Third Calendar Quarter 2015

TBR

T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

NETWORK BUSINESS QUARTERLYSM

Telecom Vendor Benchmark Third Calendar Quarter 2015

Publish Date: Dec. 23, 2015

Authors: Michael Soper ([email protected]), Telecom Analyst; Patrick Filkins, Research Analyst

Content Editor: Kate Price, Telecom Practice Manager

mailto:[email protected]

TBR

©2015 Technology Business Research, Inc. 2 Telecom Vendor Benchmark 3Q15 | Network Business Quarterly

Executive Summary

Key Findings and Trends 3

Market Overview 4

Market Leaders 5

Vendor Market Share 8

Strategy Overview 9

Key Deals

Key Acquisitions

Key Alliances

Key Personnel Developments

Revenue Trends 13

Scenario Discussions 14

Segment Views Infrastructure 16 Services 21 Applications 26

Geographic Views Americas 31 EMEA 34 APAC 37

Appendix Financial Metrics 41 Go-to-market Metrics 53 Resource Management Metrics 54 Market Share 56 Key Event Tables 57

63 64 68

Definitions Methodology About TBR

Table of Contents

Contents

TBR offers this benchmark data in an XLS format.

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TBR


China and India continue to drive the bulk of growth; vendors look to M&A to offset revenue declines

Executive Summary: Key Findings and Trends

APAC, led by China and India, continues to grow strongly

• Telecom vendors’ growth is stemming primarily from China, where operators are aggressively deploying LTE, optical, fixed-access and IP equipment, and India, where LTE investment is selective, combined with 3G build-outs and managed services deals. This spend is fueling growth for vendors that are firmly entrenched in those markets, particularly Huawei and ZTE in China and Ericsson in India.

• Elsewhere, operator spending is variable, reflecting the impact of post-peak LTE spend in North America, Japan and South Korea, and economic issues in certain developing markets such as CALA.

Nokia faces a difficult task in managing the overlap between Nokia Networks’ and Alcatel-Lucent’s mobile access portfolios

• Nokia Networks’ and Alcatel-Lucent’s primary integration challenge concerns their overlapping portfolios. The companies overlap in OSS, services, IP multimedia subsystem (IMS) and mobile core, but the most significant overlap occurs in wireless access. TBR expects Nokia product lines to win out in most areas due to its status as the acquirer, the installation of Nokia personnel as the head of the forthcoming Mobile Networks unit, and its singular mobile focus over the past three years.

• Culling primarily Alcatel-Lucent product lines will cause a degree of defection leading up to and during integration. Customers may prefer to find a new vendor rather than continue purchasing Alcatel-Lucent gear that is unlikely to see a product refresh. However, TBR expects minimal defections, especially in the U.S., Alcatel-Lucent’s strongest market. Tier 1 operators AT&T and Verizon leverage Alcatel-Lucent and Ericsson for radio access network (RAN) and would prefer to keep two suppliers. Nokia is the most likely choice, with Samsung Networks a long shot due to its small size.

M&A is expected to continue

• TBR expects the pace of acquisitions among telecom vendors to continue in 2016. Vendors are taking advantage of low interest rates to obtain financing and are embracing acquisitions to unlock operating and cost synergies and strengthen their Information and communications technology (ICT) transformation capabilities. Acquisitions are also helping vendors mask declines in their businesses and show growth.

• TBR believes Juniper, Samsung’s Networks unit, CSG International and TEOCO are prime acquisition targets as their larger competitors aim to consolidate the IP, RAN and OSS/BSS markets.

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Huawei continued to lead in telecom revenue and growth in 3Q15, but M&A will drive increased competition in 2016

• Huawei led in total revenue and growth and made margin gains. Huawei’s growth is directly related to its incumbency among China-based vendors. While LTE deployments in China are post-peak, Huawei will continue to be the lead beneficiary as Chinese operators shift from coverage to capacity build-outs over the next few years.

• Nokia’s results indicate the company has established a strong financial position fit to absorb Alcatel-Lucent when the acquisition closes in 1Q16. Nokia Networks’ gross and operating margins at 39.5% and 9.5%, respectively, lead its closest peers, even as the company’s revenue mix shifts from developed markets in Europe and North America to developing markets in the Middle East and Asia. TBR reaffirms its expectation that Nokia will deliver a 2015 operating margin nearing the double digits and low-single-digit revenue growth.

• Cisco CEO Chuck Robbins’ focus on business agility and portfolio discipline is driving profitability for the company, with total operating margin spiking 520 basis points year-to-year in 3Q15. This performance is an anomaly in an industry characterized by commoditization and pricing pressures and differentiates Cisco as it navigates its path to success in an increasingly complex and competitive IT market.

Executive Summary: Market Overview

TBR


LTE investment in China continued to drive Huawei’s peer-leading telecom revenue

Top Three Revenue Leaders in 3Q15 Company Revenue Key Strategies Drivers and Changes

Huawei $8.8 billion

Huawei will continue to compete on price to take market share from incumbents in telecom infrastructure and services, which will enable revenue growth surpassing that of its peers over the long term.

• Huawei maintained its revenue lead over Ericsson due to leading growth in 3Q15. The company will continue to rely on sales of telecom infrastructure and product-attached services — areas in which TBR expects Huawei to continue growing faster than the broader markets through 2016 — for the majority of revenue.

• China will contribute an outsized portion of revenue, but sales of LTE-related hardware that drive growth will taper off during 2016.

Ericsson $7 billion

Seize opportunities in small cells, IP, OSS/BSS, LTE and network functions virtualization (NFV). Ericsson will seek consulting and systems integration (C&SI) and managed services deals from telecom and nontelecom customers.

Ericsson is expanding its share in many of its operator accounts. Operators that chose to modernize their networks with Ericsson are contracting with the company for LTE, software and transformation projects. Deploying LTE networks in the U.S., developed Asia and Nordic countries in the past five years has created opportunities to deliver densification solutions such as carrier aggregation and small cells.

Alcatel-Lucent

$3.8 billion

In the lead-up to combining with Nokia, Alcatel-Lucent will target growth in Core Networking and leverage its Access businesses to reach consistent profitability levels.

Alcatel-Lucent delivered improved revenue and gross and operating margins in 3Q15, boosted by currency effects and Shift Plan restructuring. Alcatel-Lucent benefited from higher software sales in the U.S. and LTE deployments in China; however, declines in Alcatel-Lucent’s Access segment drove down revenue at constant currency rates.

Executive Summary: Market Leaders

TBR


Juniper’s high growth is attributed to its small and increasingly diverse customer base

Top Three Growth Leaders in 3Q15

Company Growth YTY

Key Strategies Drivers & Changes

Huawei 18%

• Huawei is shifting its strategy to increase focus on services, but hardware will continue to drive the bulk of revenue volume growth in 4Q15.

• Persuade customers to adopt transformative products and services such as NFV and SDN.

• In 2H15 Huawei began taking a more services-led approach to winning contracts as it aims for a new role as the prime ICT systems integrator for carrier networks and data centers.

• Huawei is investing more than $500 million in best practices, including building consulting competencies, methodologies and platforms as well as opening new competency centers.

Juniper 8.5%

• Become the leader in IP networking by leveraging its expertise in routing, switching and security.

• Expand outside core telecom base to increase sales to cloud and cable providers.

Juniper’s 3Q15 telecom revenue grew 8.5%, indicating efforts to diversify its customer base are working; of its top 10 customers in 3Q15, five were telecom, four were cloud or cable providers, and one was enterprise.

ZTE 7.2%

• Establish a leadership position in LTE.

• Support install base in China while expanding aggressively in international markets.

China-based operators will continue to contribute nearly half of ZTE’s revenue and margin growth through 1H16. ZTE is among the largest beneficiaries of China’s investment in LTE and fixed access infrastructure. The company’s leading positions in LTE deployments for China Mobile and China Telecom enable ZTE to achieve high revenue growth.


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Cisco preserves leading margins by increasing the sales volume of its cloud-based solutions

Top Three Operating Margin Leaders in 3Q15

Company % OM (TTM)

Key Strategies Drivers and Changes

Cisco 24.3%

• Drive higher margins by capitalizing on cloud-based delivery of its security, services and collaboration solutions.

• Maintain high share of the service provider routing and switching market, which provides strong margins.

• Cisco’s operating margin rose 520 basis points year-to-year to 24.3%, primarily due to a reduction in operating expenses and a favorable comparison to 3Q14.

• Cisco benefited from adoption of its cloud-based solutions, which generally garner higher margins.

Juniper 20.7%

• Reduce redundancies in R&D by streamlining investment across its Routing, Switching and Security segments.

• Divest low-margin or underperforming segments.

Juniper’s operating margin increased 540 basis points year-to-year to 20.7% in 3Q15, largely a result of its Integrated Operating Plan (IOP) over the past year. However, the company is well short of its goal to achieve a 25% operating margin in 2015.

IBM 16%

• Make high-growth, high-margin segments such as security, analytics, cloud and mobility its core business.

• Combine disparate telco offerings to enable customer transformation to the cloud.

• IBM’s Communications group notes strong demand for cloud and analytics in 3Q15, both of which provide higher margins.

• IBM emerged as a viable provider of NFV solutions, particularly management and orchestration (MANO). The company introduced its Dynamic Lifecycle Service Orchestration (DLSO) to address end-to-end orchestration for telecom cloud infrastructure.


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Huawei will lead in market share through at least 2016, driven by operator investment in China and gains in EMEA

Executive Summary: Vendor Market Share

• TBR expects Huawei to continue to lead the market as the company wins outsized portions of domestic contracts and expands further in EMEA. Huawei grew market share 510 basis points year-to-year, driven largely by infrastructure deployments in China. TBR expects Huawei’s share to decline slightly in 2017 as these projects wind down. LTE deployments in China are already post-peak. India, where pockets of LTE investment are emerging, presents an opportunity for rival vendors such as Ericsson to regain share.

• TBR expects India’s importance will rise throughout 2016 as evidenced by higher vendor investment in personnel and R&D in the country. India-based operators are leveraging spectrum for additional 3G deployments and initial LTE deployments. This will benefit Ericsson and Huawei primarily.

• Similar to Huawei, ZTE gained 150 basis points of market share year-to-year due to its involvement with infrastructure deployments for Chinese operators. However, ZTE’s market share declined 160 basis points sequentially. ZTE lacks the services expertise or product capability to poach Tier 1 customers from Europe-based competitors.

29.1%

23.0%

12.6%

11.1%

10.6%

8.9%

2.7% 2.1%Huawei

Ericsson

Alcatel-Lucent

Cisco

Nokia Networks

ZTE

Juniper

Samsung

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SOURCE: TBR AND COMPANY DATA

3Q15 VENDOR MARKET SHARE

NOTE: MARKET SHARES DO NOT TOTAL 100% DUE TO ROUNDING.NOTE: CHART DISPLAYS ONLY THOSE COMPANIES COVERED IN THE BENCHMARK.

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Vendors are beginning to win NFV/SDN contracts from major operators

Executive Summary: Strategy Overview

Key 3Q15 Customer

Deals

Alcatel-Lucent

China Mobile & China Unicom,

China

July 2015

Alcatel-Lucent

Telefonica,

Spain

August 2015

Ericsson

Bharti Airtel

India

September 2015

Cisco, Juniper

AT&T,

United States

September 2015

Alcatel-Lucent announced separate framework agreements with China Mobile and China Unicom worth a combined $1.3 billion. Alcatel-Lucent is supplying TD-LTE and FDD-LTE equipment, optical technology, IP routing and switching, VoLTE, NFV and SDN delivered from Nuage Networks. China Mobile Software Technology Company is deploying SDN technology from Nuage to design and test applications on its OpenStack-based private cloud in the Suzhou Province.

Telefonica selected Alcatel-Lucent to supply elements of its IP Routing portfolio for a three-year project in Spain. Alcatel-Lucent is supplying core and edge routing products including the 7950 Extensible Routing System, 7450 Ethernet Service Switch and 7750 Service Router. Alcatel-Lucent’s 5620 Service Aware Manager will centrally manage the equipment. The vendor is also providing installation, commissioning and systems integration services.

Bharti Airtel selected Ericsson in a four-year contract to deploy 3G WCDMA equipment in eight circles and, in a separate agreement, to deploy LTE in Delhi, India. Ericsson is supplying its RBS 6000 base stations configured for 3G and FDD LTE. Ericsson was a 2G and 3G supplier to Bharti, provided LTE in four other circles and, per a March 2015 contract extension, manages Bharti’s 2G, 3G, LTE, intelligent network, LAN/WAN and Wi-Fi assets across 15 circles.

AT&T selected Juniper Networks and Cisco to enhance its Network on Demand initiative. Both are supplying AT&T with virtualized customer-premises equipment. Cisco is supplying AT&T with virtualized network functions (VNFs). Cisco is supplying network functions virtualization infrastructure (NFVI) through its Integrated Service Routers. Cisco gained entry to the contract through its acquisition of Tail-f.

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With hardware commoditization accelerating, vendors acquired in software and software services in 3Q15


Key 3Q15 Acquisitions

Alcatel-Lucent

Mformation

September 2015

Ericsson

Icon Americas

August 2015

Huawei

Amartus

July 2015

IBM

Strongloop

September 2015

Alcatel-Lucent acquired Mformation for its IoT platform, which provides secure mobile device management and machine-to-machine (M2M) connectivity. Mformation joins Alcatel-Lucent’s IP Platforms division and will be integrated with the Motive portfolio. Mformation counts over 20 service providers as customers worldwide, including Telefonica and Telstra, as well as an array of enterprise customers.

Ericsson acquired Icon Americas, a Guatemala-based C&SI company. Icon Americas primarily provides application development and maintenance services in billing and charging. Approximately 250 Icon Americas employees and consultants joined Ericsson. Icon is just one of several OSS/BSS C&SI acquisitions Ericsson has made in the past two years, as the company has quickly scaled up regional C&SI talent.

Huawei acquired the software assets of Amartus, an OSS vendor in Dublin. Amartus software manages virtual and legacy networks. Specifically, Huawei acquired Amartus Chameleon SDS (software-defined services) orchestration system, senior management and product engineers. What remains of Amartus will service existing customers and provide systems integration services.

IBM acquired Strongloop for its Node.js application development software. Strongloop’s software enables developers to build and deploy Internet of Things (IoT), mobile and Web-based applications in the cloud. Node.js is available through IBM Bluemix and joins MobileFirst and WebSphere in IBM’s software portfolio. Additionally, TBR expects IBM to integrate select components from Node.js into its IBM IoT Foundation platform.

TBR


Nokia Networks and Ericsson will leverage a partnership with Intel to win IoT engagements


Key 3Q15 Alliances

Cisco

Puppet Labs

August 2015

Nokia Networks, Ericsson

Intel

September 2015

Ericsson

HP

September 2015

Alcatel-Lucent

Telefonica

July 2015

Cisco announced plans to integrate Puppet Labs’ IT automation software into NX-OS, the primary operating system in its Nexus 3000 and 9000 line of switches. Puppet Labs is a Cisco Solution Partner. Its software provides programmability and an enhanced tool set for developers. Cisco is taking steps to enable a more open and SDN-ready version of its flagship switching software as precommercial deployments of SDN proliferate.

Ericsson, Nokia and Intel partnered to create products for the commercialization of Narrowband-LTE (NB-LTE). The technology is ideal for IoT. Intel intends to support commercial rollout of the technology with a road map for NB-LTE chipsets starting in 2016. Ericsson and Nokia will upgrade LTE networks to support NB-LTE.

Ericsson partnered with HP’s Aruba Networks to provide integrated Wi-Fi and LTE solutions to customers. Ericsson is incorporating Aruba’s 802.11ac enterprise Wi-Fi technology into the Ericsson RBS 6402 indoor picocell. Ericsson and HP have also signed reseller agreements allowing Ericsson to offer Aruba’s Wi-Fi connectivity and HP to resell Ericsson’s licensed band indoor small cells.

Alcatel-Lucent and Telefonica signed a Memorandum of Understanding (MoU) to extend a partnership to develop NFV technologies including vRAN, vCPE and vEPC. The companies will explore how mobile networks can be adapted to comply with IoT, M2M communications and a higher volume of connected devices. Telefonica selected Alcatel-Lucent’s CloudBand NFV infrastructure to develop its UNICA initiative.

TBR


Management Changes

• In August HP unveiled the two separate boards of directors that now oversee operations for Hewlett Packard Enterprise (HPE) and HP Inc. In HPE, Pat Russo, previously an independent director for the combined HP, serves as chair of the board. HPE CEO Meg Whitman serves as HP Inc. chair.

• In September Juniper announced Brian Martin would become senior vice president, general counsel and corporate secretary effective Oct. 5. Martin was formerly general counsel and corporate secretary at KLA–Tencor. Martin’s duties include leading global legal affairs and advising Juniper’s executive team and board of directors. Martin replaced Mitch Gaynor, who left the company, and reports directly to CEO Rami Rahim. Juniper will leverage Martin’s background in patent law to steer innovation efforts in Juniper’s IP portfolio. This follows a July announcement that former Nvidia CIO Bob Worrall is Juniper’s new CIO. Worrall is responsible for managing Juniper’s physical resources and intellectual property.

• In July Cisco CEO Chuck Robbins announced an almost entirely new executive leadership team, including appointing a new CMO, Karen Walker; chief digital officer, Kevin Bandy; and senior vice president of operations, Rebecca Jacoby. Kelly Kramer remains CFO. TBR believes Robbins’ aggressive overhaul and focus on reducing middle management staff are meant to create a more agile Cisco and break down internal silos formed from years of legacy initiatives. These initiatives will enable Cisco to accelerate its transition into an ICT solutions company. Cisco’s growth initiatives center on security, mobility, data center, IoT and cloud.

Cisco completely retooled its executive team to kick-start growth in long-term initiatives such as cloud and IoT


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3Q15 TELECOM R&D AS A PERCENTAGE OF TELECOM REVENUE


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Telecom vendor revenue has been declining slowly as hardware and product-attached services revenue falls

Executive Summary: Revenue Trends

$88.4$81.1 $79.2 $81.5

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TELECOM REVENUE TRENDS FOR BENCHMARKED VENDORS 2011-2014 (IN $ BILLIONS)


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Scenario Discussion

Ericsson is working to balance its traditional telecom-facing business and growth areas

Scenario Discussion: Ericsson’s ICT focus exposes it to new competitors and lays bare the need for scale through acquisition

Ericsson is expanding its addressable market to broaden growth opportunities, but currently owns a limited install base of enterprise customers. To gain scale, Ericsson could make a strategic acquisition in the IT space as it increasingly competes with deep-pocketed rivals such as Cisco and IBM on their turf.

• Ericsson’s broad focus spans traditional areas where it has dominant market positions but relatively slow growth — radio, mobile core, and transmission and telecom services — as well as growth areas of IP networks, cloud, OSS/BSS, TV & Media and Industry & Society (utilities, transport and public safety). In growth areas Ericsson’s market presence is small but increasing in line with the size of the addressable market. The company’s strategy is to advance core areas through organic investment and growth areas through a combination of organic development and targeted acquisitions.

• Part of this strategy includes driving new ICT products such as the HDS 8000, a cloud portfolio, IoT and 5G developments, but the scale of these efforts is far from what is required to overtake the traditional business in revenue and likely too small to claim new markets ahead of competitors. Although Ericsson realized this and made tuck-in acquisitions to bring ICT solutions to market faster, the company must make major acquisitions in its growth areas to scale sufficiently to compete with other ICT players.

• TBR believes more acquisitions in IT and industries such as energy and transport are required to transform Ericsson into a company that balances core business areas with growth areas to enable more rapid investment in new markets.

Ericsson’s 2015 Acquisitions

Company Month

Envivio October

Ericpol Poland and Ukraine October

Icon Americas August

TimelessMind April

Sunrise Technology’s Telecom Business March

twofour54’s Playout Business February

TBR


Nokia nears the closing of its Alcatel-Lucent acquisition, at which point it will gain share in China

Scenario Discussion

Scenario Discussion: Acquiring Alcatel-Lucent will strengthen Nokia Networks’ position in China significantly

Combined, Nokia Networks and Alcatel-Lucent will be the largest foreign vendor in China, surpassing Ericsson. However, Huawei and ZTE will remain the dominant players in China as each is at least twice as large in China as the new Nokia/Alcatel-Lucent entity. The strongest impediment Nokia faces may be the Chinese government’s desire to see the majority of business within its borders pass through Chinese vendors. As Nokia is able to make up ground on Huawei and ZTE, the Chinese government may force the combined Nokia/Alcatel-Lucent entity to forfeit market share.

• TBR believes Nokia Networks and Alcatel-Lucent are the leading foreign vendors to the three China-based operators (China Mobile, China Telecom and China Unicom), lagging behind domestic leaders Huawei and ZTE, but with larger market shares than Ericsson. Combined, the two vendors will hold significant market share that will challenge but not exceed that of China-based rivals due to the Chinese government’s preference for domestic vendors. While Nokia’s presence within the three operators’ accounts is limited to radio access and mobile core infrastructure, Alcatel-Lucent provides the operators with core routing, optical and fixed access equipment as well as wireless access equipment.

• The Chinese Ministry of Commerce approved Nokia’s acquisition of Alcatel-Lucent in October, following Nokia’s agreement to merge Nokia China with Alcatel-Lucent Shanghai Bell. Nokia Shanghai Bell will be a joint venture with China Huaxin in which Nokia owns 50% plus one share. Chinese regulators have not mandated the new operating company forfeit market share, despite its large size. Combined, Nokia and Alcatel-Lucent recorded over $5 billion in sales in China in 2014. In comparison, Huawei and Ericsson recorded sales of $17.6 billion and $2 billion, respectively, in China in 2014.

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NOKIA NETWORKS AND ALCATEL-LUCENT CHINA REVENUE

Alcatel-Lucent Nokia NetworksSOURCE: TBR, NOKIA NETWORKS AND ALCATEL-LUCENT

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• As of 3Q15 Ericsson has signed over 230 LTE/EPC contracts worldwide, compared with more than 300 for Huawei, over 185 for ZTE, 183 for Nokia Networks, over 85 for Alcatel-Lucent and more than 20 for Samsung. Ericsson maintains LTE leadership in revenue as the majority of Huawei’s LTE contracts come from operators in developing markets with smaller footprints, although it is closing the gap due to the influx of LTE spend by Chinese operators.

• Alcatel-Lucent’s reported revenue growth was driven by currency effects, but declined on an organic basis. The vendor reported IP Routing grew 9.3% year-to-year driven by sales to operators in EMEA and CALA, but offset by lower sales in Japan. IP Transport revenue rose 5.5% year-to-year due to rising Wavelength Division Multiplexing (WDM) shipments. Access revenue grew a reported 0.2% year-to-year driven by a 0.7% increase in Wireless Access and 5.8% increase in Fixed Access revenues. Demand was down for infrastructure in North America, where operators have completed LTE builds.

• Nokia Networks’ infrastructure revenue contracted 6.1% year-to-year in 3Q15. Nokia Networks is no longer growing revenue in North America due to lower activity in T-Mobile’s LTE network capacity build-out and the Sprint TD-LTE rollout. Nokia’s pending acquisition of Alcatel-Lucent will greatly enhance its position in the market as Alcatel-Lucent is a major supplier of fixed, routing and wireless infrastructure to Tier 1, Tier 2 and Tier 3 operators in the U.S.

Vendors without leading positions in China’s LTE build-out largely saw their infrastructure revenue decline

Segment Views: Infrastructure

Alcatel-Lucent

Cisco

Ericsson

Nokia Networks

ZTE

Huawei

Juniper

Samsung

HP

IBM

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INFRASTRUCTURE SEGMENT 3Q15 REVENUE & YEAR-TO-YEAR REVENUE GROWTH

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NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE.SOURCE: TBR AND COMPANY DATA

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Infrastructure Revenue Leaders in 3Q15 Company Revenue Key Strategies Drivers and Changes

Huawei $5.6 billion

• China will remain Huawei’s primary driver of Carrier Network revenue, largely due to LTE deployments for the country’s three operators.

• Leverage price leadership to capture 3G rollouts in emerging markets.

As of 3Q15 Huawei has signed over 300 LTE contracts. Ericsson maintains LTE leadership in revenue, as the majority of its LTE contracts come from operators in developing markets with smaller footprints. However, Huawei is closing the gap as it deploys an outsized portion of the LTE networks for China Mobile, China Unicom and China Telecom.

Ericsson $3.4 billion

• Maintain market leadership in commercial LTE deployments.

• Invest in NFV and SDN to appeal to operators’ long-term strategies.

Networks sales decreased 4% year-to-year in 3Q15 as densification projects wound down in the U.S., 3G projects in the Middle East concluded, and weak currencies affected operator demand in Russia and Brazil. Additionally, Networks revenue declined 7.2% year-to-year in northeast Asia due to a slowdown in LTE rollouts in China, which TBR believes is temporary. Revenue in India grew 120.1% year-to-year as operators deployed 3G en masse and LTE selectively.

Alcatel-Lucent

$2.5 billion

• Maintain momentum in IP Routing, fixed access and Alcatel-Lucent Submarine Networks businesses.

• Leverage leading NFV/SDN portfolio to win new infrastructure contracts.

• TBR views Alcatel-Lucent as a technical leader in the NFV/SDN space due to its Network Services Platform (NSP) and CloudBand, now in its third release. CloudBand enables Alcatel-Lucent to supply its virtualized network functions (VNFs) such as vRAN, vEPC and vCPE from the cloud to meet operator demand for scalable solutions.

• Alcatel-Lucent’s placement in AT&T’s, Verizon’s and Telefonica’s NFV deployments positions it to be a leading supplier of software-mediated networking over the next several years.

3G deployments in India remain a strong source of vendor revenue while operators in the country only selectively invest in LTE


TBR


HP’s growth was primarily driven by its Aruba acquisition, which posts strong sales of its WLAN solutions to U.S. service providers


Infrastructure Growth Leaders in 3Q15

Company YTY Growth


Huawei 17.6%

Target LTE build-outs in developing APAC and MEA countries to maintain its contract-count leadership position in LTE.

• Wireless, Huawei’s largest Carrier Network subsegment by percentage of revenue, will grow an estimated 24% in 2015 as the company benefits from its leading position with Chinese carriers. Huawei also benefits from 3G rollouts in developing markets where its price leadership gives it a competitive advantage.

• Huawei’s Fixed revenue will grow an estimated 10% in 2015 as the company executes contracts tied to mobile backhaul, wireline and transport, particularly in China.

Juniper 12.1%

Invest in high-performance hardware and SDN to tap into pockets of telco carrier spend and expand into adjacent customer segments such as cloud and cable providers.

Telefonica selected Juniper to supply its MX Series 3D Universal Edge Routers for the operator’s metro networks in Spain. Not only is the contract significant in scale, but it is also a signature win for Juniper in the service provider market for its SDN-ready IP routing portfolio. Juniper also benefits from placement in AT&T’s coveted Network on Demand initiative.

HP 6.6%

• Leverage early customer wins in NFV to grow OpenNFV business unit.

• Use acquisition of Aruba Networks to gain further exposure to large Tier 1 accounts such as AT&T.

• HP drives sales of data center infrastructure to operators, as its solutions support virtualization and large-scale deployments at a lower cost.

• HP benefited from its Aruba acquisition. Aruba’s enterprise WLAN solutions are sold through operator channels, driving revenue from service providers.

TBR


New LTE deployments continue throughout eastern Europe and CALA


Key 3Q15 Infrastructure

Deals

Nokia Networks

Kyivstar,

Ukraine

July 2015

Juniper

Telefonica,

Spain

September 2015

Ericsson

Cable & Wireless Communications

Caribbean, Latin America

September 2015

Alcatel-Lucent

Chunghwa Telecom,

Taiwan

September 2015

Kyivstar gave Nokia Networks a five-year contract to update its mobile radio network. Nokia is modernizing the operator’s 2G network, deploying 3G services and providing a path to LTE. Nokia Networks is deploying its Flexi Multiradio 10 Base Station, Flexi Lite Base Stations, NetAct network management system, and complete network planning, optimization, design and implementation services.

Telefonica selected Juniper to supply its MX Series 3D Universal Edge Routers for the operator’s metro networks in Spain. Not only is the contract significant in scale, but it is also a signature win for Juniper in the service provider market for its SDN-ready IP routing portfolio. Telefonica is the leading adopter of virtualization in EMEA, and it is fully deploying SDN and NFV technologies through its UNICA initiative.

Cable & Wireless Communications selected Ericsson to upgrade its 3G network and deploy LTE across the operator’s 42-country footprint in CALA. Ericsson is upgrading network management, network control and radio access software and providing project management, systems integration and support services, and the network infrastructure.

Chunghwa Telecom selected Alcatel-Lucent to supply G.fast and optical solutions in Taiwan. The deployment includes Alcatel-Lucent’s 7368 ISAM ONTs, 7368 ISAM CEP and 5520 Access Management System. The deployment marks the first commercial sale for G.fast.

TBR


Huawei introduced TDD+ in July. It is an evolution of TD-LTE developed in concert with China Mobile and SoftBank and is part of Huawei’s 4.5G vision. TDD+ is based on 4T4R and 8T8R technology and provides improved interference management, leverages carrier aggregation, improves spectral efficiency and expands coverage to high-band spectrums below 6GHz. Commercial use will begin in 2016.

In July ZTE launched TDD+ for operators. TDD+ is designed to bridge the gap to 5G by offering improved performance and spectrum use over first-generation TD-LTE equipment. TDD+ features massive MIMO, multiuser shared access, ultra-dense network, 256 quadrature amplitude modulation, FDD-TDD joint operation, machine type communication and D-CoMP+.

In September Samsung announced femtocells configured for LTE-U. LTE-U improves cellular coverage by leveraging higher bands, such as 5GHz, generally reserved for Wi-Fi. The solution supports 2x2 multiple input and multiple output on both licensed and unlicensed spectrum bands. Verizon is trialing femtocells in 2H15 with commercial deployment expected in 2016.

In September Nokia announced its Flexi Zone G2 Multi-Band Carrier Aggregation Outdoor Micro/Pico Base Stations, which are capable of 1Gbps peak data speeds and includes three radio frequency modular slots. The base stations enable operators to deliver services on three licensed LTE bands or a combination of licensed and unlicensed bands.


Vendors leverage advances in carrier aggregation and unlicensed spectrum to introduce enhanced infrastructure

Portfolio/Go-to-market Changes

TBR


• Ericsson’s TIS revenue grew 10.6% year-to-year in SEK but declined 8.9% year-to-year in U.S. dollars (USD) due to currency appreciation.

• While Huawei revamps its services organization to focus on integration, the company tends to lead with its products, then pull in services to enhance contract value. However, this go-to-market strategy is changing as the vendor promotes its nonproduct-attached services, such as managed services.

• Alcatel-Lucent’s total TIS revenue increased 2.2% year-to-year in USD. Despite unfavorable currency compares, the vendor still managed to grow its deployment, maintenance and professional services businesses as it helped key customers in China and North America implement LTE and fixed network solutions.

China and India drove revenue growth for many vendors, offset by weakness in the Americas, Japan, South Korea and the strong USD impact

Segment Views: Services

Accenture

Alcatel-LucentCisco

EricssonHP

IBM

Nokia Networks

ZTE

Huawei

Juniper

Samsung

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

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Ericsson remains the dominant player in TIS despite continued gains by Huawei, which depends heavily on China for revenue


TIS Revenue Leaders in 3Q15

Company Revenue (USD)



Ericsson takes a services-led approach to new opportunities, which helps sell services and pull- through equipment and software, enabling the vendor to maximize revenue from its customer base.

All TIS segments except deployment grew in SEK but declined in USD due to the appreciating USD. TIS revenue was underpinned by strong demand for professional services.

Huawei $2.9 billion

Huawei is shifting to more standard pricing now that its capabilities are comparable to those of its peers, but the firm will continue to use aggressive pricing to win strategic deals, particularly in countries where it does not dominate the market and in ICT engagements.

Huawei is transitioning to more transformative services as demand for its traditional product-attached services slows. Though most of Huawei’s TIS volume will remain tied to its network infrastructure, growth will increasingly stem from professional and managed services.

Nokia Networks $1.5 billion

Nokia is focused primarily on growing its systems integration business, which provides relatively high margins, and is adding managed services contracts selectively, including in developing regions the company vacated as part of restructuring.

Global Services revenue increased 3.1% year-to-year due to the 2014 acquisition of SAC Wireless; implementation of RAN for operators in India, China and MEA; and higher systems integration revenue. Global Services composed 45.4% of Nokia Networks’ total revenue in 3Q15, up from 43.1% in 3Q14.

TBR


TIS Growth Leaders in 3Q15

Company YTY Growth


ZTE 23%

ZTE has been focused on supporting its key customers in China, but the vendor needs to keep an eye on how to continue its growth trajectory once spend in China goes post-peak, estimated in 2017. ZTE needs to make moves now to prepare for this revenue falloff.

Most of ZTE’s telecom infrastructure services (TIS) growth in 3Q15 stemmed from the sale of product-attached services on gear it is selling to its China-based customers.

Huawei 20%

Help telecom operators become digital service providers by transforming their business, operations and technology infrastructure through agile ICT-based on-cloud models.

Broad-based growth continued across all regions and service types as Huawei continues to take share from incumbent vendors and forge ahead in ICT. Huawei is gaining traction with its NFV/SDN, data center and cloud-enablement offerings, which is augmenting TIS growth, though its traditional network services business continues to drive the vast majority of volume as Huawei helps its key customers implement LTE and fiber.

Ericsson 10.6%

Taking a services-led approach to new contracts helps Ericsson sell services and pull-through equipment and software, enabling the vendor to maximize revenue from its customer base.

Global Services revenue grew 10.6%, driven by a year-to-year increase of 15.5% in Professional Services. Managed Services grew 11.2%, as Ericsson monetizes the record number of multiyear outsourcing contracts it has signed over the last several quarters. Network Rollout sales fell 2.4% year-to-year as 3G projects in the Middle East concluded and LTE deployments in China decelerated.

ZTE’s and Huawei’s growth was underpinned by massive infrastructure deployments across China, and this trend will continue through 2016


TBR


Huawei gains traction for IT outsourcing; Ericsson’s Mediaroom acquisition lands the company a role as a prime integrator for AT&T/DirecTV


Key 3Q15 Services

Deals

Huawei

du,

United Arab Emirates

July 2015

Huawei

Ooredoo,

Kuwait

September 2015

Ericsson

UPC,

Hungary

September 2015

Ericsson

AT&T,

United States

September 2015

Huawei is helping du architect its new mobile access network. Over the next three years, Huawei will analyze the network, providing network insight, user behavior analysis, user migration analysis, and spectrum and network evolution recommendations.

Huawei signed a five-year contract to manage Ooredoo’s network and IT environment in Kuwait. Huawei is managing IT and network operations, providing network performance management and improving service quality. As of 3Q15 Huawei counts 40 IT outsourcing contracts with over 20 operators globally.

Ericsson was selected to provide managed services for UPC in a five-year contract. Ericsson assumed responsibility for field operations, including field and site maintenance, on Oct. 1.

AT&T selected Ericsson to integrate its U-verse (wireline) and recently acquired DirecTV (satellite) networks to create a single cloud-based video platform for customers. AT&T completed its acquisition of DirecTV in July. U-verse is based on Ericsson’s Mediaroom IPTV platform, driving Ericsson’s selection.

TBR


In September Nokia introduced managed services to support converged fixed and mobile networks. Operations Assessment Service provides operational benchmarking against peers. Network Operation Center (NOC) Consolidation Service centralizes an operator’s NOC, which is then run through Nokia resources. Managed Transport Service is an operations and maintenance offering for the transport layer that can lower field maintenance costs by up to 30%.

In September Nokia introduced HetNet Engine Room Service. This is targeted to operators in the U.S. to help them deploy small cells. It can deliver up to a 20% reduction in costs and speed up small-cell deployments by up to 30% using the Site Value Index feature to determine the best place to install a small cell. The service includes 3D street-level maps and a 3D geolocation tool.

In September Nokia announced Big Data Consultancy, which provides experts to build analytics models that help operators determine their big data needs. The service brings together Nokia’s customer experience management (CEM) and analytics capabilities.


Introduction of new solutions enables Nokia Networks to move up the services value chain Portfolio/Go-to-market Changes

In September Nokia introduced two new services to its cloud wise Care Services portfolio. Resolution Prime Services provides centralized management and fixes for faulty virtualized network functions. Nokia TotalCare for VMware is a support service for operators deploying Nokia’s and VMware’s joint solutions. The service includes an extended service-level agreement (SLA).

TBR


• Nokia Networks is investing in and bringing to market a variety of CEM delivery models, solutions and services, but demand from operators remains subdued. Nokia Networks encourages operators to leverage its CEM On Demand suites, in which it delivers CEM via its global delivery centers. In February Nokia announced that its full suite of OSS and CEM software is now available over the cloud. Nokia’s software sales declined in 3Q15, but sales can vary wildly quarter-to-quarter.

• Alcatel-Lucent’s IP Platforms revenue increased 25.2% year-to-year in euros due to sales of IMS platforms, which are growing in demand as operators deploy IMS and VoLTE in the U.S. and China at scale. In 3Q15 China Mobile selected Alcatel-Lucent to supply VoLTE in 12 provinces.

• While IBM’s top-three ranking remained intact, lower demand for its legacy software hampers results. IBM is repositioning itself for a push into NFV/SDN and is introducing MANO solutions to oversee software-mediated infrastructures.

Segment Views: Applications

Pairing Nokia’s enhanced services portfolio with Alcatel-Lucent’s IP Platforms will open Nokia up to new software opportunities

TBR


Applications Revenue Leaders in 3Q15 Company Revenue Key Strategies Drivers and Changes

Ericsson $387 million

Ericsson’s strategy is to offer end-to-end solution capabilities in IPTV and OSS/BSS. Acquisitions such as Envivio, Mediaroom, Azuki Systems, Red Bee, Devoteam Telecom & Media and Technicolor in the IPTV and multimedia space as well as MetraTech, ConceptWave and Telcordia in OSS/BSS augment Ericsson’s portfolio and expand its software addressable market.

• Support Solutions revenue increased 7.6% year-to-year due to currency effects and acquisitions. Organically, sales declined 8% year-to-year as TV & Media software license sales fell. Because of acquisitions, Ericsson is the fifth-largest ICT software provider.

• Ericsson is consolidating its leading market position in OSS/BSS with portfolio-enhancing acquisitions, most recently by acquiring Icon Americas, which provides C&SI for OSS/BSS solutions in Latin America.

Huawei $367 million

Upsell carrier cloud and OSS/BSS solutions to infrastructure customer base of Tier 1, Tier 2 and Tier 3 operators in developing markets.

In September Huawei made its OSS available via the cloud. OSS as a Service enables Huawei to align its software portfolio with customer demand for cloud-based delivery.

IBM $351 million

IBM remains focused on leveraging its end-to-end solutions portfolio to drive revenue growth in telecom by enabling service providers to find new sources of revenue, primarily in cloud and mobility.

Communication Software revenue fell 10% year-to-year in 3Q15, which TBR attributes to weak performance in mature markets and increasing competition from network equipment providers such as Huawei, Ericsson and Amdocs in OSS/BSS.

Vendors’ shifting focus to software solutions challenges IBM; Huawei adopts SaaS model for its OSS


TBR


Applications Growth Leaders in 3Q15

Company YTY Growth


ZTE 16.8%

ZTE looks to prove competency with new application offerings to attract customers from Western countries leveraging low price points.

• While ZTE’s year-to-year growth is higher than that of its rivals, the company’s software sales are growing from a much smaller install base compared with Ericsson and Huawei.

• ZTE has the ability to cross-sell its infrastructure customers with mobile payment and OSS solutions, particularly in MEA where its pricing strategy is most effective.

Huawei 9.2%

Target service provider customers for fledgling SDN and NFV offerings, leveraging open standards.

• Huawei’s concerted shift to lead with services will enable it to cross-sell and upsell software to operator customers.

• A recent go-to-market alliance with Accenture to provide its BSS solutions in China and Southeast Asia will boost sales.

Juniper 8.5% Leverage high-end hardware portfolio to drive sales of its software and security portfolio.

The bulk of Juniper’s application revenues are derived from sales of its OS tied to core and edge routing products. However, Juniper’s SRX Platforms and Security Software revenue grew 27.2% year-to-year due to rising adoption from cloud and service provider customers.

China-based vendors are generating growth from sales of OSS to Chinese operators; demand for high-end networking spurs Juniper’s growth


TBR


Increasing deployments of IMS software spurred by high VoLTE demand


Key 3Q15 Applications

Deals

Nokia

Vodafone,

Italy

July 2015

Alcatel-Lucent, ZTE, Huawei

China Mobile,

China

August 2015

Ericsson

SBS/Sanoma

Netherlands

September 2015

Ericsson

MTN,

Middle East, Africa

September 2015

Nokia signed a five-year contract to enable VoLTE for Vodafone Italy. Nokia is providing its Telecommunications Application Server, Home Subscriber Server, Cloud Application Manager and NetAct as well as planning and optimization services.

Huawei secured the largest portion, or nearly half, of China Mobile’s VoLTE contract, deploying its IMS solution across 31 provinces and cities in China. ZTE secured the second-largest portion. China Mobile selected Alcatel-Lucent to supply its Rapport IMS software to enable VoLTE in nine provinces in China, including Shanghai, Jiangsu and Zhejiang.

SBS/Sanoma selected Ericsson to deploy and manage its over-the-top and on-demand TV platform for the media company. The multiyear contract began in October 2015. Ericsson provided its Online Video Service, which is based on Mediaroom Reach.

MTN selected Ericsson to deploy, implement, manage and support a new BSS system across MTN’s entire network spanning 22 MEA countries. Ericsson is replacing a legacy system. Ericsson’s Order to Cash suite consists of its Charging System, Multi Mediation and Multi Activation software.

TBR


In September Ericsson unveiled its Video on Demand (VOD) software infrastructure. The solution is based on Ericsson’s Video Storage and Processing Platform and includes features such as Master Video Library, Dynamic Origin and Long Tail Server. Software-based VOD enables Ericsson to offer customers scalability to match the growth of video traffic. Swisscom implemented Ericsson’s Video Storage and Processing Platform, enabling cloud DVR and enhanced VOD features. Swisscom’s TV 2.0 offering is based on Ericsson solutions.

In September Ericsson released IoT Networks Software 16B. It includes new features such as reduced IoT device cost, an extended battery life and improved indoor coverage delivered from new coverage software. To reduce device cost by up to 60%, the solution includes LTE Category 0 with half-duplex operation in FDD functionality. Battery life is improved by the Device Power-saving Mode for LTE & GSM feature.

In September Nokia Networks added the Network Access Guard and Signaling Security Solution to its security portfolio. Network Access Guard is an identity access management solution for use in traditional, virtualized or software-defined networks. It includes single sign-on authentication, session management, audit logging and user policy management. Signaling Security Solution includes the Signaling Guard to track and inspect signaling traffic, and the Security Assessment consulting service analyzing network security architectures in networks.

In September Nokia Networks introduced Ad Analytics, which brings together Nokia Networks, ad agencies and operators to analyze network data and deliver the ability to target demographics. Ad Analytics also anonymizes the data to protect privacy. Nokia will target its analytics solutions toward the retail, transportation and public safety sectors.


Nokia Networks and Ericsson are increasing investment in software to evolve their portfolios Portfolio/Go-to-market Changes

TBR


• Juniper’s telecom revenue in the Americas increased 2.8% year-to-year in 3Q15, reflecting improved traction with regional telecom carriers. From a corporate view, the Americas accounts for 57.1% of Juniper’s total revenue, the majority of which is derived from service providers. Recent deals with AT&T indicate Juniper remains a preferred provider to large telecom companies in the U.S.

• China-based vendors ZTE and Huawei continued to grow their presence throughout the Americas by investing in new facilities and capturing new contracts. TBR believes Huawei has the second-highest share in Brazil’s LTE market and is growing its presence in Mexico, where it is opening new facilities. Huawei has pledged to invest $1.5 billion in Mexico.

• Nokia’s steep year-to-year decline was primarily due to lower revenue from North America, where sales fell 18.8% year-to-year. The declines were driven by slowing LTE deployments with T-Mobile and Sprint, partially offset by favorable year-to-year comparisons in Global Services due to the acquisition of SAC Wireless in 3Q14, which drove growth in network implementation.

A slowing North American LTE market negatively affected Nokia’s and Samsung’s results

Geographic Views: Americas

Alcatel-Lucent

Cisco Ericsson

HP

IBM

Nokia NetworksSamsung

ZTE

HuaweiJuniper

Accenture

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-15%

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Americas Revenue Leaders in 3Q15 Company Revenue Key Strategies Drivers and Changes


Ericsson has dominant LTE market share in the Americas, including contracts with the Tier 1 U.S. carriers, Canada’s Rogers and Latin America’s Une, Oi, Vivo, Telcel, Claro, TIM and Cable & Wireless Communications.

• Ericsson’s reported revenue from North America grew 2.4% year-to-year, driven by 7.6% year-to-year growth in Global Services as SI demand grew. This was partially offset by a 5.9% year-to-year decline in Networks, which was primarily due to lower-capacity enhancement business.

• CALA revenue declined 4.6% year-to-year, primarily due to lower sales from Networks and Support Solutions, down 6.7% and 42.6% year-to-year, respectively, in the region. The capex spending environment is developing unfavorably due to currency devaluations.

Cisco $2.1 billion

Leverage relationships with service providers to cross-sell its Wi-Fi and small-cell terminals.

• While Cisco is gaining traction with cloud providers, operator customers remain a challenging segment in the Americas as operators such as AT&T and Verizon experiment with software-mediated infrastructure and rivals such as Alcatel-Lucent challenge Cisco’s routing business.

• Cisco participates in AT&T and Verizon’s SDN deployments; however, lower hardware volume and commoditization threaten long-term prospects.

Alcatel-Lucent

$1.8 billion

Leverage relationships with AT&T, Sprint and Verizon to maintain a dominant position in North America.

The company remains overly dependent on the U.S., where operator investment is slowing; U.S. revenue grew 4.8% year-to-year due to favorable currency effects, and accounted for 40% of total revenue.

A stronger U.S. dollar helped vendor results in 3Q15, but the underlying market is slowing


TBR


Americas Growth Leaders in 3Q15

Company YTY Growth


HP 11.8%

• Leverage relationships with Tier 1 operators gained through Aruba acquisition to resell networking gear.

• Capitalize on SDN/NFV investment. U.S. operators are forecasted to lead globally in software-mediated deployments.

While HP’s overall revenues in the Americas declined, telecom revenue growth was attributed to HP’s acquisition of Aruba Networks and sales to operator data centers. Aruba Networks has reseller agreements with service providers, such as AT&T, to supply its Wi-Fi gear to enterprise customers.

Accenture 9.2%

Accenture can capitalize on the wave of operator consolidation and increasing network costs, leading service providers to consider outsourcing to reduce operating expenses.

• Broad-based demand for digitally enabled cost rationalization and transformation services and solutions supported Accenture’s telecom revenue growth in 3Q15.

• In August Accenture introduced five analytics applications engineered for the telecom industry, hosted on its Accenture Insights Platform. The applications support cost-reduction and pricing strategies.

Huawei 3.8%

• Undercut competitors using price to gain traction with Tier 2 and Tier 3 operators in Latin America and Canada.

• Maintain momentum with Tier 3 U.S. operators, especially in the optical space.

• Huawei is one of several suppliers involved in building out BCE’s 1 gigabit service, called Gigabit Fibe, throughout eastern Canada.

• Huawei remains excluded from Tier 1 U.S. operator contracts; however, traction in Canada and investments in CALA will drive incremental revenue growth.

Accenture capitalized on operator consolidation and transformation trends in the Americas to drive higher revenue


TBR


• Nokia Networks’ EMEA sales decreased 6.7% year-to-year driven by an 11.3% decline in Europe, where demand weakened in Russia, France and Germany. Middle East and Africa (MEA) revenue grew 6% year-to-year as the company benefited from strong demand for 3G equipment and associated services.

• Cisco’s revenue declined 1.3% year-to-year in EMEA. TBR believes heightened competition from Alcatel-Lucent, Juniper and Huawei for core routing contracts challenged growth.

• HP’s EMEA telecom revenues declined 1% year-to-year. HP is the lead integrator for Telefonica’s UNICA initiative, which gives it brand recognition and proof of service among Tier 1 operators in Europe. However, European investment in NFV/SDN is forecasted to lag behind that of Tier 1 operators in both North America and APAC.

Vendors benefited from investment in MEA, where operators spent on 3G and LTE upgrades

Geographic Views: EMEA

Accenture

Alcatel-Lucent

Cisco

Ericsson

HP

IBMNokia Networks

Samsung

ZTE

Huawei

Juniper

-30%

-20%

-10%

0%

10%

20%

30%

40%

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EMEA Revenue Leaders in 3Q15 Company Revenue Key Strategies Drivers and Changes

Huawei $3.1 billion

Huawei’s strong presence in developing MEA markets places the company in an advantageous position for the long term. It is winning 2G and 3G build-out deals from operators in EMEA, which will likely lead to upgrades and expansions in coming years.

• Huawei leverages its portfolio of fixed and optical solutions to win consideration with operators in EMEA investing to upgrade backhaul networks. In 3Q15 the company announced trials for its G.fast solution in the U.K. and for its optical equipment in Turkey.

• Huawei’s involvement with Vodafone’s Project Spring Phase 1 also provides significant revenue.


Ericsson mines its install base for managed services contracts, which now include a higher share of media services, particularly in Europe. Ericsson takes on low-margin, full-network outsourcing contracts that yield cross-selling and upselling opportunities.

• EMEA revenue decreased 2.5% year-to-year, driven lower by a 5.1% year-to-year decline in the Middle East, where the company had an unfavorable comparison, and by a steep decline in spend in Russia. EMEA operators are increasingly spending on ICT transformation and managed services.

• Ericsson’s stable of video-based contracts in EMEA grew as it won contracts with Channel 5, Swisscom, SBS/Sanoma, Image Nation Abu Dhabi and ITV in 3Q15.

Alcatel-Lucent

$1.2 billion

Continue to focus on the LTE overlay opportunity and on providing life-extending solutions for copper infrastructure.

EMEA revenue grew 6.1% year-to-year due to continued traction in Core Networking, particularly IP Routing. Sales in western Europe (France and Other Western Europe) grew 12.6%, while the rest of Europe grew 7.7% year-to-year. Alcatel-Lucent is deploying routers as a part of Telefonica’s “Fusion Red IP” project.

Huawei’s low-price strategy and end-to-end portfolio endears it to operators in developing markets and Europe alike


TBR


EMEA Growth Leaders in 3Q15

Company YTY Growth


Juniper 19.5% Leverage high-end and open networking solutions to grow EMEA Tier 1 operator footprint.

Juniper’s small EMEA footprint enables it to grow rapidly in comparison to peers. Additionally, demand for metro network edge modernization spurred investment from Telefonica, which selected Juniper to supply edge routers in 3Q15. TBR believes the win is a key opportunity for Juniper to cross-sell its NFV portfolio, including its vMX platform, as Telefonica continues to incrementally virtualize its infrastructure.

Huawei 17.1%

• Huawei is targeting the services space, where Nokia Networks and Alcatel-Lucent are vulnerable.

• Establish R&D centers in strategic cities to leverage local talent pools.

• EMEA revenue continues to grow as Huawei captures more managed services contracts and builds out LTE and 3G networks throughout the region.

• Huawei is increasing investment in Europe’s 5G research initiatives including METIS and 5G-PPP.

ZTE 16.8%

ZTE mirrors its domestic rival Huawei by using its pricing advantage to target customers in EMEA where its brand and value proposition are resonating with customers.

ZTE’s growth in Europe largely stemmed from strong network infrastructure and services growth, while growth in MEA was due to network rollouts in the Middle East. In September KPN selected ZTE for an OSS/BSS transformation contract. ZTE is supplying its ZSmart 8 OSS/BSS suite and systems integration services.

Juniper’s contract with Telefonica will drive growth in EMEA in 4Q15


TBR


• In August Nokia and China Huaxin signed an MoU. Nokia Networks’ operations in China and Alcatel-Lucent Shanghai Bell agreed to merge. Alcatel-Lucent Shanghai Bell is a joint venture with China Huaxin in which Alcatel-Lucent retains a majority stake. As part of the joint venture, Nokia will absorb Alcatel-Lucent’s assets, including an R&D center, and maintain a 50% plus one share majority holding. The joint venture will be called Nokia Shanghai Bell.

• Post acquisition of Alcatel-Lucent, Nokia will become the largest Europe-based telecom vendor in APAC by revenue. Nokia will be strongly positioned in both China and India. Over the past several quarters both Alcatel-Lucent and Nokia signed large framework agreements to supply LTE to China Mobile (Nokia) and China Mobile and China Unicom (Alcatel-Lucent). As a result, Nokia’s 3Q15 revenue from China grew 17% while Alcatel-Lucent’s grew 12.9%, year-to-year.

• Samsung benefits from long-standing relationships with domestic operators in South Korea, where the company is winning deals for its NFV solutions and securing partnerships for 5G. However, Samsung remains challenged to scale up its customer count outside South Korea, limiting its long-term growth outlook.

Nokia is poised to become the second-largest telecom vendor in APAC following its acquisition of Alcatel-Lucent

Geographic Views: APAC

Accenture

Alcatel-Lucent

Cisco

Ericsson

HP

IBM

Nokia Networks

Samsung

ZTE

HuaweiJuniper

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-10%

0%

10%

20%

30%

40%

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APAC Revenue Leaders in 3Q15 Company Revenue Key Strategies Drivers and Changes

Huawei $4.9 billion

While its APAC operations are geared heavily toward China, Huawei is working to build trust and relationships in Australia and India.

The ramp-up of LTE and fixed broadband investment by China-based operators through 2015 coupled with ongoing market share gains across the services market will enable Huawei to outperform the market over the next few years.


• Ericsson will continue to capture revenue from the China Telecom and China Mobile LTE deployments in 4Q15.

• Win 2G and 3G rollout deals in India following spectrum auctions, then leverage these wins for LTE contracts.

• Ericsson is committed to growing its headcount in India in step with its large managed services agreements with Reliance Jio and Bharti Airtel.

• In September Ericsson signed a contract to supply Bharti Airtel with 3G equipment in eight circles and, in a separate agreement, deploy LTE in Delhi, India.

ZTE $1.6 billion

Leverage proven capabilities in China-based contracts to expand outside its domestic base into other APAC markets.

Incumbency status with China’s Tier 1 operators, including China Mobile, China Unicom and China Telecom, enables the vendor to win disproportionately high capex in the domestic market. For example, in August ZTE secured a leading portion of China Mobile’s latest IMS and VoLTE tender.

Customers investing in 3G and LTE in China and India drove high sales volumes for vendors


TBR


APAC Growth Leaders in 3Q15

Company YTY Growth


Huawei 21.4%

Grow via LTE deployments in China and other emerging markets and sustain double-digit growth from the services segment as the company takes share and signs customers for multiyear managed services agreements.

TBR estimates China revenue will grow 35% in 2015, driven by the deployment of LTE networks, while APAC revenue (excluding China) will grow an estimated 12% in 2015 driven by new partnerships including those with Accenture and Infosys, and by 3G and LTE deployments in Southeast Asia.

ZTE 19.2%

Support install base and help China-based operators implement IoT, smart cities and operational transformation.

Growth was driven by large-scale LTE deployments in domestic and regional APAC markets and an acceleration of wireline broadband rollout.

Ericsson 14.9%

• Leverage managed services incumbency in India to win LTE contracts from India-based operators.

• Leverage leading mindshare in NFV/SDN to win contracts with early adopters in South Korea and China.

APAC revenue increased 14.9% year-to-year, led by 81.5% year-to-year growth in India due to higher sales of 3G and LTE infrastructure and managed services. Growth was partially offset by a 9.7% year-to-year decline in northeast Asia, where LTE deployments in China slowed and operator investment in Japan remained subdued. Ericsson grew 25.3% year-to-year in Southeast Asia and Oceania due to new LTE contracts, which spurred growth across Networks, Global Services and Support Solutions.

ZTE’s and Huawei’s relationships with developing markets operators, combined with their high shares in China, enable leading growth


TBR


Appendix

Appendix

TBR


Financial Metrics

RANKING TBR SCORE COMPANY

TOP 3 COMPANIES

1 7.60 Huawei

2 5.40 Juniper

3 5.10 Samsung

4 4.83 ZTE

5 4.54 Alcatel-Lucent

6 4.26 Cisco

7 4.12 Ericsson

8 3.37 Nokia Networks

25.0%

10.9%

8.9%

7.2%

5.4%

3.6%

2.6%

-2.1%

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

3Q152Q151Q154Q14Average


REVENUE GROWTH YEAR-TO-YEAR 3Q15

3Q15 AVERAGE = 8.3%

3Q15 STD DEV = 6.4%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 8.30 Juniper

2 7.96 Cisco

3 5.40 Huawei


5 4.24 Samsung


7 3.44 Ericsson

8 3.06 ZTE

63.9%

61.8%

46.0%

39.5%

38.8%

34.5%

33.9%

31.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%



GROSS MARGIN 3Q15

3Q15 AVERAGE = 43.5% 3Q15 STD DEV = 6.2%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 8.43 Cisco

2 7.52 Juniper

3 6.19 Huawei

4 5.94 Samsung


6 4.51 Ericsson


8 2.79 ZTE

24.3%

20.7%

15.3%

14.3%

9.5%

8.6%

6.0%

1.6%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0%



OPERATING MARGIN 3Q15

3Q15 AVERAGE = 10.5%

3Q15 STD DEV = 4%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 7.42 Ericsson



4 6.14 ZTE

5 5.41 Huawei

6 4.66 Samsung

7 2.52 Juniper

8 2.48 Cisco

10.8%

10.9%

12.3%

14.1%

16.0%

17.9%

23.4%

23.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

3Q15

2Q15

1Q15

4Q14

Average


SG&A AS A PERCENTAGE OF REVENUE 3Q15

3Q15 AVERAGE = 17%

3Q15 STD DEV = 2.6%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 8.63 Samsung

2 6.16 Cisco

3 6.13 ZTE

4 5.42 Huawei

5 5.24 Ericsson



8 2.91 Juniper

6.6%

12.3%

12.4%

14.0%

14.4%

15.7%

16.2%

19.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%



R&D AS A PERCENTAGE OF REVENUE 3Q15

3Q15 AVERAGE = 15%

3Q15 STD DEV = 2.3%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 8.47 Cisco

2 6.73 Samsung

3 6.61 Juniper


5 3.93 Huawei

6 3.57 Ericsson


8 3.03 ZTE

$694.2

$533.7

$522.7

$293.7

$274.8

$241.9

$235.6

$192.1

$0.0 $200.0 $400.0 $600.0 $800.0



ANNUALIZED REVENUE PER EMPLOYEE (IN $ THOUSANDS) 3Q15

3Q15 AVERAGE = $373.9 3Q15 STD DEV = $92.4

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 7.49 Huawei

2 6.92 Samsung

3 6.76 Cisco

4 5.14 Juniper


6 3.92 Ericsson

7 3.69 ZTE


10.1%

9.1%

8.8%

5.9%

5.0%

3.8%

3.4%

-0.3%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%



RETURN ON ASSETS (ROA) 3Q15

3Q15 AVERAGE = 5.7%

3Q15 STD DEV = 1.8%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 8.77 Huawei

2 5.80 Cisco

3 4.98 ZTE

4 4.97 Samsung


6 4.57 Juniper

7 3.94 Ericsson


29.9%

16.2%

12.4%

12.4%

11.9%

10.6%

7.7%

-6.6%

-9.0% -6.0% -3.0% 0.0% 3.0% 6.0% 9.0% 12.0% 15.0% 18.0% 21.0% 24.0% 27.0% 30.0% 33.0%



RETURN ON EQUITY (ROE) 3Q15


3Q15 STD DEV = 4.6%

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 9.85 Cisco

2 4.79 Juniper



5 4.40 Samsung

6 3.96 Huawei

7 3.67 ZTE

8 3.62 Ericsson

419.46

142.96

139.34

134.91

121.42

97.49

81.50

78.42

0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 400.00 450.00

3Q15

2Q15

1Q15

4Q14

Average


DAYS CASH OUTSTANDING 3Q15

3Q15 AVERAGE = 154.21 3Q15 STD DEV = 54.73

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 8.42 Huawei

2 6.62 Samsung

3 6.46 Ericsson

4 5.85 ZTE



7 3.79 Juniper

8 2.52 Cisco

1.04

0.86

0.85

0.79

0.61

0.59

0.59

0.46

0.00 0.20 0.40 0.60 0.80 1.00 1.20



TOTAL ASSET TURNS 3Q15

3Q15 AVERAGE = 0.71

3Q15 STD DEV = 0.1

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 10.00 Cisco

2 5.69 Ericsson


4 5.19 Samsung


6 4.07 Juniper

7 3.22 Huawei

8 2.78 ZTE

3.35

2.11

2.06

1.97

1.83

1.67

1.44

1.32

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50



CURRENT RATIO 3Q15

3Q15 AVERAGE = 1.92

3Q15 STD DEV = 0.27

TBR

TBR


Financial Metrics


TOP 3 COMPANIES

1 7.71 Samsung

2 7.46 Juniper


4 5.08 Cisco


6 4.53 Ericsson

7 2.81 Huawei

8 2.05 ZTE

0.27

0.29

0.43

0.46

0.47

0.50

0.63

0.69

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80



DEBT/ASSET RATIO 3Q15

3Q15 AVERAGE = 0.47

3Q15 STD DEV = 0.07

TBR

TBR


Go-to-market Metrics

RANKING TBR SCORE COMPANY TOP 3 COMPANIES

1 7.65 Cisco

2 7.17 Juniper

3 6.78 Samsung



6 3.64 Huawei

7 2.85 Ericsson

8 2.63 ZTE

33.44

41.63

48.12

66.43

100.20

100.79

114.03

117.75

0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00



DAYS SALES OUTSTANDING 3Q15


TBR

TBR


Resource Management Metrics


TOP 3 COMPANIES

1 9.60 Cisco

2 6.47 Huawei

3 5.01 Samsung


5 4.19 Ericsson


7 2.75 ZTE

8 Not Scored Juniper

12.48

8.06

6.00

5.50

4.85

4.52

2.82

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00



INVENTORY TURNS 3Q15


TBR

TBR


Resource Management Metrics


TOP 3 COMPANIES


2 6.56 Ericsson

3 6.55 Cisco

4 5.53 ZTE

5 5.19 Huawei


7 2.77 Juniper

8 1.63 Samsung

16.72

15.23

15.19

12.53

11.65

10.10

5.36

2.41

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00



FIXED ASSET TURNS 3Q15


TBR

TBR


Market Share


TOP 3 COMPANIES

1 8.59 Huawei

2 7.23 Ericsson


4 4.68 Cisco

5 4.56 ZTE


7 2.89 Juniper

8 2.76 Samsung

29.2%

22.9%

12.1%

11.0%

10.5%

9.6%

2.7%

2.1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%



VENDOR MARKET SHARE 3Q15


3Q15 STD DEV = 4.7%

NOTE: MARKET SHARES DO NOT TOTAL 100% DUE TO ROUNDING.

TBR

TBR


Key Deals Company Scope of Deal Cisco, Juniper

AT&T,

United States

September 2015

AT&T selected Juniper Networks and Cisco to enhance its Network on Demand initiative. Both are supplying AT&T with virtualized customer-premises equipment customized to AT&T’s specifications. Cisco is supplying AT&T with VNFs including vCPE. Cisco is supplying NFVI through its Integrated Service Routers. Cisco gained entry to the Network on Demand contract through its acquisition of Tail-f in 2Q14. Both companies share the contract with Brocade.

Ericsson

Bharti Airtel

India

September 2015

Bharti Airtel selected Ericsson in a four-year contract to deploy 3G WCDMA equipment in eight circles and, in a separate agreement, to deploy LTE in Delhi, India. Ericsson is supplying its RBS 6000 base stations configured for 3G and FDD LTE. Ericsson is also providing spectrum refarming services in three circles. Ericsson was a 2G and 3G supplier to Bharti, provided LTE in four other circles and, per a March 2015 contract extension, manages Bharti’s 2G, 3G, LTE, intelligent network, LAN/WAN and Wi-Fi assets across 15 circles.

Alcatel-Lucent

Telefonica,

Spain

August 2015

Telefonica selected Alcatel-Lucent to supply elements of its IP Routing portfolio for a three-year project in Spain called Fusion IP Red. Alcatel-Lucent is replacing Telefonica’s legacy infrastructure. Alcatel-Lucent is supplying core and edge routing products including the 7950 Extensible Routing System, 7450 Ethernet Service Switch and 7750 Service Router. Alcatel-Lucent’s 5620 Service Aware Manager will manage the equipment centrally. The vendor is also providing installation, commissioning and systems integration services.

Alcatel-Lucent

China Mobile & China Unicom,

China

July 2015

Alcatel-Lucent announced separate framework agreements with China Mobile and China Unicom worth a combined $1.3 billion. Alcatel-Lucent is supplying additional TD-LTE and FDD-LTE access equipment (the vendor was named an LTE RAN supplier in previous agreements), optical technology, IP routing and switching, VoLTE, NFV and SDN delivered from Nuage Networks. China Mobile Software Technology Company is deploying SDN technology from Nuage Networks to design and test applications on its OpenStack-based private cloud in the Suzhou Province, with plans to expand to other China Mobile subsidiaries in the future. The bulk of the work is to be completed over the next year as the Chinese government aggressively pushes its Broadband China initiative on domestic operators.

Appendix: Customer Deals

TBR


Key Acquisitions Company Scope of Acquisition

Alcatel-Lucent

Mformation

September 2015

Alcatel-Lucent announced it acquired Mformation for its IoT platform, which provides secure mobile device management and M2M connectivity. Mformation joins Alcatel-Lucent’s IP Platforms division and will be integrated with the Motive portfolio. Mformation counts over 20 service providers as customers worldwide, including Telefonica and Telstra, as well as an array of enterprise customers. Acquiring Mformation advances Alcatel-Lucent’s position in MDM and IoT security. Mformation’s solutions manage over 700 million devices. Alcatel-Lucent can now offer secure IoT connectivity spanning the core network out to endpoint devices.

IBM

Strongloop

September 2015

IBM acquired Strongloop for its Node.js application development software. Strongloop’s software enables developers to build and deploy IoT, mobile and Web-based applications in the cloud. Node.js is available through IBM Bluemix and joins MobileFirst and WebSphere in IBM’s software portfolio. Additionally, TBR expects IBM to integrate select components from Node.js into its IBM IoT Foundation platform.

Ericsson

Icon Americas

August 2015

Ericsson acquired Icon Americas, a Guatemala-based C&SI company. Icon Americas primarily provides application development and maintenance services in billing and charging. The acquisition expands Ericsson’s portfolio of OSS/BSS solutions and C&SI capabilities in Latin America. Approximately 250 Icon Americas employees and consultants joined Ericsson. Icon is just one of several OSS/BSS C&SI acquisitions Ericsson has made in the past two years, as the company has quickly scaled up its regional C&SI talent in North America, Asia and Latin America.

Huawei

Amartus

July 2015

Huawei acquired the software assets of Amartus, an OSS vendor in Dublin. Amartus software manages virtual and legacy networks. Specifically, Huawei acquired Amartus Chameleon SDS (software-defined services) orchestration system, senior management and product engineers. Until now, Huawei’s NFV portfolio lacked broad orchestration capabilities, leading to the company losing deals to Cisco, which offers Tail-f, and Alcatel-Lucent’s Motive OSS portfolio. What remains of Amartus will service existing customers and provide systems integration services.

Appendix: Acquisitions

TBR


Key Alliances

Company Scope of Alliance

Ericsson, Nokia Networks

Intel

September 2015

Ericsson, Nokia and Intel partnered to create products for the commercialization of NB-LTE. The technology is ideal for IoT. Intel intends to support commercial rollout of the technology with a road map for NB-LTE chipsets starting in 2016. Ericsson and Nokia will upgrade LTE networks to support NB-LTE.

Ericsson

HP

September 2015

Ericsson partnered with HP’s Aruba Networks to provide integrated Wi-Fi and LTE solutions to customers. Ericsson is incorporating Aruba’s 802.11ac enterprise Wi-Fi technology into the Ericsson RBS 6402 indoor picocell. Ericsson and HP have also signed reseller agreements allowing Ericsson to offer Aruba’s Wi-Fi connectivity and HP to resell Ericsson’s licensed band indoor small cells.

Cisco

Puppet Labs

August 2015

Cisco announced plans to integrate Puppet Labs’ IT automation software into NX-OS, the primary operating system in its Nexus 3000 and 9000 line of switches. Puppet Labs is a Cisco Solution Partner. Its software provides programmability and an enhanced tool set for developers. TBR believes Cisco is taking steps to enable a more open and SDN-ready version of its flagship switching software as proofs of concept and precommercial deployments of SDN accelerate.

Alcatel-Lucent

Telefonica

July 2015

Alcatel-Lucent and Telefonica signed an MoU to extend a partnership to develop NFV technologies including vRAN, vCPE and vEPC. The companies will explore how mobile networks can be adapted to comply with IoT, M2M communications and a higher volume of connected devices. Telefonica selected Alcatel-Lucent’s CloudBand NFV infrastructure to develop its UNICA initiative.

Appendix: Alliances

TBR


Key Infrastructure Deals Company Scope of Deal

Alcatel-Lucent

Chunghwa Telecom,

Taiwan

September 2015

Chunghwa Telecom selected Alcatel-Lucent to supply G.fast and optical solutions in Taiwan. The deployment includes Alcatel-Lucent’s 7368 ISAM ONTs, 7368 ISAM CEP and 5520 Access Management System. The deployment marks the first commercial sale for G.fast.

Ericsson

Cable & Wireless Communications

Caribbean, Latin America

September 2015

Cable & Wireless Communications selected Ericsson to upgrade its 3G network and deploy LTE across the operator’s 42-country footprint in CALA. Ericsson is upgrading network management, network control and radio access software and providing project management, systems integration and support services, and the network infrastructure.

Juniper

Telefonica,

Spain

September 2015

Telefonica selected Juniper to supply its MX Series 3D Universal Edge Routers for the operator’s metro networks in Spain. Not only is the contract significant in scale, but it is also a signature win for Juniper in the service provider market for its SDN-ready IP routing portfolio. Telefonica is the leading adopter of virtualization in EMEA, and it is fully deploying SDN and NFV technologies through its UNICA initiative.

Nokia Networks

Kyivstar,

Ukraine

July 2015

Kyivstar gave Nokia Networks a five-year contract to update its mobile radio network. Nokia is modernizing the operator’s 2G network, deploying 3G services and providing a path to LTE. Nokia Networks is deploying its Flexi Multiradio 10 Base Station, Flexi Lite Base Stations, NetAct network management system, and complete network planning, optimization, design and implementation services.

Appendix: Infrastructure Customer Deals

TBR


Appendix: Services Customer Deals

Key Services Deals Company Scope of Deal

Ericsson

AT&T,

United States

September 2015

AT&T selected Ericsson to integrate its U-verse (wireline) and recently acquired DirecTV (satellite) networks to create a single cloud-based video platform for customers. AT&T completed its acquisition of DirecTV in July. U-verse is based on Ericsson’s Mediaroom IPTV platform, driving Ericsson’s selection.

Ericsson

UPC,

Hungary

September 2015

Ericsson was selected to provide managed services for UPC in a five-year contract. Ericsson assumed responsibility for field operations, including field and site maintenance, on Oct. 1.

Huawei

Ooredoo,

Kuwait

September 2015

Huawei signed a five-year contract to manage Ooredoo’s network and IT environment in Kuwait. Huawei is managing IT and network operations, providing network performance management and improving service quality. As of 3Q15 Huawei counts 40 IT outsourcing contracts with over 20 operators globally.

Huawei

du,

United Arab Emirates

July 2015

Huawei is helping du architect its new mobile access network. Over the next three years, Huawei will analyze the network, providing network insight, user behavior analysis, user migration analysis, and spectrum and network evolution recommendations.

TBR


Appendix: Applications Customer Deals

Key Applications Deals Company Scope of Deal

Ericsson

MTN,

Middle East, Africa

September 2015

MTN selected Ericsson to deploy, implement, manage and support a new BSS system across MTN’s entire network spanning 22 MEA countries. Ericsson is replacing a legacy system. Ericsson’s Order to Cash suite consists of its Charging System, Multi Mediation and Multi Activation software.

Ericsson

SBS/Sanoma

Netherlands

September 2015

SBS/Sanoma selected Ericsson to deploy and manage its over-the-top and on-demand TV platform for the media company. The multiyear contract began in October. Ericsson provided its Online Video Service, which is based on Mediaroom Reach.

Alcatel-Lucent, ZTE, Huawei

China Mobile,

China

August 2015

Huawei secured the largest portion, or nearly half, of China Mobile’s VoLTE contract, deploying its IMS solution across 31 provinces and cities in China. ZTE secured the second-largest portion, and is deploying its solution in the Guangdong, Jiangsu, Hubei, Hunan, Shandong, Sichuan and Fujian and other provinces in China. China Mobile selected Alcatel-Lucent to supply its Rapport IMS software to enable VoLTE in nine provinces in China, including Shanghai, Jiangsu and Zhejiang. China Mobile has trialed Rapport since April. Alcatel-Lucent is now deploying Call Session Control Functions (CSCF), Application Servers and Session Border Controllers. Additionally, China Mobile is trialing an NFV-based version of Rapport that supports VoLTE.

Nokia

Vodafone,

Italy

July 2015

Nokia signed a five-year contract to enable VoLTE for Vodafone Italy. Nokia is providing its Telecommunications Application Server, Home Subscriber Server, Cloud Application Manager and NetAct as well as planning and optimization services.

TBR


Definitions

TBR Definition

All fixed and mobile access, core and transport infrastructure in a telecom network

OSS, BSS, SDM, SDP, IMS, TV, media, M2M, security and all other applications running on the telecom network

Telecom infrastructure services (TIS) including deployment services, maintenance services, professional services and managed services

Telecom Vendor Benchmark Definitions

Category

Infrastructure

Applications

Services

TBR

65 ©2015 Technology Business Research Inc.

TBR Modeling Methodology Overview

Telecom Vendor Benchmark 3Q15 | Network Business Quarterly

TBR


TBR Modeling Methodology

TBR uses a methodology built on 19 years of company-centric analysis

Company Revenue

Company Gross Profit Company Operating Profit

SG&A R&D

Reported Segment or Business Unit Financials:

Revenue Gross or operating profit

Company-reported

TBR-modeled

Top-down:

Bottom-up

Segment Revenue Models

Segment area 1 Segment area 2 Segment area 3

Segment Area Profit Models Gross profit Operating profit

Additional cuts can be made on product area models, including Direct versus indirect Consumer versus commercial Geographies Verticals/industries Headcount


Company Expenses

Company-reported and public data

Correlation via primary and secondary research, as well as company briefings


TBR



TBR initiates models with reported information, which provides a foundation for analysis and a baseline for correlation

Capture regularly reported financial and earnings information as model foundation.

Sources: Quarterly earnings documents, SEC filings, annual reports

Break down reported figures by layering in growth, mix and directional financial information delivered by the company.

Sources: Earnings presentations and transcripts, investor/analyst meeting and conference transcripts

Refine model by integrating adoption, switching, pricing, volume and incentive figures captured in TBR’s survey research of customers and partners.

Sources: TBR benchmarks, TBR adoption studies, custom partner/ecosystem analysis

Regularly Reported

Company Guidance

Quantitative Primary Research Data


TBR



In-depth interviews, interactions and research validate, expand and highlight TBR’s top-down research methodology

Layer in substantiations built on answers to questions that specifically target supporting and refining modeled figures.

Sources: One-on-one executive and manager meetings, topic-specific calls

Strengthen model substantiations by leveraging strategic, road map and directional information delivered by each company.

Sources: Industry analyst meetings, briefing and update calls, in-person meetings

Build in most recent information regarding product releases, organizational and resource changes, and investments.

Sources: Technology and business publications, company blogs and press rooms

Targeted Interviews and Surveys

Regular Company Interactions

Secondary Research


About Us Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators.

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Third Calendar Quarter 2015

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