Magic Quadrant for LTE Network

Infrastructure
12 July 2012 ID:G00230286
Analyst(s): Sylvain Fabre, Frank Marsala, Jessica Ekholm, Akshay K. Sharma, Joy Yang, Akiyoshi Ishiwata,
Deborah Kish, Tina Tian
VIEW SUMMARY
This Magic Quadrant evaluates end-to-end vendors of Long Term Evolution network infrastructure.
This segment is expected to grow to over 40% of mobile infrastructure spend in 2016. Leaders
separate from the pack as more LTE networks are launched during 2012 and 2013. Consolidation
could follow.
Market Definition/Description
Long Term Evolution (LTE) network infrastructure products for communications service providers
(CSPs) include radio access infrastructure (eNodeB) located in base station sites, and core network
equipment where switching and radio resource management is handled. The latter are new core
network elements compared to legacy second generation (2G) and third generation (3G) networks
for example, mobility management entity, packet data network gateway and signaling gateway. This
Magic Quadrant includes end-to-end infrastructure vendors of network equipment for CSPs wanting to
roll out LTE, whether as an overlay network layer or with partial integration with and some reuse of
legacy network equipment.
The market for LTE end-to-end infrastructure for CSP networks includes nine vendors. Overall, the
worldwide LTE infrastructure market for radio and core service architecture evolution equipment is
expected to grow from $4.1 billion in 2012 to $21.1 billion in 2016. LTE is expected to grow at a
compound annual growth rate of 58.5% in that period, and will be the fastest-growing segment within
mobile network infrastructure (radio and core).
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Magic Quadrant
Figure 1. Magic Quadrant for LTE Network Infrastructure
Source: Gartner (July 2012)
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Vendor Strengths and Cautions
Alcatel-Lucent
Alcatel-Lucent has shown thought leadership around small cells, and with the lightRadio Network
concept, and counts some prominent references for LTE (for example, with Verizon). Alcatel-Lucent's
overall financial position improved in 2011, despite weaker revenue, due to improved profitability,
balance sheet and cash flow metrics. Still, the company's balance sheet metrics in terms of debt-to-
earnings before interest, taxes, depreciation and amortization (EBIDTA), and EBIDTA-to-interest and
debt-to-free cash flow warrant monitoring since they are not on a par with the overall mobile
infrastructure market share leaders, Huawei and Ericsson.
EVIDENCE
Questionnaires to vendors provide Gartner with an up-
to-date view of their LTE activities and achievements
to date, as relevant for this Magic Quadrant. We had
direct discussions with technical personnel from
carriers that have deployed LTE from one or several of
the vendors. We also conducted surveys of all available
and relevant commercial contracts for LTE for the
vendors concerned. Country-specific and region-
specific views have also been provided by our local
analysts as appropriate. Revenue market share for LTE
mobile network infrastructure in 2011 was also part of
the input.
Gartner requested that vendors provide supplemental
information for this research, and our analysis is also
based on earlier briefings and credible sources
including public information.
NOTE 1
LONG TERM EVOLUTION
LTE was initially intended as the acronym to identify
the new RAN introduced in Release 8 of the 3GPP
standards. The term LTE has since been extended to
identify the entire technology, including core network
elements.
EVALUATION CRITERIA DEFINITIONS
Ability to Execute
Product/Service: Core goods and services offered by
the vendor that compete in/serve the defined market.
This includes current product/service capabilities,
quality, feature sets and skills, whether offered
natively or through OEM agreements/partnerships as
defined in the market definition and detailed in the
subcriteria.
Overall Viability (Business Unit, Financial,
Strategy, Organization): 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 pre-sales activities and the structure that supports
them. This includes deal management, pricing and
negotiation, pre-sales support and the overall
effectiveness of the sales channel.
Market Responsiveness and Track 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
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Strengths
The company is well positioned to leverage wireline assets, particularly in service-aware Internet
Protocol/Multiprotocol Label Switching (IP/MPLS) for Evolved Packet Core (EPC) and mobile
technology. Alcatel-Lucent will try to leverage its incumbency in these segments, where it can
to an extent offset its more limited mobile infrastructure position.
Alcatel-Lucent is a leader in the 3G small-cell segment.
Alcatel-Lucent's approach to the evolution to LTE is based on an end-to-end perspective, including
global architecture design, interoperability, operations support systems, business support systems
(BSSs), service transformation and vertical applications (for example, leveraging its IP Multimedia
Subsystem solutions, mobile analytics as service, and so forth).
Cautions
The company's main strengths are its presence in North America and its code division multiple
access (CDMA) solutions; however, it lacks the scale of its larger competitors in terms of mobile
infrastructure footprint which could affect its ability to gain more LTE contracts quickly.
Alcatel-Lucent will need to gain more LTE deals, as LTE rollouts by CSPs gather further
momentum, in order to secure its viability as a leader in the LTE infrastructure space. However,
limited 3G incumbency creates a challenge as new LTE deals will have to displace an incumbent
vendor.
The strongest competitors can and will use their superior financial position as a selling point
against Alcatel-Lucent. The company must, therefore, continue improving its financial position to
ensure it remains an option for CSPs and retains its credibility with customers and investors. It will
have to do this in the face of a challenging macroeconomic environment in which its CSP
customers are spending cautiously.
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Datang Telecom
Datang manufactures radio and core equipment in the Time Division-LTE (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 Chinese 3G flavor (Time Division-Synchronous Code Division Multiple Access) market,
capturing about one third of the Chinese market having supplied China Mobile.
Strengths
Datang is a specialist in TD-LTE, for which it holds a large set of patents.
Datang has a good chance of ending up providing part of the infrastructure for China Mobile.
Cautions
There is little chance of Datang deploying beyond the Chinese market, despite TD-LTE becoming a
serious alternative in other markets.
Datang's brand is little known, and having a significant portion of its time division duplex (TDD)
sales via other vendors does not help the company to gain visibility.
Datang did not grow revenue in this business unit in 2011, and its margin was negative. Its
overall viability comes in slightly below that of other Niche Players such as Fujitsu and Samsung.
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Ericsson
Ericsson remains in a position to do well in the LTE market, leveraging its dominant position in the
2G/3G sector. Ericsson's wideband code division multiple access (WCDMA), CDMA and end-to-end LTE
offering and "footprint" together with its professional services put it in a uniquely strong position
to leverage Third Generation Partnership Project (3GPP) accounts. Ericsson's in-house IP capabilities are
improving; it remains to be seen what uptake its upcoming Smart Services Router (SSR) EPC platform
will get, and how much business will result from Ericsson's partnership with Akamai in the content
delivery network space.
Strengths
Ericsson has a long-standing and strong focus on Global System for Mobile Communications
(GSM) and WCDMA technology, it is a strong advocate of the heterogeneous network (HetNet)
and a leader in LTE deals.
The company has scale and size in legacy 2G and 3G accounts in all geographies including the
U.S. market where some competitors are not as strong or are not even present for LTE.
Ericsson's financial metrics remain the strongest in the industry and its balance sheet metrics
suggest sustainable viability in the long term.
While rivals will continue to edge closer, Ericsson has been able to grow its market share in mobile
infrastructure during the past couple of years albeit at lower margins because it chose to
protect its embedded base of customers. Ericsson's dominant share of carrier infrastructure overall
remains a solid advantage.
Cautions
Ericsson continues to deal with an aggressive set of competitors, especially in certain regions, and
must continually manage its cost structure in order to maintain competitiveness.
Ericsson continues to face a long-term challenge as Huawei gains scale, market share and mind
share in the carrier infrastructure space.
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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, SLAs 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.

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Fujitsu
Fujitsu is a small vendor, and very focused on Japan for LTE infrastructure. It cooperates with Nokia
Siemens Networks in the joint development of the Service Architecture Evolution (SAE) Gateway
provided to NTT Docomo.
Strengths
Fujitsu offers its 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 or
outdoor models, while the remote radio head is designed to take advantage of the lower
operational cost of an all-outdoor deployment.
A significant share of NTT Docomo's early investment for LTE in Japan went to Fujitsu.
Cautions
Fujitsu is very Japan-centric, with just one customer for LTE. It has not shown evidence of traction
in international markets.
Fujitsu did not grow revenue in this business unit in 2011, but was able to generate positive
margins. Its overall viability is sufficient for a position in the Niche Players quadrant.
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Huawei
Huawei has good traction in the LTE infrastructure market with respect to deals won, with much better
early momentum than it had in the 2G/3G sector in terms of CSP mind share. Gaining more orders from
Tier 1 CSPs in mature markets is increasing the company's recognition as a leading provider of
advanced technologies such as LTE, but continued security concerns hamper its access to the lucrative
U.S. market. Huawei remains a strong competitor in the CSP space, but must maintain its focus on this
market even as it expands and invests in enterprise networking and mobile devices.
Strengths
Huawei's business has expanded from China to emerging markets in Asia, Eastern Europe and the
Middle East and Africa. It is now growing quickly in Western Europe, with some deals in Japan.
Huawei ranks in the top three for carrier infrastructure in all regions apart from Japan and North
America.
Huawei's overall financial performance remains strong relative to its peers. The company posted
industry-leading revenue growth, while maintaining good profitability, cash-flow and balance sheet
metrics, which makes it a viable vendor for the long term and could be an effective selling point
against a few of its competitors.
Huawei has a large number of R&D employees and is driven to satisfying customer demands, both
in frequency division duplex and TDD. It has also demonstrated greater willingness and ability
than some competitors to improve product developments and deployments, and has a strong
small-cell offering.
Cautions
Huawei lacks significant wins in North America and finds penetration in this market challenging
due to the large CSPs having already announced their main vendors for LTE, and the
uncooperative regulatory environment.
Huawei is also not present in Korea and Japan which, together with the U.S. market, represent the
only large-scale deployments worldwide. This limits Huawei's LTE market share for revenue,
despite an otherwise large number of deals in other geographies.
The company's professional services remain a relative weakness, though it has been working to
improve its multivendor capabilities.
While Huawei's overall financial performance remains strong, its overall financial score decreased
in 2011 due to slower revenue growth and weaker profitability and cash flow scores than in prior
years. CSP infrastructure revenue grew only 3% in 2011, so its double-digit overall revenue
growth was driven more by enterprise and mobile devices than it was by CSP infrastructure.
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NEC
NEC has an historical and continued focus on the Japanese market with 2G and 3G technologies. The
company has international aspirations for LTE networks, but lacks references outside Japan.
Strengths
NEC has a solid base in its home market of Japan, with technology and market references with
NTT Docomo one of the key early adopters here.
NEC supplies KDDI, provides the radio access network (RAN) and core network elements of LTE to
NTT Docomo, and will also provide its product to SoftBank from 2012.
NEC's overall viability is as good as many of its larger competitors, and is sufficient for a player in
the Visionaries quadrant.
Cautions
NEC has ambitions for global expansion; however, its two LTE contracts to date are, although
significant, limited to Japan indicating that it has a lot to prove to market LTE internationally.
NEC has limited scale and brand visibility (for example, it had significant 3G RAN sales in Europe
but these were resold under the Siemens brand).
NEC's ability to gain system integration and multivendor environment contracts outside its home
region may prove difficult, because it has no mind share for network management outside of
Japan.
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Nokia Siemens Networks
After a strong start in 2011, NSN's pro forma financial results weakened in what was a difficult
environment. Now in restructuring mode, NSN is expecting volatile operating margins although an
improvement is expected in 2Q12 as compared to 1Q12. The company's restructuring program and
asset sales should have a beneficial impact over time, but it must be able to fight off a perception of
financial weakness. This can only happen with good step-by-step execution on its plans and
demonstrated financial improvement. As a combined entity now including former parts of Motorola
Networks NSN has a larger installed base within CSP networks. NSN needs to improve on its financial
position and its presence in North America.
Strengths
NSN has a comprehensive end-to-end LTE solution that includes radio, EPC, self-organizing
network, voice core, transport, network management and professional services, and an interesting
vision for small cells with its Liquid Radio and Network architectures, and its Customer Experience
Management solutions. It is among the leaders in terms of contracts signed for LTE.
NSN has strong traction in Japan and Korea for wireless infrastructure, and benefits from its good
3G presence and skill set as well as LTE wins from both its historical NSN and Motorola
customer bases.
Motorola brought with it strong skills in radio and TD-LTE, as well as improved global presence (in
the U.S., for example, and also in Japan through recent strong expansion).
T-Mobile USA announced at CTIA-The Wireless Association in early May 2012 that it will
continue to use Ericsson and NSN as its mobile infrastructure vendors for LTE. NSN adds T-Mobile
to other North American operators, Telus and Bell Mobility. This was an important win for NSN and
demonstrates the value of incumbency.
Cautions
NSN's recent restructuring has helped improve its financials somewhat, but results are likely to be
volatile while it progresses through its restructuring plan. Like Alcatel-Lucent, NSN's overall
financial position warrants monitoring since it is not on a par with the overall mobile infrastructure
market share leaders, Huawei and Ericsson.
As is the case with Alcatel-Lucent, the strongest competitors can and will use their superior
financial position as a selling point against NSN. NSN must, therefore, be able to demonstrate
good execution against its plan in order to retain customer confidence. It will have to do this in a
challenging macroeconomic environment where CSP customers are spending cautiously.
One of the goals of the Motorola acquisition was to strengthen NSN's U.S. footprint. However,
expanding its customer presence in this market remains an uphill battle; NSN will need to be
patient about its progress in this region and will have to continue to invest in order to maintain its
visibility.
NSN is executing its restructuring, which includes a 17,000 head count reduction. It remains to be
seen which assets will eventually be sold off (for example, likely the BSS division and sales
operations in non-core countries).
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Samsung
Samsung has leveraged its historical dominance in WiMAX infrastructure to secure its position in LTE
equipment as well.
Strengths
Good traction with LTE infrastructure in the important Korean market, but also in the Japanese
and North American markets.
Samsung's legacy expertise and footprint in WiMAX is useful in approaching the CSP market for
TD-LTE evolution (for example, Mobily in Saudi Arabia).
Samsung's viability score is very good because the company generated positive revenue growth
and margins, and has a good cash-flow metric.
Samsung has managed to deploy beyond its native Korean market. It has been chosen by Sprint
for its Network Vision plan: which will roll out over the next three to five years and will encompass
different frequency bands such as 800MHz, 1.9GHz and 2.5GHz. Samsung established its Europe
Network Operations in 2011, to increase its focus on regional operations in Europe.
Cautions
Although Samsung's strong orthogonal frequency-division multiple access experience from WiMAX
can be leveraged for LTE, it is not clear whether this will lead to a scalable market advantage.
The company's lack of a footprint in 2G/3G globally will pose a challenge to expanding its LTE
infrastructure share.
While it has been getting commercial deals for LTE infrastructure, Samsung would benefit from
more deals with larger CSPs.
Samsung needs to improve the CSP mind share of its LTE offering, because many CSPs have very
little understanding of Samsung's LTE infrastructure capabilities.
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ZTE
ZTE places strong emphasis on the Chinese and Asia/Pacific markets, but is making steady progress
toward becoming a bigger international player with some recent international LTE wins. ZTE's revenue
grew faster in 2011 than it did in 2010 and while its scores on profitability, balance sheet and cash
flows were maintained, the metrics underlying these scores did weaken partly due to a changing mix
in its business (23% overall growth but with 52% growth in terminals and only 10% in networks).
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Strengths
ZTE's financial performance remains promising. Its revenue growth was better in 2011 than it was
in 2010, and other financial metrics that Gartner uses to assess overall viability were maintained.
As a stepping stone to gaining mind share and market share in North America, ZTE opened an LTE
lab in the U.S. in 2009 to demonstrate, test and interoperate with CSPs. It has also been
working toward becoming more visible in Europe and the Middle East and Africa.
Cautions
While the company is working toward emerging from China to gain more contracts and a bigger
footprint in international markets, it still lacks significant presence and mind share outside its
home country. It may have difficulty competing against stronger players in the international
market.
ZTE's revenue remains heavily weighted toward legacy technologies such as GSM and CDMA.
While ZTE scores reasonably well in our financial assessment model, the company maintains high
levels of debt and its debt-related metrics such as debt-to-EBIDTA and debt-to-free cash flow
are weak. This is not an overriding concern while the company is in growth mode, but if this
growth were to slow down these metrics would need to be monitored more closely.
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Vendors Added or Dropped
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.
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Added
Datang Telecom has been added this year.
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Dropped
No vendors were dropped this year.
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Inclusion and Exclusion Criteria
Vendors included in this Magic Quadrant are end-to-end vendors of LTE network infrastructure
equipment for both LTE radio and core networks for CSPs. Many are already included in our mobile
infrastructure market share report, and have LTE customer references or advanced trials with a wireless
CSP.
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Evaluation Criteria
Ability to Execute
Gartner analysts evaluate technology providers on the quality and efficacy of the processes, systems,
methods and procedures that enable provider performance to be competitive, efficient and effective,
and to positively impact revenue, retention and reputation. Ultimately, technology providers are judged
on their ability and their success in capitalizing on their vision.
The technology providers' positions on the Ability to Execute axis have been determined by evaluating
them against the following criteria:
Product/Service. Goods and services offered by the technology provider that competes
in/serves the defined market. This includes current product/service capabilities, quality, feature
sets and skills, whether offered natively or through OEM agreements or partnerships as defined in
the market definition and detailed in the subcriteria. Both radio and core equipment are included,
and professional service offers including system integration skills specifically related to LTE are
also considered. Potential advantages gained in the LTE market through capabilities within
important neighboring segments are also taken into account.
Overall Viability (Business Unit, Financial, Strategy, Organization). Overall viability
includes an assessment of the overall organization's financial health, the financial and practical
success of the business unit and the likelihood of the individual business unit to continue to invest
in the product, to continue offering the product and advancing the state of the art within the
organization's portfolio of products. The volume aspect of the access market and derived
challenges for LTE technology providers are included in this part of the evaluation, where a
technology provider's market share and number of enabled subscribers across the customer base
are key indicators.
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. 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 provider's history of
responsiveness. Ability to adapt and scale activities in individual markets and work with own
partners as well as crucial third parties such as regulators, municipalities and civil work
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contractors to "cast a wide net" and still be able to execute and scale fast when opportunities
turn into actual contracts.
Marketing Execution. The clarity, quality, creativity and efficacy of programs designed to deliver
the organization's message in order 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, promotion, thought leadership, word-of-mouth and sales activities. Ability to market
offered solutions under different regulatory contexts and adapt to different carrier LTE business
models.
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, SLAs and so on.
Evaluation Criteria Weighting
Product/Service High
Overall Viability (Business Unit, Financial, Strategy, Organization) Standard
Sales Execution/Pricing Standard
Market Responsiveness and Track Record High
Marketing Execution Standard
Customer Experience Standard
Operations No rating
Table 1. Ability to Execute Evaluation Criteria
Source: Gartner (July 2012)
Completeness of Vision
Gartner analysts evaluate technology providers on their ability to convincingly articulate logical
statements about current and future market direction, innovation, customer needs and competitive
forces, and how well they correspond to Gartner's position. Ultimately, technology providers are rated
on their understanding of how market forces can be exploited to create opportunity for the provider.
The technology providers' positions on the Completeness of Vision axis have been determined by
evaluating them against the following criteria:
Market Understanding. Ability of the technology provider to understand buyers' needs and
translate these needs into products and services. Vendors that show the highest degree of vision,
listen and understand buyers' wants and needs and can shape or enhance those wants with their
added vision. The ability to see LTE in the wider context of CSPs' overall network transformation
strategies is of particular importance, provided that this insight is reflected directly in the product
road map of the technology provider.
Marketing Strategy. A clear, differentiated set of messages consistently communicated
throughout the organization and externalized through a website, advertising, customer programs
and positioning statements. Alignment of the technology provider's LTE marketing strategy with
its current market position and its overall LTE portfolio strategy, including a regional focus.
Offering (Product) Strategy. A technology provider'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 network rollout where it is economically
feasible.
New product development milestones and compliance with the road map of milestones.
Migration path for existing wireless network infrastructure technologies to include 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 market: typically geographies outside the "home" or native geography,
either directly or through partners, channels and subsidiaries, as appropriate for that geography
and market.
Evaluation Criteria Weighting
Market Understanding High
Marketing Strategy Standard
Sales Strategy No rating
Offering (Product) Strategy High
Business Model No rating
Table 2. Completeness of Vision
Evaluation Criteria
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Evaluation Criteria Weighting
Vertical/Industry Strategy No rating
Innovation Standard
Geographic Strategy Standard
Source: Gartner (July 2012)
Quadrant Descriptions
Leaders
Leaders in this market have scale in terms of market presence, size and early indications of significant
market share. They have also gained momentum in the LTE infrastructure space. They have a broad
portfolio and, even where they need partners, would still be preferred prime vendors for CSPs again
owing to their large scale. Their weight makes them appear in nearly all CSP procurements and trials
for 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 portfolio and are
likely to continue to deliver leading products. Leaders do not necessarily offer the best solution for
every customer requirement, and their products may not be "best-of-breed" in every area of their
portfolio. Overall, however, they provide solutions that offer relatively low risk, and can achieve and
sustain deployments of high quality.
Vendors in this quadrant are: Alcatel-Lucent, Ericsson, Huawei and NSN.
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Challengers
These are technology providers with strong market capabilities and good solutions for specific markets,
but overall their products lack the breadth and depth of those of the Leaders. Their solutions do not
offer a clear vision of how the market is evolving and are not as innovative or advanced as those of the
Leaders.
Vendors in this quadrant are: ZTE.
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Visionaries
Visionaries demonstrate a clear understanding of the market and provide key elements of innovation,
illustrative of the future of the market. However, they either lack the ability to influence a large portion
of the market or have not yet fully expanded their sales and support capabilities to achieve a global
reach, or they do not yet have the funding and scale to execute with the same capabilities as a
technology provider in the Leaders quadrant.
The main characteristic of vendors in the Visionaries quadrant is that they are not as stable as those in
the Leaders or Niche Players quadrants. Visionaries are in various phases of transition, so some may
move over time into other quadrants where they could end up in a more stable state. They could
achieve this stable state by gaining strength and scale, or by wider market adoption (in terms of global
share, multiple geographical markets and recognition) in order to move into the Leaders quadrant, or
by judiciously specializing in a smaller segment and ceasing activities in others as part of a strategic
transformation and thereby move into the Niche Players quadrant.
Vendors in this quadrant are: NEC.
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Niche Players
The technology providers in this quadrant offer products that tend to focus on a segment of the market
or a subset of functionality. These players tend to be more specialized with regard to regional coverage
and/or technology. This can be an advantage, because CSP customers that are aligned with the focus of
Niche Players can find such providers' offerings to be a good fit. In some cases, Niche Players have
made specific decisions about where to compete and where not to compete, so being a Niche Player
does not preclude having a well-defined strategy. They could also be attractive partners for some of the
larger players in this space, thanks to their specialized markets or technology strengths.
Vendors in this quadrant are: Datang Telecom, Fujitsu and Samsung.
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Context
The LTE network infrastructure market for CSPs is still in its early days. Although 72 commercial LTE
networks had launched as of April 2012 according to the Global mobile Suppliers Association (GSA)
this is still only a fraction (less than 9%) of approximately 800 CSPs worldwide. However, based on
contract announcements and the size of the CSPs involved, the relative early market traction of the
different end-to-end vendors can already be observed.
As was the case in the 2G/3G market even prior to the latest economic downturn the number of
larger end-to-end technology providers in the LTE carrier infrastructure market could continue to
decline over time due to consolidation.
Vendors of fourth-generation (4G) LTE technology claim that the technology will increase mobile
network capacity, reduce latency, cope with the explosion in data traffic and cut production costs.
CSPs should take into account the many commitments that need to be made in deploying LTE
infrastructure in terms of invested capital, time spent, duration of the project and impact on network
complexity when added as an overlay when shortlisting potential suppliers. In particular, LTE
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deployment is such a complex project that switching out under-performing vendors after
implementation has already begun can be impractical.
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Market Overview
We estimate that 6% of all mobile connections in 2016 will be LTE connections, despite a fairly slow
start in 2010. At the end of April 2012, 72 LTE operators had launched commercial services which
included 25 networks that have launched so far in 2012 (according to the GSA). TeliaSonera was the
first to launch, in December 2009. Commercial LTE services are available today in 37 countries: in
developing and developed markets in all regions around the world. In terms of uptake, the U.S. has
seen the strongest growth and had over 75% of all LTE connections worldwide at the end of 2011.
Some of the growth can be attributed to the fact that CSPs offered LTE-enabled smartphones, rather
than opting to sell LTE access via USB modems only. LTE-enabled devices will help push LTE services
and uptake over the coming five years, an example of this is the new LTE-enabled iPad which launched
in March 2012; also, several LTE-enabled smartphones are set to launch during the course of the year.
We assume that CSPs are likely to charge a premium for accessing LTE data at least in the early
stages of the commercial launch of LTE services. We have, therefore, forecast that data average
revenue per unit (ARPU) for LTE services will be higher than other data ARPU such as smartphone
data ARPU and 3G cellular modem access ARPU over the coming three to four years worldwide.
However, as competition increases, and as LTE handset access increases, we believe that prices for LTE
services will decrease and align with 3G access over time. The price of LTE will depend on the maturity
of the LTE market, the availability of LTE handsets and the number of CSPs offering LTE services. We
predict that LTE revenue will comprise just over 7% of all mobile services revenue in 2016.
In this Magic Quadrant, we examine the end-to-end vendors of LTE equipment (radio and core). In
addition to these, Gartner is also currently tracking several LTE network infrastructure vendors that do
not yet meet the minimum criteria for inclusion in the Magic Quadrant, because they don't provide end-
to-end offers for LTE network equipment but focus on the radio or core network only. For example:
Starent Networks (now part of Cisco) is a strong provider of packet core switches and is offering
femtocells, but lacks macrocellular base stations; Hitachi supplies KDDI with EPC technology, and
reuses what was Nortel's packet core; Potevio only has a radio product; Panasonic collaborates with
NSN in NTT Docomo.
LTE is still a new technology, so it is important that vendors in this space are seen to offer a
differentiated product offering for radio and core equipment related to LTE.
There are still many vendors in the mobile infrastructure space, so further consolidation in the LTE
infrastructure sector remains a possibility. CSPs will therefore continue to favour larger, more stable
vendors, in order to minimize the risk of disruption from acquisitions or exits from this space while
containing supplier management overheads.
We also note that while the race for market share in the LTE infrastructure market has just started,
vendors are achieving many different levels of traction when it comes to commercial contracts (as
opposed to just trials) with CSPs. A history of delivering with quality is also considered by CSPs during
vendor selection. CSPs will tend to be more responsive to vendors with a strong track record that
effectively promotes their LTE network equipment brand and that clearly provides differentiation
beyond the standards. Such vendors are more likely to be invited to trial, then bid and, potentially, be
given a chance to become an LTE supplier. CSPs want to partner with vendors that show vision and
understand their wants and needs. They don't just want a vendor for boxes, but also ultimately as a
partner to help them with the business models for LTE.
There are several LTE vendors for CSPs to choose from, and they vary greatly in the scale and scope of
their offerings. It is therefore vital that equipment providers have a clear and differentiated network
value proposition and strategy, and that they emphasize their differentiation, functionality and feature
set in order to stand out. Software quality and network stability is also expected now.
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. For vendors seeking business outside
their traditional home market, CSPs will look for evidence that the provider has an effective strategy to
direct resources to meet the specific needs of their stated international market.
In order to capture how well vendors fit the above requirements, Gartner scores them on a series of
criteria, which have been chosen to capture their capabilities when it comes to addressing CSPs' wants
and needs for LTE infrastructure, as described above. These criteria are, ultimately, summed up in our
framework as "Ability to Execute" and "Completeness of Vision" in the market for LTE infrastructure for
CSPs.
Several players in the lower half of the Magic Quadrant are much broader, larger technology
conglomerates (with the exception of Datang Telecom) than those in the top half. The
leaders/challengers in the top half of the Magic Quadrant therefore naturally have more commitment to
this segment, because they expect to generate a significant proportion of their overall revenue from
LTE./4G. Strategically, this has implications for vendor selection because LTE is bound to be a long
sales cycle, long cost recovery model for CSPs.
The main change since last year's Magic Quadrant, apart from the relative movement of the various
vendors, is the addition of Datang Telecom.
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its website,
http://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp.
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