rate (CAGR) of 41.8% over that period, making it the fastest-growing segment, not just in the mobile network infrastructure market but also in the overall carrier network infrastructure market.
Source: Gartner (August 2013)
Alcatel-Lucent's position has improved as it has won a substantial number of new deals in the past year. It has shown thought leadership in relation to small cells and introduced an end-to-end offering in the form of its lightRadio distributed network architecture. Overall, Alcatel-Lucent had a 12.1% share of the mobile infrastructure market in 2012. In the LTE sector it has won contracts from companies such as Verizon, AT&T, Sprint, Etisalat and VimpelCom. Just as promisingly, approximately half of Alcatel-Lucent's trials and contracts are with customers for which it is not the incumbent radio access network (RAN) vendor (as it has a smaller presence in 2G and 3G networks).
At the end of 2012, Alcatel-Lucent entered into contracts to deploy commercial LTE networks with over 36 CSPs, and it was contributing to over 40 LTE trials covering different geographies, frequencies and applications. The company was one of several vendors that won orders from China Mobile for time division LTE (TD-LTE) technology. China Mobile Communications Corporation (CMCC) is expanding its footprint by 20,000 eNodeB base stations and plans to add another 180,000 in its next phase of expansion, which will start later in 2013.
Alcatel-Lucent recently announced a strategic "Shift Plan" to reposition itself from a product standpoint — among other things, by focusing on LTE — and to cut costs. This plan also targets asset sales, debt reprofiling and debt reduction. It is intended to address Alcatel-Lucent's operational and financial challenges (revenue weakness, margin erosion and poor cash generation), which remained evident during the past 12 months. The company's execution of the plan needs monitoring in the coming reporting periods.
Alcatel-Lucent has announced support for Hotspot 2.0, with heterogeneous network (HetNet) support, and it is a leader in the 3G small-cell segment.
- Alcatel-Lucent has shown good traction in terms of winning LTE deals and it participates in some large LTE deployments, which provide it with experience and strong reference accounts to help it win future LTE business.
- The company's main strengths are its presence in North America and legacy code division multiple access (CDMA) solutions, as CDMA CSPs need to migrate their networks to LTE infrastructure.
- The company is well-positioned to capitalize on its wireline assets, particularly in service-aware Internet Protocol/Multiprotocol Label Switching (IP/MPLS) for Evolved Packet Core (EPC) and mobile network technology. Where it can, Alcatel-Lucent is using its presence in these segments to offset — to some extent — its more limited position as an incumbent provider of mobile network infrastructure and to gain access to CSPs looking to procure LTE infrastructure.
- Alcatel-Lucent's approach to the evolution or migration to LTE is based on an end-to-end perspective, including global architecture design, interoperability, operations support systems, business support systems, service transformation and vertical applications — it draws on, for example, its IP Multimedia Subsystem (IMS) solutions and mobile analytics as a service.
- Because other leading vendors will use their superior financial positions as a selling point against Alcatel-Lucent, the company must demonstrate strong execution of its Shift Plan to retain credibility with customers and investors. It will have to do this despite a challenging macroeconomic environment in which its CSP customers are investing cautiously.
- Alcatel-Lucent lacks the scale of larger competitors in terms of mobile network infrastructure footprint, although it has managed to gain new LTE contracts quite quickly during the past 12 months.
- The Shift Plan will put most of Alcatel-Lucent's wireless division into "maintenance mode," with LTE receiving the R&D and marketing emphasis. Although this is good for LTE customers, it may concern some 3G customers, who might therefore view Alcatel-Lucent less favorably when planning upgrades to LTE.
Cisco is a dominant player in the EPC segment of LTE. Cisco has been involved in this technology since its acquisition of Starent in December 2009, but the lack of a 4G base station meant it did not appear in previous issues of this Magic Quadrant. Cisco filled this gap in May 2013 with the acquisition of Ubiquisys, a U.K.-based company whose portfolio includes an LTE small-cell product. Furthermore, Cisco's acquisition in February 2013 of Intucell, a provider of self-organizing network (SON) technology, clearly signals its ambition to play a bigger role in CSPs' mobile network infrastructure. However, it will take time for Cisco to make an impact on a broader range of CSPs' infrastructures due to its limited experience with wireless products, weakness in related professional services, and the perception among some CSPs that it is principally an IT and Internet Protocol (IP) player. Although Cisco's lack of a macro radio network offering for LTE is a weakness, the company could effectively position its core network and small-cell offerings — and possibly a neutral approach to multivendor networks — to CSPs.
- Cisco is a leader in the EPC segment, and in IP technology, which is an advantage as LTE is an all-IP network technology.
- Of the vendors in this Magic Quadrant, Cisco has one of the highest scores for overall financial viability. Not only is it a solid choice for CSPs from a viability standpoint, but it can massively fund growth in R&D, and its head count and acquisitions in this field of technology are increasing. However, it needs to convince the market of its commitment to, and credentials for, wireless networks, and LTE in particular.
- CSPs typically do not want many large vendors in their list of strategic suppliers and are often very choosy when considering newcomers. However, thanks to its strong packet core offering and financial stability, Cisco could be seen as a viable alternative to the "big three" vendors — Ericsson, Nokia Siemens Networks and Huawei — for parts of CSPs' networks.
- Professional services are key to LTE rollouts, but Cisco is relatively weak in this area. It has, however, a very strong partner ecosystem.
- Voice over LTE (VoLTE) services are often based on IMS, a technology that Cisco lacks. Cisco could, however, offer hosted services like content delivery networks, unified communications as a service and telepresence.
- Although Cisco has aggressively complemented its portfolio with critical capabilities such as SON technology (from Intucell) and 4G small cells (from Ubiquisys), it lacks skills in, and experience with, the infrastructure, operation and fine-tuning of public 3G and 4G wireless radio networks — experience that its competitors have gained in recent years.
- To gain credibility in this area, Cisco must demonstrate its skills and experience in relation to the end-user experience, all the way down to the level of mobile devices over a Third Generation Partnership Project (3GPP) interface.
- Cisco is hiring intensively to attract staff with skills in wireless networks, and is likely to use its network of Wi-Fi resellers and partners to scale its ability to deliver a more wireless-oriented offering to CSPs globally. But how quickly and effectively it can ramp up in all regions, and industrialize Ubiquisys's specialist expertise in small cells, remains to be seen.
Datang Telecom Technology & Industry Group manufactures radio and core network equipment in the TD-LTE segment, with a focus on Chinese customers, but it also has an agreement with Ericsson for R&D on TD-LTE. Datang has done well in the market for the Chinese variety of 3G technology called Time Division-Synchronous Code Division Multiple Access (TD-SCDMA) — it has captured about one-third of this Chinese market, having supplied China Mobile.
- Datang is a specialist in TD-LTE, for which it holds a large set of patents.
- Datang is one of the vendors selected for a trial of China Mobile's TD-LTE network. It therefore has a good chance of being awarded part of the commercial rollout for this large CSP.
- Datang has a very minor share of the global LTE infrastructure market and is involved only in the minority variety of TD-LTE, although this variety is used in the significant Chinese market.
- There is little chance of Datang deploying infrastructure beyond its home market of China, due to the company's lack of an international marketing effort and unfamiliarity to buyers in other countries. This is despite TD-LTE becoming a serious alternative in other markets.
- In addition to Datang's brand being little known outside China, the company's focus on time division duplex (TDD) technology in its home market does not help it increase its visibility abroad.
- Datang has grown overall, but its profitability and cash generation are not particularly strong. Its overall viability is slightly higher than that of the other Niche Player, Fujitsu.
Ericsson remains in a good position in the LTE infrastructure market, aided by its leading share of the 2G/3G/4G mobile network infrastructure market (35% in 2012). Ericsson's wideband CDMA (WCDMA), CDMA and end-to-end LTE offerings and footprint, together with its professional services, put it in a strong position to win business from 3GPP accounts. Ericsson's in-house IP capabilities are improving. The mobile network infrastructure market remains competitive, however, and Ericsson's nearest competitors gained market share in 2012.
- Ericsson has a strong, long-standing focus on Global System for Mobile Communications (GSM) and WCDMA technology. It is a strong advocate of the HetNet and of Wi-Fi integration for small cells, and it is among the leaders in terms of number of LTE deals.
- The company has many 2G and 3G accounts in all geographies, including the U.S. — a country in which some of its competitors are less strong or have yet to enter the LTE market. Incumbency in 2G and 3G accounts has proved invaluable for vendors looking to supply LTE upgrades.
- Ericsson's financial metrics are among the strongest in the industry, and its balance sheet suggests sustainable viability in the long term.
- While Ericsson's rivals have continued to edge closer to it during the past two years, the company still has a leading — albeit reduced — share of the mobile network infrastructure market because it chose to protect its established customer base. Ericsson's dominant share of the overall carrier network infrastructure market, along with its many long-standing relationships with CSPs, remains a solid advantage in terms of making it one of the "go to" vendors for LTE upgrades.
- Feedback from CSPs indicates that Ericsson's LTE network platforms are very stable due to the company's thorough testing procedures. One CSP observed that Ericsson's deliveries "are non-eventful, and the equipment works."
- Ericsson continues to face the long-term challenge of dealing with aggressive competitors, and must continually manage its cost structure to maintain competitiveness as Huawei gains scale. Nokia Siemens Networks is a serious challenger to Ericsson, as it now has a strong position in LTE network infrastructure.
- One CSP noted that a disadvantage of Ericsson's thorough product testing is that it can take longer for products to become available.
Fujitsu, a small mobile network infrastructure vendor, is very focused on the Japanese market for LTE network equipment. It cooperates with Nokia Siemens Networks in the joint development of the Service Architecture Evolution (SAE) Gateway provided to NTT Docomo.
- Fujitsu offers the BroadOne LS LTE eNodeB base station family with a distributed architecture consisting of a remote radio head and a baseband unit. The baseband unit is available in indoor and outdoor models, while the remote radio head is designed to take advantage of the lower operational costs of all-outdoor deployments.
- A significant share of NTT Docomo's early investment in LTE in Japan went to Fujitsu.
- Fujitsu is very Japan-centric, where, however, it has only one customer for LTE network infrastructure. We have seen no evidence of traction in international markets.
- Fujitsu's overall financial performance was weaker in the past year than in the preceding 12 months. Its overall viability remained, however, sufficient for a position in the Niche Players quadrant.
- Fujitsu's lack of progress in the LTE network infrastructure market, especially compared with the other vendors, should be a concern for CSPs considering using it as a vendor of this infrastructure.
Huawei is among the Leaders in this market, despite having its potential limited by political concerns in North America. Huawei's common radio access architecture has found good acceptance among CSPs, which view its single RAN platform as an advantage. Feedback from CSPs also indicates that they view Huawei as having more scale and breadth to its portfolio than some of the more specialized competitors. Huawei was the world's second-largest provider of mobile network infrastructure equipment by revenue in 2012, with a 17.1% share.
- Huawei has a strong position in emerging markets in Asia/Pacific, Eastern Europe and the Middle East and Africa, and is ranked third in the Western European market. The company appears well-positioned to win further LTE contracts in 2013 as China Mobile ramps up its deployment and European launches gain momentum.
- Huawei's overall financial performance remains strong relative to its peers, despite lower top-line growth in 2012 than in 2011. In 2012, Huawei's revenue grew in a challenging environment, and the company has maintained good profitability, cash flow and balance sheet metrics. This makes it a viable vendor for the long term and could be an effective selling point against a few of its competitors.
- The company has many R&D employees, for both frequency division duplex (FDD) and TDD technologies, and it is known for working hard to satisfy customers' demands. Huawei is involved in major TD-LTE network deployments and trials in China, Japan and Europe.
- Huawei's mobile broadband strategy rests on SoftMobile, a software-defined networking approach with a modular network architecture that uses multiband, multimode integration across layers and aims to provide more scalable capacity. Huawei has enhanced its SingleRAN solution into "six multi" — multiband, multimode, multisector, multilayer, and multiple input/multiple output (MIMO), with maximum output power — to support gigabit capacity for mobile networks. Huawei has improved its professional and managed services capability with its SmartCare service solution, which could benefit its LTE position in the future.
- Huawei has developed a TD-LTE-based trunking system for industry use, which could provide a business opportunity for CSPs.
- Huawei is not involved in the largest-scale LTE markets in the U.S. and South Korea. It is contributing to SoftBank's construction of a TD-LTE network, but has no other contracts in Japan's LTE market. This somewhat limits Huawei's access to the global LTE market.
- Political resistance in the U.S. to granting Huawei access to the U.S. market continues to prevent the company gaining share in one of the largest LTE markets. Concerns about cybersecurity mean that Huawei will find it very challenging to penetrate North America, India and other markets with similar concerns.
- Huawei's small-cell solution, the compact AtomCell base station, has strong rivals, such as lightRadio from Alcatel-Lucent, Liquid Radio from Nokia Siemens Networks and the HetNet approach of Ericsson.
NEC has long focused on the Japanese market for 2G and 3G technologies. It has international aspirations for LTE networks, but lacks reference customers outside Japan and is showing no signs of momentum outside Japan. NEC is seventh in Gartner's ranking of mobile network infrastructure vendors by revenue in 2012, with a 2.6% share.
- NEC has a solid customer base in its home market of Japan. It supplied references testifying to its technology and market involvement on the basis of its supply of, for example, RAN equipment to KDDI and LTE RAN and core network elements to NTT Docomo, one of the key early adopters in Japan.
- NEC's overall viability is as good as that of many of its larger competitors and sufficient for a participant in the Visionaries quadrant.
- NEC has ambitions for global expansion, but its two LTE contracts, although significant, are limited to Japan. This indicates that it has a lot of work to do to market its LTE products internationally.
- NEC has limited scale and brand visibility. For example, it has achieved significant sales of 3G RAN products in Europe, but, except in the U.K. and Italy, many of these were resold under the Siemens brand.
Nokia Siemens Networks
Nokia Siemens Networks (NSN) is a leading vendor in the mobile network infrastructure market, one that we ranked third for revenue in 2012 with 15.2% of the market's total. NSN has made very good progress recently from a financial standpoint. It has executed well on its goal of shutting down or selling noncore businesses and improving its profitability, cash position and cash flow. Nokia's presence in deployed LTE networks has enabled it to establish a presence for its LTE Advanced (LTE-A) solution. Operators such as NTT Docomo, SK Telecom and A1 Telekom Austria are trialing its LTE-A solution, with deployments planned for future years. On 1 July 2013, Nokia announced that it had acquired the 50% of NSN that it did not already own. Gartner views this as a positive development for NSN, because it removes any uncertainty with respect to Siemens' ownership and enables NSN to withdraw support for legacy Siemens infrastructure and refocus its R&D resources accordingly. It also helps ensure that NSN's current management team — which successfully designed and executed the recent turnaround — will stay and that there will be no interference with the current direction (from private equity investors, for example). Now that NSN has re-established itself as a viable vendor, we expect it to shift toward balancing profit with growth and capitalizing on its success and experience with LTE in new markets. One CSP that provided Gartner with feedback described NSN as "a strategic vendor, now more focused on doing what they are good at."
- NSN has a comprehensive, end-to-end LTE solution that includes radio, EPC, SON, voice core network, transport, network management and professional services. Feedback from CSPs indicates that NSN's radio solution is flexible, enabling reuse of sites and antennas. NSN also has an interesting vision for small cells with its Liquid Net and Liquid Applications architectures and customer experience management solutions. It is among the leading vendors in terms of number of LTE contracts signed.
- NSN has strong traction in Japan and South Korea for wireless network infrastructure, and benefits from its good 3G presence and skills, as well as LTE contracts with established NSN and Motorola Solutions customers. NSN is also showing traction in North America, with deployments at T-Mobile USA and US Cellular underway. Additionally, NSN will be one of the suppliers to China Mobile for its TD-LTE launch, which offers the potential for momentum in the Chinese market.
- NSN has demonstrated strong corporate discipline and management, with good execution of its business focus, innovation and commitment to quality. Nokia has stated that the current management team's priorities and goals will remain, now that Nokia has taken full control of NSN.
- NSN has improved its financial position, but must now demonstrate that it can maintain its financial discipline and strong execution as it increasingly does business outside its initial markets of Japan and South Korea.
- NSN announced its Flexi Zone small-cell solution in February 2013 and needs to gain traction with it, given the potential importance of small-cell technology to future deployments of mobile network infrastructure.
- While NSN has made a very clear commitment to quality by embracing Motorola's Six Sigma methodology across the company, its large and growing number of LTE contracts will make it a challenge to improve the quality of its delivery and support.
- Although NSN is strong in the core network and VoLTE areas, it faces strong competition in the EPC sector from vendors such as Alcatel-Lucent and Cisco, which use different architectures.
Samsung has used its historical dominance in WiMAX infrastructure to secure a position in the LTE network equipment market. It came sixth for overall mobile network infrastructure market revenue in 2012, according to Gartner's findings, with a 4.4% share.
- Samsung has established a position in large-scale LTE deployments in South Korea, North America and Japan. It also penetrated the Middle East in 2011 and European LTE markets in 2012, after establishing Samsung Networks Europe to increase its focus on regional operations in Europe.
- Samsung's expertise and presence in the WiMAX sector is useful for CSPs in the market for a TD-LTE evolution (such as Mobily in Saudi Arabia). Samsung will also have the opportunity to gain market share in China's TD-LTE market. In addition, Samsung has enriched its mobile network infrastructure solution to support multimode technologies, including GSM.
- Samsung's viability is very good, as it has achieved good revenue growth and profit margins, and it has a good cash flow metric.
- Samsung has participated in some very advanced commercial deployments of technology (including HD voice, VoLTE, LTE-A and cloud RAN solutions) with South Korean CSPs, which are the world's most advanced mobile network operators.
- Samsung's lack of presence in the 2G/3G network market globally will make it a challenge to expand its share of the LTE infrastructure market.
- Samsung suffers from a relative lack of mind share in many markets, but CSPs should consider it for deployments.
- Samsung has recently striven to be more open and to communicate proactively with industry participants, but it must do more to strengthen its mind share as a provider of mobile network equipment.
ZTE places strong emphasis on China and other Asia/Pacific markets, but is also making steady progress toward becoming a bigger international player, having recently secured international LTE contracts, including for the launch of the world's first dual-mode LTE network in Sweden. However, ZTE has also faced challenges lately — following many years of growth, it recorded decreases in both revenue and profit in 2012, which continued into the first quarter of 2013. ZTE recently re-evaluated its geographical expansion strategy and refocused on fewer markets with greater potential for the company. LTE is one of ZTE's highest-priority product areas in terms of investment.
- China will soon issue 4G operating licenses and begin nationwide deployment of LTE networks. ZTE is a major supplier to this market, which will secure it a steady stream of revenue and much project experience. For China Mobile's large-scale LTE trials, ZTE built over 3,000 LTE sites in Guangzhou City to test its Cloud Radio solution.
- ZTE continues to demonstrate, test and interoperate with CSPs in order to gain mind share and market share. It has become increasingly visible in Asia (for example, in SoftBank's LTE network in Japan and China Mobile's TDD/FDD-LTE network in Hong Kong), Europe, and the Middle East and Africa. It can also use its fixed-line products and relationships in these markets to help it access CSPs wanting LTE upgrades and to tighten its cooperation with them.
- CSPs contacted by Gartner reported that ZTE is "better-priced than Western vendors" and "flexible and responsive with fixing issues."
- Although ZTE is working to branch out from China in order to gain more contracts and a bigger footprint in international markets, it still lacks significant presence and mind share outside its home country.
- While ZTE is contributing to some projects in Europe (for example, with KPN E-Plus in Germany and Hutchison 3 in Sweden and Austria), it may have difficulty competing against stronger players for Tier 1 CSP accounts in this region.
- In North America, ZTE suffers from some U.S. political resistance to Chinese suppliers of communications infrastructure.
- Although ZTE scores reasonably well in our financial assessment model, it maintains high levels of debt and its debt-related metrics are weaker than some of the leading vendors. In the 12-month period ending 31 December 2012, ZTE failed to comply with the requirement of its debt facility agreement with respect to one financial indicator and had to obtain an exemption from Bank of China (Hong Kong). The exemption was granted and the short-term risk removed, but the company's financial situation warrants monitoring.
- ZTE's mainly Chinese culture is not helping it expand outside China. It needs to include in its decision-making processes more managers from countries other than China.
We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.
Vendors included in this Magic Quadrant supply end-to-end (radio and core network) LTE infrastructure equipment to CSPs. Many are already included in Gartner's "Market Share: Carrier Network Infrastructure, Worldwide, 2012" and have customer references for LTE technology or are conducting advanced trials of this technology with a wireless CSP.
Gartner evaluates technology vendors on the quality and efficacy of the processes, systems, methods and procedures that enable their performance to be competitive, efficient and effective, and to benefit revenue, retention and reputation. Ultimately, we judge vendors on their ability to capitalize on their vision and their success in doing so.
The vendors' positions on the Ability to Execute axis were determined by evaluating them against the following criteria:
- Product/Service. Goods and services offered by the vendor that compete in the defined market. This includes current product and service capabilities, quality, feature sets and skills, whether offered natively or through OEM agreements or partnerships, as defined in the Market Definition/Description section and detailed in subcriteria. Both radio and core network equipment are included. Professional service offerings including system integration skills specifically relating to LTE are also considered. In addition, potential advantages gained in the LTE market through capabilities in important neighboring segments are taken into account.
- Overall Viability (Business Unit, Financial, Strategy, Organization). This criterion includes an assessment of the overall organization's financial health, the financial and practical success of the relevant business unit, and the likelihood of that business unit continuing to invest in the product, offer the product and advance the state of the art within the organization's portfolio. The high-volume nature of the access network market and derived challenges for LTE technology vendors are included in this assessment, with a technology vendor's market share and number of enabled subscribers across the customer base being key considerations.
- Sales Execution/Pricing. The vendor's capabilities in all presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support and the overall effectiveness of the sales channel.
- Market Responsiveness and Track Record. The vendor's ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customers' needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness. In addition, it covers the vendor's ability to adapt and scale activities in individual markets and to work with its own partners as well as crucial third parties (such as regulators, municipalities and civil work contractors) — in other words, to "cast a wide net" while still being able to execute and scale quickly when opportunities turn into actual contracts.
- Marketing Execution. The clarity, quality, creativity and efficacy of programs designed to deliver the vendor's message in order to influence the market, promote the vendor's brand and business, increase awareness of its products, and establish a positive identification with its products, brand and organization in the minds of buyers. This mind share can be driven by a combination of publicity, promotion, thought leadership, word-of-mouth and sales activities. Also considered are the vendor's ability to market solutions in different regulatory contexts and to adapt to different CSPs' LTE business models.
- Customer Experience. Relationships, products, services and programs that enable the vendor's clients to succeed with the products evaluated. Specifically, this includes the ways in which customers receive technical support or account support. It can also include ancillary tools, customer support programs (and the quality thereof), the availability of user groups and SLAs.
Source: Gartner (August 2013)
Gartner also evaluates technology vendors on their ability to articulate logical statements about the market's current and future direction, innovation, customer needs and competitive forces, and how well these statements correspond to Gartner's position. Ultimately, vendors are rated on their understanding of how market forces can be exploited to create opportunities for CSPs.
We determined the vendors' positions on the Completeness of Vision axis by evaluating them against the following criteria:
- Market Understanding. The vendor's ability to understand buyers' needs and to translate them into products and services. Vendors that show the highest degree of vision listen to and understand buyers' wants and needs, and can shape or enhance them with their added vision. The ability to see LTE in the wider context of CSPs' overall network transformation strategies is particularly important, though this insight must be reflected directly in the vendor's product road map.
- Marketing Strategy. We look for a clear, differentiated set of messages, consistently communicated throughout the organization and externalized through a website, advertising, customer programs and positioning statements. We also assess the alignment of the vendor's LTE marketing strategy with its current market position and its overall LTE portfolio strategy, including a regional focus.
- Offering (Product) Strategy. A vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements. This includes differentiated approaches to the different LTE segments, including traditional carriers, municipalities and utilities.
- Innovation. Direct, related, complementary and synergistic layouts of resources, expertise or
capital, for investment, consolidation, defensive or pre-emptive purposes. This includes:
- Sustained evidence of technological expertise
- Ability to commit to an individual service provider's network rollout, where economically feasible
- New product development milestones and compliance with the road map of milestones
- Migration path for existing wireless network infrastructure technologies, including software upgrade evolution to LTE
- Support for ecosystem partners via interfaces and interoperability
- Demonstration of appropriate budget for R&D planning
- Geographic Strategy. The vendor's strategy to direct resources, skills and offerings to meet the specific needs of its stated markets — typically outside its native geography — either directly or through partners, channels and subsidiaries, as appropriate for those geographies and markets.
Source: Gartner (August 2013)
Leaders have a significant share of the end-to-end LTE network equipment market. They also have momentum in this area. They have a broad portfolio and, even where they need partners, are the preferred prime vendors for CSPs, owing to their large scale. They appear in nearly all CSP procurements and trials of LTE infrastructure, and their presence in the Leaders quadrant tends to be fairly stable. These are high-viability technology providers. They are well-positioned with their current product portfolios and likely to continue to deliver leading products. Leaders do not necessarily offer the best solution for every customer requirement, however, and their products may not be "best of breed" in every area. Overall, Leaders provide solutions that offer relatively low risk and can achieve and sustain deployments of high quality.
Challengers have strong market capabilities and good solutions for specific markets, but overall their products lack the breadth and depth of those of Leaders. Their solutions do not show a clear vision for how the market is evolving and are not as innovative or advanced as those of Leaders.
Visionaries demonstrate a clear understanding of the market and provide key innovative elements that are illustrative of the market's future. However, they lack the ability to influence a large part of the market, or have not yet fully expanded their sales and support capabilities to achieve global reach, or do not yet have the funding and scale to execute with the capabilities of Leaders. The main characteristic of Visionaries is that they are less stable than Leaders and Niche Players. Visionaries are in various phases of transition, so some may move over time into other quadrants, where they could attain a more stable state. They could achieve this stability by gaining strength and scale or wider market adoption (in terms of global share, multiple geographical markets and recognition), in which case they could enter the Leaders quadrant, or by judiciously specializing in a smaller segment and ceasing activities in others as part of a strategic transformation, in which case they could enter the Niche Players quadrant.
Niche Players tend to offer products that focus on a particular segment of the market (for example, a given country, such as Japan) or a subset of functionality (such as TD-LTE). They also tend to be more specialized with regard to regional coverage and/or technology. This can be an advantage, because CSPs aligned with the focus of Niche Players can find these vendors' offerings very suitable. In some cases, Niche Players have made specific decisions about where and where not to compete, so being a Niche Player does not preclude having a well-defined strategy. They could also prove attractive partners for some of the larger vendors in this market, thanks to their market specialisms or technological strengths.
The number of large vendors in the end-to-end LTE network infrastructure market could continue to decline due to consolidation, as happened in the 2G/3G market even before the latest economic downturn.
Vendors of LTE technology claim it will increase mobile network capacity, reduce latency, cope with the explosion in data traffic and cut production costs.
When shortlisting vendors, CSPs should take into account the many commitments that need to be made when deploying LTE infrastructure in terms of capital investment, time, project duration and the impact on network complexity when LTE is added as an overlay. LTE deployments are such complex projects that replacing an underperforming vendor after implementation has begun can be impractical.
As of 16 July 2013, 194 CSPs in 75 countries had launched commercial LTE networks (according to the Global mobile Suppliers Association), and Gartner predicts that 6% of mobile network connections will use LTE by the end of 2016. Regional uptake varies strongly: South Korea has seen the strongest growth, with an LTE connection penetration rate of 29.5% at the end of 2012, whereas penetration has reached barely 1% in Western Europe. South Korean CSPs launched LTE successfully by placing strategic focus on fundamental drivers, such as a wide range of LTE devices, data-centric pricing, and innovative services and applications.
We assume that the end-user price for LTE will depend on the maturity of the LTE market, the availability of LTE handsets and the number of CSPs offering LTE services. A more competitive market is highly likely to create downward price pressure, but will also increase consumers' awareness and demand for LTE services. We predict that LTE will account for just over 7% of revenue from mobile services in 2016.
This Magic Quadrant examines vendors of end-to-end (radio and core) LTE network infrastructure, but Gartner also monitors several vendors that do not yet meet the minimum criteria for inclusion because they do not offer end-to-end LTE network equipment, instead focusing on only the radio network or the core network. For example, Hitachi supplies KDDI with EPC technology and reuses what was formerly Nortel's packet core, China Potevio offers only a radio product, and Panasonic collaborates with NSN for radio access for NTT Docomo.
LTE is a new technology, and CSPs need to look for vendors that offer differentiated LTE radio and core network equipment. They should beware of being overly biased toward their incumbent vendor — as is often the case.
There are still many vendors in the mobile network infrastructure market, some of which face financial issues, so further consolidation in the LTE infrastructure sector remains possible. CSPs should therefore generally continue to favor a diverse set of larger, more stable vendors to minimize the risk of disruption from acquisitions in or departures from this market, while containing supplier management overheads — although some CSPs have chosen to use a single vendor for their entire mobile network.
The race for market share in the LTE infrastructure market is far from over, and vendors are achieving different levels of traction when it comes to securing commercial contracts with CSPs, as opposed to just trials. In addition to the factors already noted, CSPs evaluating vendors for selection should consider whether they have a history of high-quality delivery. They should also favor vendors with a strong track record that effectively promotes their LTE network equipment brand and provides clear differentiation beyond standards. CSPs should partner with vendors that show vision and understand their wants and needs. They should choose a vendor not just for its "boxes" but ultimately also as a partner to help them with their business models for LTE.
4G small cells are being considered and in some cases rolled out by CSPs, but it is unclear whether the levels of capital expenditure these products generate will be significant to most of the vendors in this segment — or how much being seen as a leader in the small-cell segment would help them in the overall LTE infrastructure market. Gartner forecasts that the small-cell market will grow at a CAGR of 31% from 2012 to 2017 to reach an equipment value of $3.5 billion (this includes carrier-grade Wi-Fi hot spots and 3G and LTE small cells managed as an integral part of CSPs' networks).
There are multiple LTE vendors for CSPs to choose from, but they vary greatly in the scale and scope of their offerings. It is therefore vital that CSPs look for equipment providers that have a clear and differentiated network value proposition and strategy, and that emphasize their differentiation, functionality and features. They should also expect quality software.
CSPs also need to know that their vendor will maintain an adequate road map and enable them to sustain a high-performance network. Vendors therefore need to show evidence of resources, expertise and capital for investment in LTE technology in the longer term. With regard to vendors seeking business outside their home market, CSPs should look for evidence that these vendors have effective strategies to direct resources to meet the specific needs of their intended international markets.
To gauge how well vendors meet the above requirements, Gartner scores them using a series of criteria that have been developed to capture their capabilities when it comes to addressing CSPs' wants and needs for end-to-end LTE infrastructure, as described above. These criteria are summed up in our framework as vendors' Ability to Execute and Completeness of Vision.
Several vendors in the lower half of the Magic Quadrant (Cisco, Fujitsu, NEC and Samsung) are much broader and larger technology conglomerates than those in the top half. The Leaders and Challengers in the top half therefore naturally have more commitment to this segment, as they expect to generate a significant proportion of their overall revenue from it. This has strategic implications for vendor selection because, for CSPs, LTE is bound to require a long-sales-cycle, long-cost-recovery model.
Various vendors have shifted position on this year's Magic Quadrant, but the main change is the addition of Cisco.
- Questionnaires sent to vendors provided Gartner with an up-to-date view of their activities and achievements in relation to LTE.
- We held direct discussions with technical personnel from CSPs that have deployed LTE infrastructure from one or more of the vendors profiled. The quotations from CSPs come from these discussions.
- We also conducted surveys investigating all available and relevant commercial contracts for LTE involving the vendors concerned.
- Local Gartner analysts provided country- and region-specific views, as appropriate.
- We considered Gartner's revenue market share statistics for LTE mobile network infrastructure in 2012.
- We also requested that vendors provide supplementary information to use in our research.
- Finally, our analysis also reflects earlier briefings and credible sources, including publicly available information.
LTE was initially intended as an acronym to identify the new radio access network introduced in Release 8 of the 3GPP's standards. It has since been extended to denote the entire technology, including core network elements.
Ability to Execute
Product/Service: Core goods and services offered by the vendor for the defined market. This includes current product/service capabilities, quality, feature sets, skills and so on, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.
Overall Viability: Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product and will advance the state of the art within the organization's portfolio of products.
Sales Execution/Pricing: The vendor's capabilities in all presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support, and the overall effectiveness of the sales channel.
Market Responsiveness/Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.
Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional initiatives, thought leadership, word of mouth and sales activities.
Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and so on.
Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.
Completeness of Vision
Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen to and understand buyers' wants and needs, and can shape or enhance those with their added vision.
Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements.
Sales Strategy: The strategy for selling products that uses the appropriate network of direct and indirect sales, marketing, service, and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.
Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements.
Business Model: The soundness and logic of the vendor's underlying business proposition.
Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical markets.
Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.
Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.