Magic Quadrant for LTE Network Infrastructure

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Magic Quadrant for LTE Network
Infrastructure

12 July 201
2

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.
T
his 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 b
ase 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
som
e 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 fr
om $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 c
ash flow


warrant monitoring since they are not on a par
with the overall mobile infrastructure market share leaders, Huawei and Ericsson.

Strengths



The company is well positioned to leverage wireline assets, particularly in service
-
aware
Internet Proto
col/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.



Al
catel
-
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 (BS
Ss), 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 divisio
n
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 compet
itors 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
an
d 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 u
p 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 signific
ant 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 Partners
hip 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 t
he 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.



Th
e 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 ba
lance 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 con
tinually 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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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 P
layers 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 frequenc
y 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 f
inds 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,
repres
ent 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 infrast
ructure 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 m
arket 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 Sof
tBank 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 sign
ificant, 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 abil
ity 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 imp
rovement 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
-
ste
p 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 i
n 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 R
adio 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 ope
rators, 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 mac
roeconomic 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 WiM
AX 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 manage
d 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 m
ore 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).

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 viabili
ty 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 a
nd 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 ha
ve 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
maintain
s 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
mo
nitored 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
m
obile infrastructure market share report, and have LTE customer references or advanced trials
with a wireless CSP.

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Evaluation Criteria

Ability to Exe
cute

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 cr
iteria:



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 integratio
n 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, Organiza
tion).

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 of
fering 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 technolog
y 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, pri
cing 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 regu
lators, municipalities and
civil work 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 Experien
ce.

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.

Table 1.

Ability to Execute Evaluation Criteria

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

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 i
nto 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
tran
sformation 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 or
ganization 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 reg
ional 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 differ
entiated 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, defensiv
e or pre
-
emptive purposes.
This includes:

o

Sustained evidence of technological expertise.

o

Ability to commit to an individual service provider network rollout where it is
economically feasible.

o

New product development milestones and compliance with the roa
d map of
milestones.

o

Migration path for existing wireless network infrastructure technologies to include
software upgrade evolution to LTE.

o

Support for ecosystem partners via interfaces and interoperability.

o

Demonstration of appropriate budget for R&D pla
nning.



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 sub
sidiaries, as appropriate for
that geography and market.

Table 2.

Completeness of Vision Evaluation Criteria

Evaluation Criteria

Weighting

Market Understanding

High

Marketing Strategy

Standard

Sales Strategy

No rating

Offering (Product) Strategy

High

Business Model

No rating

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 sti
ll 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 la
ck 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 provid
er 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 i
nto 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 speciali
zed 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 numb
er
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 capacit
y, 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 projec
t and impact on
network complexity when added as an overlay


when shortlisting potential suppliers. In
particular, LTE deployment is such a complex project that switching out under
-
performing vendors
after implementation has already begun can be impractic
al.

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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
coun
tries: 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 th
at 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 Marc
h 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, ther
efore, 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 increas
es, 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 offer
ing 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 t
racking 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 exampl
e: 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 ma
ny 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 acquisition
s 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 comm
ercial 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 scal
e 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. Softw
are 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 infr
astructure, 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 gene
rate 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 Quadra
nt, apart from the relative movement of the various
vendors, is the addition of Datang Telecom.

Return to Top

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 sev
eral 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 sha
re 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 inf
ormation.

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
offer
ed 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 fi
nancial 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
organ
ization'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 o
f 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 activ
ities.

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.

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 d
irect 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 devel
opment 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 St
rategy:
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
cap
ital 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 o
r through
partners, channels and subsidiaries as appropriate for that geography and market.

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