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Barclays highlights opportunities in mobile data

Posted: 11 Mar 2010     Print Version  Bookmark and Share

Keywords:mobile data  Wi-Fi  WiMAX  3G  network 

Carriers will be tight fisted on capital equipment spending over the next two years despite increases in mobile data traffic. Nevertheless, systems and semiconductor companies have a handful of openings for growth in the sector, according to analysts from Barclays Capital.

Capital equipment spending in Europe will be flat through 2011. But U.S. carriers will continue planned increases in spending as they take the lead in rolling out 4G wireless services, Barclays analysts said.

For some carriers mobile data traffic has grown to require nearly 90 per cent of network capacity, up from less than 30 per cent three years ago. However, most carriers will be able to manage the increased traffic without buying new gear with a few exceptions such as AT&T which has seen congestion due traffic from Apple iPhone users.

Only five per cent of users generate as much as 60 per cent of mobile data, and only five per cent of base stations ever hit 95 per cent of their capacity, said one Barclays analyst.

"There are underlying network congestion issues that vary by carrier and market, but with the exceptions of AT&T and O2 it seems more like a question of time rather than money to solve them," said Andrew Gardiner, a Barclays analyst covering communications systems in Europe.

Chips ahoy!
Semiconductors serving a wide variety of mobile data systems should see growth on several fronts despite the tight climate for capital equipment spending by carriers, said Tim Luke, lead chip analyst at Barclays.

To deal with increasing traffic carriers are generally not putting in more base stations, but they are taking a variety of other, lower costs measures that will drive needs for new silicon. They include deploying femtocells and Wi-Fi to siphon off mobile data traffic as well as moving to higher speed networks such as HSPA+ which requires new silicon, Luke said.

Altera and Xilinx are already seeing demand for FPGAs to serve HSPA+ systems. A wider group of mobile data chip companies are seeing increases in sales due to the rise of China's big communications systems makers Hua Wei and ZTE that use merchant chips rather than their own ASICs, he added.

Backhaul opportunity
The piece of the carrier's network that links a base station to a core network—the so-called backhaul—is facing the greatest congestion and thus is the focus of most network upgrades. Backhaul utilisation rates are running at much higher levels than the 30 to 40 per cent in the overall wireless network, Barclays said.

System vendors such as Alcatel-Lucent, Hua Wei, Adtran, Ciena and TellLabs will benefit from this situation given their focus on this part of the net. Makers of IP networking equipment such as AlcaLu, Cisco Systems and Juniper networks will also benefit from the trend, the firm said.

Mobile data vendors more focused on base stations such as Ericsson and Nokia Siemens Networks will not fare as well, given carriers are not adding significant numbers of new base stations.

United States gears for 4G
The move to 4G networks is happening first in the United States, driving opportunities for new systems. For example, Clearwire has already deployed as many as 3 crore (30 million) points of presence (POPs) for its WiMAX network and plans to have a total of 13 crore (130 million) installed by the end of the year, Barclays estimates.

Verizon Wireless has announced it will end development of its CDMA network and transition early to LTE. It is expected to deploy about 10 crore (100 million) POPs by the end of the year, covering a third of the United States.

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