lte industry insight and vendor analysis

LTE Industry Insight and Vendor Analysis

2© 2014 Informa UK Ltd. All rights reserved. www.informatandm.com

ContentsIntroduction ................................................................................................................................................................5

Background ................................................................................................................................................................5

LTE-market status .....................................................................................................................................................6 Market activities ....................................................................................................................................................... 6 Spectrum .................................................................................................................................................................. 7 Standards and regulation ......................................................................................................................................... 7 Business drivers for launching LTE ......................................................................................................................... 8 China Mobile ..................................................................................................................................................................... 9 EE ...................................................................................................................................................................................... 9 Etisalat ............................................................................................................................................................................10 NTT DoCoMo ...................................................................................................................................................................11 SK Telecom .....................................................................................................................................................................11 Verizon Wireless .............................................................................................................................................................12 Vodafone Germany .........................................................................................................................................................13

LTE deployment scenarios .......................................................................................................................................14 Network sharing ..................................................................................................................................................... 14 The case for LTE network sharing .................................................................................................................................14 The 1800MHz band ................................................................................................................................................. 15 Network modernization and Single RAN................................................................................................................ 16 Convergence of FDD and TDD LTE ......................................................................................................................... 16 Infrastructure support ....................................................................................................................................................17 Handset support .............................................................................................................................................................17 VoLTE and RCS ....................................................................................................................................................... 17 VoLTE ..............................................................................................................................................................................17 RCS .................................................................................................................................................................................18 Small cells and hetnets .......................................................................................................................................... 18 Technology innovation ............................................................................................................................................ 19 Carrier Aggregation ........................................................................................................................................................19 Coordinated Multipoint ...................................................................................................................................................19 eICIC ................................................................................................................................................................................19 Relay ...............................................................................................................................................................................19 Handset support .............................................................................................................................................................19

Vendor analysis .......................................................................................................................................................20 Vendor financials .................................................................................................................................................... 20 LTE-vendor assessment ......................................................................................................................................... 21 Commercial contracts ............................................................................................................................................ 21 Alcatel-Lucent ................................................................................................................................................................21 Ericsson ..........................................................................................................................................................................21 Huawei ............................................................................................................................................................................21 NSN .................................................................................................................................................................................22 Samsung .........................................................................................................................................................................22 ZTE ..................................................................................................................................................................................22


Vendor scorecard ......................................................................................................................................................... 23 Product line ....................................................................................................................................................................23 End-to-end support ........................................................................................................................................................23 Market strength in TD-LTE ............................................................................................................................................24 R&D .................................................................................................................................................................................24 Standards contribution ...................................................................................................................................................25 CTO survey ......................................................................................................................................................................25 Final market position ............................................................................................................................................. 25 Conclusions ............................................................................................................................................................ 26

Future outlook ..........................................................................................................................................................26


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Julian BrightSenior Analyst

Julian Bright is a Senior Analyst and part of Informa Telecoms & Media’s Networks team. In his role he writes about a range of wireless broadband technologies including WCDMA/HSPA, LTE, LTE-Advanced, WiMAX and Wi-Fi, and covers associated technology areas such as IP voice, fixed-mobile convergence, next generation IP core networks and IMS technologies and strategies. He is a regular speaker and session chair at Informa conferences. His current area of research is into global spectrum availability and deployment strategies for LTE.

Julian has almost 20 years experience as a commentator and analyst in the telecoms arena.

Dimitris Mavrakis Principal Analyst

Dimitris Mavrakis is a Principal Analyst with Informa Telecoms & Media. He is part of the Networks team where he covers a range of topics including Next Generation Networks, IMS, LTE, WiMAX, OFDM, core networks, network APIs and identifying emerging strategies for the mobile business.

Dimitris is also actively involved in Informa’s consulting business and has led several projects on behalf of Tier-1 operators and key vendors.

Dimitris has over 12 years experience in the telecommunications market. He has a strong background in mobile and fixed networks and an in depth understanding of market dynamics in the telecoms business.

About the authors


Introduction

As consumers, employees and citizens, we have never before attached so much value to communications, to mobility and connectivity generally, and to entertainment services. An increase in awareness of data services has benefited consumers and developers, as applications that bridge the physical and virtual worlds continue to emerge to enhance everyday living conditions. In a way, the ability to go online has evolved from a privilege to a basic human right in developed markets and is expected to become a standard across the world.

The skull beneath the skin of the digital economy is the network. But the network is changing. Virtualized, programmable and demand-driven infrastructure promises greater alignment between consumer and enterprise consumption patterns and digital-resource availability. What’s more, it demands a radical rethink of success metrics for builders and operators of infrastructure.

Relatedly, Metcalfe’s Law – the idea that the value of a telecommunications network is proportional to the square of the number of its compatible communicating devices, as developed by Robert Metcalfe in the 1980s – has strongly influenced determinations of value and market power. This law also came to apply to the number of end-users as well as devices. A fundamental assumption of Metcalfe’s Law is that each connected device or user generates ARPU, perhaps the most popular success metric in the global telecoms industry.

Informa’s 2013 Industry Outlook survey asked the whole telecoms industry about the most important areas of focus, and unsurprisingly, the majority of the industry is expected to focus on higher-speed networks and improving customer-experience management (see fig. 1).

In mobile networks, LTE is arguably the biggest step toward data networks since the inception of cellular communications. In Informa’s 2013 survey, more than 70% of the operator respondents (whether mobile or hybrid operators) chose LTE over many other technologies when asked about drivers of profitable top-line growth in their businesses.

Background

Long Term Evolution (LTE) is arguably the first cellular data network designed for data access. Previous networks, including analog and 2G, had been designed for voice, and 3G was an intermediate step, a combination of circuit-switched voice and packet-based data that still used voice-driven network planning and deployment methodologies. LTE has been designed for data access and

includes several technological advances compared with previous cellular networks: flatter IP architecture, OFDM, higher spectral efficiency, lower latency and many other benefits that provide superior data-access capabilities.

LTE has also arrived at the right time in the market: Data awareness is increasing rapidly, and smartphones are fueling tremendous traffic growth, which can be sustained only by next-generation networks. Informa’s WCIS service has been tracking subscription numbers since 1981 and can provide a comparison of analog, 2G, 3G and LTE subscriptions from the beginning of cellular communications through today (see fig. 2). The speed of growth for LTE has overtaken all previous technologies, and it is expected to grow even faster over the next few years.

There are several reasons why LTE is growing faster than previous technologies, but the most important are awareness of data services among subscribers and its time of arrival in the market. The following list illustrates some key ingredients in the success of – and

Other1.3%Partnerships with other operators and

Internet players 14.1%

Efficiencies, cost control and best practice

13.4%

New digital-service developments 19.5% Network deployments and developments

(NGN and LTE) 25.7%

Customer-experience management 26%

Fig. 1: Survey question: What is the most important area of focus for telecoms and TV operators in 2013?

Note: 550 respondents.Source: Informa Telecoms & Media Industry Survey 2013


perhaps the need for – LTE in the market.• Smartphones:Themostpopular

device for mobile networks since the launch of touchscreen smartphones. A peculiarity of LTE networks is that they are only populated by smartphones and, in the early stages of the market, very high-end devices. Mobile operators are attaching data plans to smartphones, both low-end and “hero” devices.

•Market evolution: The consumer and enterprise markets are borrowing trends from each other. For example, mobile operators are offering cloud and hosted services to their subscribers, while enterprise IT departments deal with the “bring your own device” trend, in which employees are allowed to use their personal devices in the enterprise space. A common denominator for these examples is that they both need persistent and higher-quality connectivity, something that LTE can satisfy.

•New revenue opportunities: Telecoms operators are looking for new revenue streams in the traditional value chain and are also venturing out to new market segments, including verticals

such as transportation, energy, logistics, M2M, financial services and health. Valuable services to these markets will surely require robust networks with ubiquitous coverage, something nationwide LTE networks can provide.

•Spectrum consolidation: The LTE standard has introduced higher spectral efficiency in mobile networks, and several operators have already refarmed previous technology spectrum or are planning to do so in the near future. Spectrum refarming is somewhat associated with network modernization, when a single platform replaces many and powers different radio interfaces. In many cases, this coincides with an LTE-network launch.

Informa’s market research illustrates that LTE is deployed not only for cost savings. Arguably, the biggest drivers for LTE deployment are the aims of alleviating capacity constraints in current networks and making sure that networks have sufficient capacity for the future. Several operators argue that LTE will bring new revenue opportunities, which might come from a gamut of different sources, such as ARPU uplift and new services and market segments.

LTE-market status

The LTE market is growing at an increasing pace, due to the demand for higher speeds and greater capacity in mobile networks. Another reason for the rapid deployment of LTE networks is the experience of major vendors with mobile data networks, since experience from 3G rollouts can be reused in LTE deployments. Moreover, the smartphone value chain is much more advanced than it was when 3G/HSPA was launched. The end-to-end capabilities of major vendors – covering devices, networks and service provisioning – is a major ingredient for the success of early LTE rollouts.

Market activitiesInforma estimates that there were 191 live LTE networks as of end-September. The first networks were launched in December 2009 in Norway and Sweden. Informa’s databases also indicate that 159 networks are being planned or in deployment, raising the total number of LTE networks within the next few years to 343 globally. The majority of operators launching LTE are doing so either to be first

LTE3G2GAnalog

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Fig. 2: Subscription count, from analog networks to LTE (logarithmic scale), 1981-2017

Source: Informa Telecoms & Media


to market, to illustrate technology leadership or for competitive differentiation rather than directly combating capacity constraints. However, the spectral-efficiency enhancement that LTE offers will benefit operators that either obtain new spectrum assets or refarm existing spectrum for LTE.

Informa expects 2013 to witness the apogee of LTE-network launches worldwide, and a recent Informa survey targeting mobile operators supports that analysis (see fig. 3).

SpectrumAlthough LTE has been positioned as a global standard, there are several spectral bands that are hindering the adoption of roaming. However, the 1800MHz band and a few more are now becoming much more dominant than the rest. According to the latest forecast from Informa Telecoms & Media, the number of LTE subscriptions worldwide is expected to be around 1.36 billion by end-2018. This reflects a slightly higher rate of growth than was forecast a year ago, though the degree of change varies between countries and regions.

Informa has identified 23 frequency bands that are currently in use or expected to be deployed in LTE networks. By 2018, there will be eight major FDD bands or band groups (see fig. 4). In order of addressable market size, they will be: Band 7 (2600MHz); Band 3 (1800MHz); Band 4 (2100MHz AWS); Band 1 (2100MHz); Bands 12/13/14/17 (700MHz US); Band 20 (800MHz); Band 28 (700MHz APT); and Band 2 (1900MHz). Growing support among a number of countries for the Asia Pacific 700MHz band plan (Band 28) means that, despite being adopted later than many other bands, the addressable market for this band will grow quickly.

The major TDD bands will be Band 40 (2300MHz); Band 41 (2500MHz); Band 38 (2600MHz); and Band 39 (1900MHz). China will lead the charge for TD-LTE adoption, though operators in a growing number of countries have committed to using TDD spectrum. Currently, Band 40 appears likely to be the most widely adopted of the TDD bands, with operators in India, Saudi Arabia, Australia and a number of countries in Africa all planning to adopt the TDD frequencies.

Meanwhile, China has announced that it expects to make 190MHz of spectrum available in Band 41 within the year, and possibly to more than one operator; the same band will be used by Clearwire in the US and has already been adopted by SoftBank in Japan.

Recent research by Informa shows that significant amounts of TDD spectrum in these four bands, as well as in Bands 42 and 43 (3400-3600MHz), are expected to become available over the next few years in a number of countries in Europe, Asia Pacific and North America.

Standards and regulation3GPP is the organization that has standardized LTE and continues to host discussions on the evolution

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Fig. 3: Survey question: When did you launch LTE or plan to do so?

Note: 208 respondents.Source: Informa Telecoms & Media LTE survey

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Fig 4: Global addressable market, major FDD bands, 2012-2018

Note: Figures refer to year-end.Source: Informa Telecoms & Media


toward LTE-Advanced and beyond. To understand the development of LTE, it is important to understand each 3GPP release and which LTE features it has introduced. Fig. 5 illustrates major 3GPP releases.

Although 3GPP specifications have introduced several features, mobile operators have identified Carrier Aggregation as the feature that will best enable them to introduce new spectrum bands to increase their

network capacity. As of 4Q13, a few networks have introduced Carrier Aggregation, notably in South Korea and Japan.

We can compare the momentum behind the LTE standard with that of others by comparing the time elapsed between the completion of each standard and the time the network technology reaches 100 million subscribers. This illustrates how fast technologies reach maturity

and how aggressively they are developed, deployed and marketed. Fig. 6 illustrates this metric for all 3GPP standards, from GSM to LTE .

Although the above method might be a crude measure, Informa expects subsequent standards to be deployed in more rapidly, due to the experience the vendor community has from deploying GSM, UMTS and now LTE.

The 3GPP ecosystem has matured and is now the de facto global standard for mobile networks, including both FDD and TDD technologies.

Business drivers for launching LTEThe majority of operators that initially launched LTE did so in order to be first to market and to alleviate traffic bottlenecks. Subsequently, a number of second and third operators have also launched services. However, when asked why they have deployed – or are about to deploy – LTE in a survey, operators cited capacity constraints and higher speed requirements (see fig. 7).

The following section introduces examples of operators around the globe that have successfully launched LTE in a variety of markets with different drivers.

The case studies illustrate how operators are using LTE technology in a variety of ways to achieve their strategic goals, driving growth and innovation through a combination of significantly improved network performance and new service offerings. This in turn is helping them deliver an enhanced end-user experience and hence greatly improved customer satisfaction.

Licensing or other regulatory policy requirements

4%Create new revenue streams

based on LTE16%

Responding to competitors’ launch

9%

Take first-mover advantage

12%Users want greater speeds21%

Build brand value through technology leadership16%

Current networks do not offer sufficient capacity22%

Fig. 7: Survey question: – Why is now the right time to deploy LTE?

Note: 208 respondents.Source: Informa Telecoms & Media LTE survey

Fig. 6: Time elapsed between standardization and mass market (100 mil. subscribers)

Standard Frozen 100 mil. subscribers reached

GSM (Phase 1) 1992 Jul-98 (6 years after launch)

UMTS (Release 99) Mar-00 Jan-07 (6.8 years after launch)

LTE (Release 8) Dec-08 Mar-13 (4.2 years after launch)


Fig. 5: 3GPP release details

3GPP release Date frozen Features

8 Dec-08 First LTE release, including all-IP network specification,introduction of new air interface (OFDM)

9 Dec-09 Enhancements, WiMAX/LTE interoperability,home eNodeB, SON, MBMS, location services

10 Mar-11 Introduction of LTE-AdvancedCarrier Aggregation, higher-order MIMO, eICIC, relay

11 Mar-13 (final) Service-layer improvements,ePDCCH, CoMP, FeICIC

12 Sep-14 (final) Performance, power, cost, application enhancements

Source: 3GPP


China MobileChina Mobile is a state-owned mobile operator. It operates the largest mobile network in the world in terms of subscribers and coverage; the network now covers more than 97% of the 1.3 billion people in China. China Mobile operates in a largely prepaid market and has yet to officially launch LTE (see fig. 8).

LTE deploymentAlthough China Mobile has not yet launched LTE, its TD-LTE deployment is one of the largest rollouts in the world due to its reach and size. China Mobile’s LTE-rollout plan (see fig. 9) aims to deploy 200,000 LTE base stations in 2013.

China Mobile is aiming to launch TD-LTE and is expected to deploy FDD in the longer term, though an official strategy has not been disclosed. The operator is also looking to launch voice over Wi-Fi (VoWi-Fi) and VoLTE, using a combined VoLTE/VoWi-Fi technology. It has designated VoLTE as a target for LTE-voice-service development and hopes to spur simultaneous TD-LTE and LTE FDD development through VoLTE.

China Mobile is by far the largest TD-LTE mobile operator in the global market and is expected to kick-start the evolution of the TDD value chain as soon as it is given the green light to officially launch. The carrier is also operating an LTE FDD network in Hong Kong and demonstrated roaming between FDD and TDD in a trial in 2012.

Strategic goals and resultsChina Mobile is operating a 3G TD-SCDMA network that is the only large-scale network of its kind in the world. Although it has reached maturity and mass market, this network has not enjoyed the

benefits of a global market, including economies of scale, handset availability, the experience of other operators and many other benefits the global market can provide. Despite being ratified as UMTS-TDD, TD-SCDMA has only been deployed by China Mobile.

On the other hand, with TD-LTE, China Mobile will jump to a global value chain and will be exposed to a broader range of chipsets, handsets, infrastructure and a much larger ecosystem. LTE will also provide the necessary capacity

and spectral efficiency for one of the largest markets in the world and the necessary environment for future expansion.

EEEverything Everywhere (EE), a 50/50 joint venture of Deutsche Telekom and France Telecom, is the largest mobile operator in the UK. It operates under three brands – EE, Orange and T-Mobile. LTE services are only offered by the EE brand. As shown in fig. 10, EE is currently offers only postpaid services.

Fig. 8: China Mobile market and operator information, end-Jun 13

KPI Value

Market penetration (China) 90.4%

Total subscriptions 763 mil.

LTE subscriptions –

Postpaid penetration (China Mobile) 20.4%

ARPU US$10 (Mar-13)

LTE spectrum 1900MHz, 2.3GHz, 2.6GHz

Primary LTE vendors Alcatel-Lucent, Ericsson, Huawei, NSN, ZTE


Trial in seven cities and

commenced expanded

rollout

20,000 base stations,

coverage in 13 cities

200,000 base stations

1H12 2H12 2013

Fig. 9: China Mobile LTE-rollout milestones

Source: China Mobile

Fig. 10: Everything Everywhere market and operator information

KPI Value (as of June 2013)

Market penetration (UK) 122.5%

Total subscribers 27.6 million

LTE subscribers 500,000

Postpaid penetration (EE) 52.7% (100% for LTE)

ARPU US$28.30 (March 2013)

LTE spectrum 1800MHz

Primary LTE vendor Huawei



LTE deploymentEE is the first operator to have launched LTE in the UK at 1800MHz, which was refarmed from GSM. The operator also bid and won a spectrum license for 2x5MHz of 800MHz and 2x35MHz of 2.6GHz spectrum, paying £589 million (US$922 million), making EE the holder of the largest spectrum portfolio in the UK market. The 800MHz and 2.6GHz networks have yet to be launched, but EE has published aggressive targets for coverage: At end-July 2013, its LTE coverage reached 55% of the UK population, and EE expects to cover 70% by the end of 2013 and 98% by the end of 2014, making its strategy the most aggressive in the UK.

The frequency of operation has enabled EE to reuse existing sites to a large extent, making its deployment much quicker and more cost-effective than a 2.6GHz launch, which would require considerable effort and capex in new sites.

Strategic goals and resultsEE’s strategic plan is to differentiate from competition while using existing sites (T-Mobile and Orange) to deploy LTE quickly and with capex as low as possible. Since launching 4G, EE applied a price premium to its 4G price plans of approximately £5 compared with 3G price plans. In June, EE introduced shared plans for families and shared data plans for devices. It has also introduced SIM-only 4G plans (contracts for 30 days and 12 months) and prepaid SIM-only plans for 4G.

Despite being the only operator in the UK with LTE, by being postpaid-only and charging a premium for its LTE services in a highly competitive market, EE has succeeded in creating a healthy subscriber base with an ARPU that is in the highest

tiers of the market. EE’s aggressive rollout plan includes small cells, and its spectrum acquisitions are likely to maintain its leading position in the UK for the next few years.

EtisalatEtisalat is a multinational operator, providing fixed, mobile and Internet services in 18 countries across Asia, Middle East and Africa (see fig. 11). It is the 15th-largest mobile operator in the world. In its home market, the United Arab Emirates (UAE), Etisalat is the largest mobile operator.

LTE deploymentEtisalat launched LTE in the UAE in December 2011, a few months after the first regional launches in Saudi Arabia. The operator doesn’t differentiate between 3G and 4G pricing – as in other advanced LTE markets, such as the US and South Korea – which means that essentially all customers are 4G subscribers if they have 4G-enabled devices. Just recently, Etisalat boosted its 4G theoretical download speeds from 100Mbps to 150Mbps.

The UAE has one of the highest data-consumption levels in the region, and its smartphone penetration has grown by 21% over the past two years to 80%, making the market ripe for LTE networks, because of their better spectral efficiency compared with 3G.

Etisalat says 80% of the UAE population has LTE FDD coverage, with over 1,000 base stations in Abu Dhabi, Dubai, Al Ain and Ras Al Khaimah. The company has not yet expressed a strategy on what it would do with rural areas, though Informa believes the upcoming 700-800MHz harmonization for mobile broadband is a potential solution for remote broadband: Etisalat has a small WiMAX-d network, found in certain suburban areas.

Strategic goals and resultsIn the context of the UAE’s competitive dynamics, LTE is an important step for Etisalat in terms of trying to improve KPIs and end-user satisfaction. As both operators in UAE have launched LTE and are providing high speeds, they are competing on packaging and pricing. Etisalat subsidizes its dedicated LTE devices when taken with higher data allowances on postpaid packages (the highest of which is 20GB per month).

Since launch, Etisalat has been focusing on the postpaid segment with LTE, providing the service on six- and 12-month contracts, without charging extra for accessing the network. The service is still aimed at high-end users, and it is unlikely LTE will be accessible on prepaid except via 4G smartphones on prepaid contracts.

Fig. 11: Etisalat UAE market and operator information


Market penetration (UAE) 181%

Total subscribers 7.7 million

LTE subscribers 20,000

Postpaid penetration (Etisalat UAE) 16.7%

ARPU US$38.30 (March 2013)

LTE spectrum 2.6GHz

Primary LTE vendors UAE Alcatel-Lucent, Huawei



Sales volumes of dedicated LTE data devices have not been revealed by Etisalat, but Informa estimates that, as of end-1Q13, about 15,000 dedicated-LTE device users had signed up to the service. On top of this, all 4G-smartphone-enabled subscribers can automatically access the 4G network if they have a data plan on their phones. Although the actual number of 4G smartphone customers is unknown, it is estimated to be growing gradually. LTE has not had any noticeable impact on revenues, ARPU or traffic, though the last is expected to increase as the proportion of 4G smartphones increases in the market.

NTT DoCoMoNTT DoCoMo is the incumbent and largest operator in Japan with fixed, mobile and Internet services in one of the world’s most advanced and competitive markets (see fig. 12).

NTT DoCoMo is dominant in the Japanese mobile market and

this has continued with LTE as well, though competition is set to increase as all Japanese mobile operators now offer LTE services. Nevertheless, NTT DoCoMo is considered a pioneer for developing new technologies and is expected to be a front-runner for implementing LTE network enhancements.

LTE deploymentNTT DoCoMo was one of the first operators to launch LTE and commands an important share of the global LTE subscriber base. It has continuously developed its network (see fig. 13) and has acquired new spectrum at 700MHz to roll out LTE.

NTT DoCoMo increased the speed of its Xi (LTE) network to 100Mbps in November 2012 and reports to have deployed 23,000 LTE base stations covering 70% of the Japanese population by the end of 1Q13. It is also deploying LTE-Advanced capabilities in its network and aims

to offer 300Mbps download speeds, though a launch date has not yet been announced.

NTT DoCoMo has also deployed small cells and offers a dual-mode 3G/LTE femtocell that enables circuit-switched voice services for LTE handsets, which the operator aims to use to accelerate the migration to LTE.

Strategic goals and resultsNTT DoCoMo has the largest revenue of any company in Japan’s telecoms market, 1.5 times as high as that of its nearest competitor, KDDI. It also enjoys the highest ARPU in the market, due to its postpaid-only subscriber base, which is also being boosted by its introduction of LTE services. Data ARPU has been increasing consistently after the launch of LTE and accounts for more than 60% of total service revenue. NTT DoCoMo is also ranked third in terms of total data revenue, behind AT&T and Verizon Wireless, which are significantly bigger.

NTT DoCoMo’s strategic plan is to migrate its data subscribers to LTE while reinforcing its leadership in the Japanese market. The operator reported that 70% of smartphones sold in 3Q12 were LTE-enabled, and its LTE service (Xi) is positioned as the front-runner to maintain the operator’s leading position in the market.

SK TelecomSK Telecom is the largest mobile operator in South Korea, one of the most advanced data markets in the world, with more than 50% market penetration in (see fig. 14).

South Korea is the most advanced LTE market in the world, and SK Telecom boasts population coverage

Fig. 12: NTT DoCoMo market and operator information, end-Jun 13


Market penetration (Japan) 103%

Total subscriptions 62 mil.

LTE subscriptions 14.4 mil.

Postpaid penetration (NTT DoCoMo) 100%

ARPU US$45.89 (Mar-13)

LTE spectrum 800MHz, 2100MHz, 700MHz (future)

Primary LTE vendors Alcatel-Lucent, Ericsson, NSN, Panasonic


Launches LTE Xi handsets

Offers discounts on

LTE plans

LTE subscount exceeds

2 mil.

Obtains 20MHz spectrum in

700MHz band

LTE subs count reaches

6 mil.

Extended LTE-network coverage to 75% of pop.

Oct-11 Jan-12 Mar-12 Jun-12 Sep-13 Mar-13

Fig. 13: NTT DoCoMo LTE-network milestones

Source: NTT DoCoMo


of 99% and has already launched VoLTE. The operator says it has a first-mover advantage in the market, which has enhanced its leadership, and has launched LTE-specific packages that aim to enhance the user experience in the new network while enabling the operator to become a digital-services provider.

LTE deploymentSK Telecom’s LTE deployment has been one of the most aggressive and rapid rollouts in the global market, albeit on a much smaller scale than those in the US and other markets. Even so, SK Telecom’s deployment is impressive, as illustrated by its important milestones (see fig. 15).

SK Telecom is also the first operator to launch Multicarrier LTE at 850MHz and 1800MHz bands, followed by Carrier Aggregation (LTE-Advanced) in June. Only a month later, SK Telecom reported that 150,000 of its subscribers were already using the new air interface. SK Telecom has also introduced a variety of supplementary technologies in the LTE network, including LTE femtocell, Wi-Fi offload, Cloud RAN and SON. The operator is also planning to continue innovating in its LTE network and include CoMP, Massive MIMO, 3D beamforming and hetnets.

Strategic goals and resultsThe ultimate goal of SK Telecom’s LTE launch was to increase its leadership in the market while providing additional capacity in a very data-hungry market. The operator has enjoyed several benefits from its new LTE network, the most notable of which is ARPU uplift: In 3Q12, LTE ARPU (KRW52,000 [US$48.45]) was significantly higher than smartphone and blended ARPU in 3Q12 (25%

and 57% higher, respectively). SK Telecom’s ARPU has continued to rise and is significantly higher than the South Korean average. Informa expected SK Telecom to have a 30% share of South Korea’s LTE market as of end-2013 and expects the share to rise to 50% at end-2016.

Verizon WirelessVerizon Wireless is one of the largest mobile operators in the world and is the third globally in terms of service revenue (see fig. 16).

LTE deploymentVerizon Wireless is also the world’s largest LTE operator and reached a major milestone at the end of June, when it substantially completed its nationwide LTE rollout in the US. The operator now offers LTE services to more than 300 million people – nearly 95% of the US population – in 500 markets across all 50 states. Impressively, Verizon’s LTE network now covers 99% of its 3G network, quite an achievement given that the

Fig. 14: SK Telecom market and operator information, end-Jun 13


Market penetration (South Korea) 113%

Total subscriptions 27.9 mil.

LTE subscriptions 11.1 mil.

Postpaid penetration (SK Telecom) 100%


LTE spectrum 850MHz, 1800MHz

Primary LTE vendors Ericsson, NSN, Samsung


Infrastructure contracts awarded

84 cities covered (95%

of pop.)

All cities covered (99%

of pop.)

Multicarrier commercial

launch

Carrier Aggregation

launch

150,000 LTE-A subscriptions

Jul-11 Apr-12 Jun-12 Jul-12 Jun-13 Jul13

Fig. 15: SK Telecom's LTE-network milestones

Source: SK Telecom

Fig. 16: Verizon Wireless market and operator information, end-Jun 13


Market penetration (US) 107%


LTE subscriptions 31 mil.

Postpaid penetration (Verizon) 95.1%


LTE spectrum 700MHz

Primary LTE vendors ALU, Cisco, Ericsson, NSN



operator launched LTE only in December 2010 and that its 3G CDMA network is more than a decade old.

A major success factor for Verizon’s new network is that the operator chose not to charge more for LTE, but implement pricing equality between its mobile networks. As a result, more than 30% of its subscriber base is now converted to LTE and is using smartphones, tablets or portable hotspots.

Strategic goals and resultsVerizon’s ultimate goal was to jump from the 3GPP2 value chain to 3GPP and enjoy economies of scale and the wealth of global experience in LTE. Verizon’s 3G EV-DO network was essentially at a dead end when the support for UMB was dropped by the global mobile community, forcing the mobile operator (and many other 3GPP2 operators) to deploy LTE.

Verizon’s aggressive business model for LTE has delivered a host of results across metrics including subscriptions, ARPU and network usage. The operator recently reached the milestone of seeing its LTE network carry more data traffic than its long-established CDMA networks. Verizon says that, as of 2Q13, its LTE network was carrying 59% of its total data traffic. In terms of subscriptions, Verizon is the dominant LTE operator both globally and in the US, with 26.3 million LTE subscriptions at end-1Q13, more than twice as many as its nearest rival. In addition, its LTE subscriptions already account for close to one-quarter of its total mobile subscriptions, standing at 22.7% of subscriptions in 1Q13.

Vodafone GermanyVodafone Germany is the second-largest mobile operator in Germany and also operates a fixed-line DSL/VDSL network in the country (see fig. 17).

Spectrum regulations in Germany have forced both Vodafone and T-Mobile to roll out LTE for fixed services in rural areas first, before launching LTE in urban areas. Vodafone took the technology lead in rural areas, when its network rollout started ahead of the competition in September 2010, and the service was commercially launched in December 2010. Vodafone was the first operator in the large Western European markets to launch LTE.

Vodafone’s time-to-market was impressively fast: It took only six months from receiving the spectrum to connecting the first customer (see fig. 18). However, Vodafone Germany is still in an

embryonic phase when it comes to LTE adoption. Its focus is mainly limited to indirect replacement of DSL and, eventually, some DSL direct displacement.

Strategic goals and resultsVodafone Germany’s strategic goal was initially driven by regulation, but, as urban areas were covered, it experienced a healthy growth in the take-up of smartphones. The operator reports that, as of end-3Q13, 26.3% of its retail postpaid connections were LTE-enabled and that its LTE network covered 61% of the German population – and this coverage is increasing with rural and urban deployments.

Vodafone Germany – and Vodafone generally in Europe – aims to consolidate mobile data access in LTE networks and use converged infrastructure (Single RAN) to reduce costs. LTE will also enable the operator to segment the market more efficiently and monetize more

Spectrum auction closed

First site deployed

Commercial launch

White spots fully covered

LTE smartphone and 2.6GHz

launch

Large-scale urban rollout

May-10 Sep-10 Dec-10 Dec-11 Dec-11 Dec-12

Fig. 18: Vodafone Germany LTE-network milestones

Source: Vodafone Germany

Fig. 17: Vodafone Germany market and operator information, end-Jun 13


Market penetration (Germany) 129.8%


LTE subscriptions 582,000

Postpaid penetration (Vodafone Germany) 53.4%


LTE spectrum 800MHz, 2.6GHz

Primary LTE vendors Ericsson, Huawei



effectively. Vodafone plans to have 40% of its European sites equipped with LTE by March 2015, 80% of which will be Single RAN.

LTE deployment scenarios

LTE deployments range from small localized networks at high frequencies (e.g., 2.6GHz) to nationwide deployments at lower frequencies (e.g., 700MHz) with very large cell sizes. The legacy of each carrier is also a defining factor for the speed of rollout, reach and capacity deployed. Although each operator’s deployment strategy is different and unique, there are a few industry trends that can accurately describe the current status of the LTE market.

Network sharingNetwork sharing is a widely exercised deployment strategy and has been a topic of discussion for operators since 3G networks were first deployed. The concept attracted major interest when mobile broadband revenues were decoupled from costs to support the exponential rise in traffic and operators had to instigate new measures to actively reduce opex. There are several ways to

implement network sharing (see fig. 19).

Cost savings from network sharing rise when operators share more of their networks. For example, core-network sharing can bring greater cost savings than RAN sharing, which is itself more efficient than passive-network sharing. But the complexity associated with implementation and integration rises with cost savings, since RAN- and core-network-sharing arrangements require significant restructuring of the network and can raise cultural and business problems between operators. Nevertheless, in almost all cases, the opex savings more than cancel out the problems associated with implementation and integration, providing a solid business case for network sharing.

The case for LTE network sharingAlthough network sharing is widely exercised in the industry, it is generally accepted that, for a partnership to be beneficial for all parties, all participants must be in a similar competitive position and provide similar ingredients to the partnership. For example, it is not beneficial for a dominant Tier 1 to share its network with a Tier 2 challenger that might bring fewer benefits to the table. This has not

been the case with 3G in developed markets, where most of the operators are operating in saturated markets, have already deployed HSPA+ extensively and are actively looking to reduce costs while expanding coverage incrementally. Several examples of these partnerships can be found in the industry; for example, Mobile Broadband Networks Limited (MBNL) in the UK, under whose umbrella T-Mobile and Orange (now EE) and 3 have partnered to actively share their 3G networks.

A network-sharing strategy might be complicated by network-modernization initiatives, where aging equipment is being consolidated and replaced by a single platform (Single RAN). This might not necessarily be the case with LTE-network sharing. LTE deployments are subject to fierce competition for being first to market or demonstrating technology leadership. In almost every LTE market across the world, operator deployments are polarized, and there is usually a dominant mobile operator that is deploying much more aggressively than its competitors. In these cases, network sharing may not make sense, since competitive issues and speed of deployment are much more important than saving opex in the short term. For example, EE and 3UK are deploying their own LTE networks separately, even though their 3G networks are tightly integrated and shared.

Informa expects operators in developed markets to exercise passive-network sharing at best for their LTE networks. In developing markets or the later stages in developed markets, network sharing might be more suitable for LTE networks, but competitive

Spectrum

Active

Passive

Fig. 19: Network-sharing scenarios



issues are preventing it from being as prominent as it is in 2G or 3G networks.

The 1800MHz bandThe group of frequencies around 1800MHz is increasingly regarded as the prime candidate to provide a globally harmonized roaming solution for LTE. The 1800MHz bands enjoy a unique set of advantages that make them ideal for LTE services, such as:•Widespreadavailabilityinthe

world’s major regions.• Acoveragearearoughlytwicethat

of the 2.6GHz band.• Thepossibilityofreusingassets

from GSM1800 or WCDMA/HSPA2100.

• Thepotentialtodeploysingle-RANwith simultaneous LTE and GSM capabilities.

• Sufficientbandwidthtosecurethefull benefits of LTE.

•Moreeasilyrefarmedthan900MHz.

• Agrowinguser-deviceecosystem.

The 1800MHz frequencies include Band 3 (1710-1880MHz), which has already been widely adopted by operators in Africa, Asia Pacific, Middle East, Europe and Latin America, and which is expected to reach a global addressable market

of over 300 million people by end-2018 (see fig. 20).

Informa has identified over 90 operators in 53 countries that have either launched or are planning to launch LTE in the 1800MHz band between 2011 and 2015, covering Africa, Asia, Australasia, Europe, Latin America and the Middle East. Major operator groups including Vodafone, Orange, T-Mobile and Hutchison are committed to adopting the band, and are planning to launch LTE at 1800MHz in multiple markets (see fig. 21).

Rather than waiting for LTE spectrum to become available, several European operators are building their LTE strategies around 1800MHz spectrum; some are relying solely on this band, while others are using it in conjunction with 2.6GHz spectrum. Many, such as the UK’s EE, are using their existing spectrum holdings in the 1800MHz band to gain early or first-mover advantage in markets where the licensing of spectrum in alternative bands is delayed or slow to be implemented. EE has recently doubled the amount of 1800MHz spectrum it has dedicated to 4G from 10MHz to 20MHz, increasing the headline speeds on its LTE

network to 80Mbps and doubling average speeds to 20Mbps.

Much recent licensing activity has also made new blocks of 1800MHz spectrum available to operators, while in countries where there is a fair distribution of 1800MHz spectrum among market players, smaller players are refarming as a credible alternative to bidding for new spectrum.

Located on virtually the same footprint as Band 3 is Band 9 (1750-1880MHz), which is used in Japan by mobile operator eAccess. Rival operator SoftBank, which has seen burgeoning demand for its data services arise

0

50

100

150

200

250

300

350

North and Latin America

Western Europe

Eastern Europe

Asia Pacific*Middle EastAfrica

2018201720162015201420132012

Add

ress

able

mar

ket (

mil.

)

Fig. 20: Global, Band 3 (1800MHz FDD) addressable market, 2012-2018

*Includes Band 9 in Japan Source: Informa Telecoms & Media

Fig. 21: Current and planned LTE1800 launches by major operator groups

Operator group Operating company

Hutchison HI3G Denmark

Hutchison 3G Ireland

Orange Orange Dominicana

Everything Everywhere UK

Orange Luxembourg

Orange Mauritius

Orange Poland

Orange Spain

T-Mobile Everything Everywhere UK

T-Mobile Germany

T-Mobile Hungary

T-Mobile Macedonia

T-Mobile Poland

Vodafone Vodafone Australia

Vodafone Spain

Vodafone Greece

Vodafone Hungary

Vodafone Iceland

Vodafone Ireland

Vodafone Italia

Vodafone New Zealand

Vodafone Tanzania

Vodafone UK



in part due to sales of the iPhone 5, recently acquired a share in eAccess in its quest to obtain more bandwidth. It is now expected that the 1800MHz band will be deployed even more widely in the country.

Also of note is the overlap between Band 3 and the uplink channel (1710-1755MHz) as currently defined in Band 4, the so-called AWS band, which has been adopted by leading US operators including AT&T, Verizon and T-Mobile. The AWS band is also used by mobile operators in Canada and throughout Latin America.

Last but not least, the availability of flagship handsets operating in the 1800MHz band (see fig. 22), such as Apple’s iPhone 5, Samsung’s Galaxy S4 and Nokia’s Lumia 925, has undoubtedly helped pave the way for the rapid adoption of the 1800MHz bands as the most widely adopted bands for LTE deployments around the world.

The level of commitment from handset vendors is a clear reflection of the mobile operators’ growing interest in the 1800MHz band. If, as seems highly likely, the number and pace of network deployments in the band continues to grow, then 1800MHz will have an undisputable claim to become the primary band supporting global roaming for LTE.

Network modernization and Single RANThe competitive and macroeconomic state of the mobile market necessitates cost savings and lean network operations, particularly for LTE networks, where nationwide deployments can cause strain on operator financials. A parallel trend to the deployment of LTE is network modernization, in which several RANs are replaced by a single hardware platform, often referred to as Single RAN. This allows the operator to minimize site costs by reducing energy and hardware footprint while needing to manage

only one hardware platform. Fig. 23 illustrates potential LTE deployment scenarios for mobile operators with existing 2G or 3G networks.

It is certain that deployment strategies depend on many factors, with cost being one of the most critical. Others might include existing vendor relationships, the state of the legacy network, the age of the 2G/3G equipment and a variety of internal and external parameters. Nevertheless, several Tier 1 operators – including Vodafone – have stated that Single RAN is necessary for the future of networks. Vodafone aims to widen the deployment of Single RAN to 80% of its footprint globally by March 2015. The benefits of Single RAN – particularly cost savings – can in most cases offset its drawbacks (see fig. 24), especially for international operators that have the capabilities and experience to successfully deploy these platforms.

Convergence of FDD and TDD LTEAlthough Time Division Duplexing (TDD) and Frequency Division Duplexing (FDD) define two different air interfaces, LTE is the first standardized technology that brings both under a single umbrella. The device-software stacks for FDD and TDD are virtually identical, with only the physical layer different, enabling devices for the two technologies to be built on the same platform and creating economies of scale in the chipsets, which keeps costs down. It also allows for much simpler roaming between the two, and for network sharing if an operator has both types of spectrum.

Even at this relatively early stage in the rollout of 4G networks, there is widespread and growing

Fig. 22: Leading smartphones with LTE1800 band support

Manufacturer Model LTE category LTE bands supported (MHz)

Apple iPhone 5 3 700/850/1800/1900/2100

HTC One mini 3 800/1800/2600

Huawei Ascend P2 4 800/900/1800/2100

Nokia Lumia 1020 3 800/900/1800/2100/2600

Samsung Galaxy S4 3 700/800/850/1800/2100


Legacy 2Gnetwork

Single RAN for 2G+3G

Add 3Goverlay

Add LTE payloadin Single RAN

LTE deployment3G deployment

Add LTEoverlay

Single RAN for2G, 3G and LTE

Fig. 23: LTE-deployment strategies (generalized)



concern that the global supply of spectrum will be insufficient to meet future demand for high-speed mobile broadband services. This concern is already being felt acutely by operators in more-advanced markets, where the rapidly expanding number of smartphone subscriptions is leading to ever-increasing data consumption, particularly with regard to video traffic.

With LTE and LTE-Advanced still being deployed, several operators have expressed the view that FDD and TDD devices will have to converge as soon as 2015, to enable handover between the two technologies.

Infrastructure supportConvergence of FDD and TDD is not a major issue in radio-access infrastructure. Top vendors already support the coexistence of both modes in their latest base-station platforms and claim that baseband can be reused, while the two modes are 80% similar in the RF. Although a Single RAN base station can host both FDD and TDD capabilities, a single scheduler that will provide connectivity across both modes has not yet been deployed in the market, largely because there is no need for such a converged network yet. However, this is expected to change within the next two years, especially

as several mobile operators have unpaired spectrum assets and wish to use them in their LTE networks.

Handset supportUnlike with infrastructure, handset support for FDD/TDD convergence is a more complicated issue, due to power, handset real estate and complexity concerns. Nevertheless, there is ongoing work taking place in chipset, handset and end-to-end vendors to ensure converged handsets are available when operators request them. There are already devices in the market that include both FDD and TDD modems with an automatic “reselector” that enables handover between FDD and TDD.

However, the feature that will eliminate the distinction between FDD and TDD is PS-Handover, which enables devices to seamlessly switch between the two air interfaces. There are already examples of dual-mode smartphones in the market, and Informa expects that mass market PS-Handover support will arrive in early 2014.

VoLTE and RCSAlthough an industry-wide approach has been agreed for voice over LTE (VoLTE) and messaging (RCS), very few LTE networks are offering these services (as of July 2013).

Operators have opted to take a phased approach to LTE voice in particular, due to the lack of either VoLTE devices or a business case for launching the new voice service in deployments that are not extensive or nationwide. However, the dynamics of VoLTE and rich communication services (RCS) are different: The presence of an LTE network is necessary for the former but not for the latter.

VoLTEVoLTE is the chosen voice protocol for LTE which is enabled by IMS in the core network. The VoLTE market is expected to grow gradually as new handsets, infrastructure and protocols enter the market, but most operators are expected to start with Circuit Switched Fallback (CSFB). As nationwide LTE networks are present only in South Korea (as of 3Q12), VoLTE-only strategies are not expected to gain mainstream interest until after 2013 or 2014. The South Korean operators have already deployed VoLTE on a national scale and are expected to lead the evolution of practical issues concerning LTE voice technologies.

Despite vendors’ optimism about VoLTE, some operators remain unconvinced about the business case for the technology, especially the claims that it will spark a new RCS-inspired era for voice and messaging services (see fig. 25). A recent Informa survey concluded that HD voice and other service enhancements offered by VoLTE are expected to slow down the rate of decline – or OTT cannibalization – of voice traffic rather than stimulate new voice revenues. However, with WebRTC and voice services entering the Web world, it might well be that VoLTE will play a more significant role than the industry expects.

Fig. 24: Comparison of Single RAN and LTE-overlay deployment strategies

Comparison LTE overlay Single RAN

Benefits Speed of deploymentNo network disruptionLower capex compared with MS-BTS

Lower opex (site rental, power)Cell-site and OSS simplificationRefarming evolutionFaster commercial launchHardware sharing

Challenges Potentially higher opexMultiple platforms to manage

Additional training, personnelMay require extensive optimizationVendor lock-inPotential network disruption



However, it is almost certain that mobile operators will not be able to charge additionally for HD voice or VoLTE when similar OTT providers offer similar services for free.

RCSRich Communication Suite (RCS) is complementary to VoLTE, although it does not require LTE. Several operators have launched RCS and are attempting to beat OTT providers at their own game – developing their own IM applications or pursuing the GSMA-led RCS initiative and launching the resulting Joyn service on their networks. Some operators have adopted more than one of these approaches, but it is by no means clear – yet – whether any has been successful.

As with VoLTE, RCS can provide business benefits to the mobile operator and value to the subscriber, under specific circumstances. When RCS is preinstalled on the handset and integrated with key functions, it is possible to offer value-added services, e.g., presence status in the address book. However, these types of application have yet to appear in the market, and the mobile operators’ positioning of RCS against OTT IM apps has met with questionable success and market penetration.

Small cells and hetnetsSmall cells are now considered a critical part of future mobile

networks. Essentially, small cells shrink macro base stations to a more localized environment to follow traffic demand more closely. They are particularly suitable for capacity hotspots, though early small-cell deployments have focused on filling coverage gaps, primarily for voice and SMS services. Nevertheless, traffic congestion in public areas and higher QoE in urban areas are the main reasons for deploying small cells in LTE networks (see fig. 26).

In a survey on small cells conducted by Informa in 2012, a staggering 95% of mobile operators stated that small cells are vital for the future of networks. It is natural that the evolution of mobile data networks trends toward small cells. Current network deployments are based on the principles of 2G, which was mainly driven by voice services, whereas 3G and LTE are

dominated by data-traffic volume, and large cell sizes are not an ideal fit for them. Nevertheless, operator CTOs are not likely to just switch off their macrocells to migrate to small-cell platforms. They are more likely to gracefully evolve their networks to include a variety of cell sizes.

Hetnets introduce different layers of connectivity in mobile networks and are particularly suitable for LTE. A wide blanket of coverage might be provided by a macrocell, which will ensure that simple services, including VoLTE, are enabled in the large area. In high-traffic areas, small cells can be introduced to alleviate capacity constraints and enhance the user experience. Hetnets can operate in the same frequency band, where strenuous coordination will be necessary to avoid interference and unnecessary mobility or in different frequency bands for a simpler network operation.

Hetnets are being considered for deployment worldwide. The lower frequencies of US networks (700MHz) have enabled Verizon and AT&T to deploy nationwide networks at a reasonable cost. However, this means that cell sizes are inherently large, and the

Fig. 25: Benefits and shortcomings of VoLTE

Benefits Shortcomings

Voice becomes another data service Difficult to justify business case

Network is easier to manage CSFB widely deployed

Voice is more efficient; spectrum is freed for data services

Requires nationwide rollouts to make business sense

Wide availability of HD voice Requires new handsets


Value-added services provided by the small cell 10.9%

None; public-area LTE small cells will be much less important than

currently discussed5.8%

Requirement for higher QoE in busy urban areas

27.5%

Traffic congestion in public areas55.8%

Fig. 26: Survey question: What are the most important reasons for the deployment of public-area small cells?a

Note: 240 mobile/hybrid-operator respondents.Source: Informa Telecoms & Media


overall system capacity will be low. Informa expects the public-area small-cell market to start in the US and be closely followed by advanced markets worldwide, including Western Europe, South Korea and Japan.

Technology innovationAlthough LTE technology is revolutionary compared with previous air interfaces, it provides the ground for additional innovation, which is now materializing in 3GPP releases. These improvements include enhancements that increase the system capacity (for the same amount of spectrum used), additional functionality for using spectrum and even new network topologies. Higher-order MIMO is an incremental enhancement to existing schemes, and there are also new, more radical enhancements that follow network evolution.

The following sections give a high-level overview of four of these enhancements: Carrier Aggregation, Coordinated Multipoint, Enhanced Inter-Cell Interference Cancellation and Relay.

Carrier AggregationCarrier Aggregation (CA) is arguably the most important enhancement to LTE. It enables operators to use more spectral bands (whether contiguous or not) in their LTE network. 3GPP Release 10 was the first to see CA enhancements included but with limited band support. More bands (especially noncontiguous) are planned for Release 11 and Release 12.

Business implication: CA allows operators to use existing spectrum assets or refarm other frequencies to use with LTE. The technology

allows higher top speeds (by combining two or more frequency bands), which is what most LTE operators are using for marketing as of 2013. SK Telecom has already launched CA in bands 3 (1800MHz) and 5 (850MHz), and more operators are expected to follow shortly when handset support is more widespread.

Coordinated MultipointCoordinated Multipoint (CoMP) is a radical new concept to be introduced in Release 11, which enables a device to communicate simultaneously with more than one base station in order to increase its downlink or uplink speeds. Although it is an interesting technology, CoMP requires extremely low-latency communication between base stations, something that may not be available in early LTE networks.

Business implication: Arguably the biggest challenge of an LTE network – and any mobile data network – is cell-edge performance. CoMP mitigates this by enabling the device to communicate with several base stations to enhance communication quality while CoMP can also select the least loaded base station to connect to. The technology may also be used for interference cancellation.

eICICEnhanced Inter-Cell Interference Cancellation (eICIC) is an enhancement to LTE networks that has been introduced in Release 10. Normal ICIC has been introduced in Release 8 and refers to interference cancellation for macrocells, while eICIC introduces the same concept for hetnets, where macro- and small cells coexist in the same frequency with less interference.

Business implication: Although an advanced concept, eICIC is necessary for the coexistence of macrocells and small cells in the same frequency band. This is particularly the case when several small cells are deployed within the footprint of a single macrocell, something that is likely to happen within the next two years. However, eICIC requires performance tradeoffs at the macrocell, so further work is taking place to enhance its operation.

RelayThe most radical enhancement for LTE networks, relay relates to direct communication between base stations, so that data is routed without touching the core network. This can increase coverage and capacity – especially at the cell edge – but the deployment of the concept is quite disruptive compared with typical network-planning procedures. Although relay nodes are interesting, Informa does not expect them to be deployed in LTE and LTE-Advanced networks in the next five years.

Handset supportAlthough handset support is arguably not a part of network strategy, the availability of new technologies in mass-market devices in many cases defines a network rollout. There are good examples of a mobile operator urging handset manufacturers to include LTE in handsets.

The most notable case is Verizon Wireless, which pressured OEMs to include dual-mode capabilities in its early LTE smartphones: simultaneous CS for voice (CDMA) and PS for LTE data. Although this was hardly an ideal case due to real-estate and battery constraints,


Verizon did manage to launch LTE to the mass market with smartphones, when other operators launched only USB modems and MiFi units.

Another example of handset influence is the launch of SK Telecom’s LTE-Advanced in June 2013, which was supported by Samsung’s Galaxy range of smartphones. Launching a new network or even deploying a new technology requires full visibility in device/chipset road maps to make sure that network technologies are deployed at the right time, not before handsets will be available. The availability of chipsets and devices from OEMs is vital to the success of LTE and LTE-Advanced services: These devices need to support high speeds, full-HD video, computational imaging, close-to-SLR camera capabilities – and all without compromising the battery life of the device.

These new considerations could complicate the overall design of the smartphone and compromise its power consumption, its form factor and its overall cost. Arguably, end-to-end OEMs and chipset manufacturers are best placed to arrive at integrated designs that are cost-effective and quick to market.

Vendor analysis

Vendor financialsAs a measure of vendor competence, financial robustness ranks alongside technical superiority in establishing the suitability of a potential LTE supplier partner. Evidence of financial stability, sustained revenue growth and profitability are crucial to the operator/supplier relationship, providing as they do assurances about the vendor’s ongoing capacity

to deliver on critical aspects of support, such as technical skills and human resources, to the operator client. Over the longer term, they can also influence the supplier partner’s capability to drive new product development and invest in technology R&D.

While evidence of a robust performance can be a deciding factor in the selection of a supplier of LTE equipment and services, maintaining such demanding levels quarter after quarter and year after year is difficult in today’s uncertain market. Even among the small group of vendors aspiring to meet these criteria, there is a high degree of fluctuation, as is clearly shown by Informa’s evaluation of vendor’s performance and profitability arising from sales of network infrastructure and services. The results in Fig. 27 are based on the ratio of EBITDA to sales for the networks divisions of five of the major vendors.

Market leaders Ericsson and Huawei stand out as having delivered sustained levels of profitability in the networks market over recent years. Both companies have seen significant revenue generation and quarter-on-quarter double-digit operating margins. Nokia Solutions

and Networks, in which Nokia has now taken a controlling interest, has recently emerged from a radical restructuring process that has left the company leaner and more focused on its core business of delivering high-quality mobile broadband solutions.

Despite some ground-breaking technological advances, Alcatel-Lucent has struggled with the breadth and lack of focus in its business, and has suffered in the LTE-FDD market due to the lack of a significant installed base of mobile infrastructure outside North America. The company has recently announced a restructuring program, likely to be similar to that carried out by NSN, which is expected to see the vendor divesting many of its noncore and unprofitable lines of business to focus on a still-to-be-defined set of core businesses and technology areas.

China’s ZTE struggled with major losses in 2012, attributing its declining fortunes to reduced infrastructure spending, due to poor economic conditions, and lower-margin contracts in emerging markets such as Africa, where the company conducts much of its business.

ZTENSNHuaweiEricssonAlcatel-Lucent

2012201120102009

Pro

fitab

ility

(US

$ bi

l.)

-1

0

1

2

3

4

5

Fig. 27: Vendor profitability (networks), 2009-2012

Note: Based on the ratio of EBITDA to sales.Source: Informa Telecoms & Media


LTE-vendor assessmentThis section compares the performance of LTE vendors, including number of contracts, subscribers supported, R&D contribution, standards and several other relevant metrics.

LTE launches peaked in 2013, but levels of demand for network equipment can be expected to remain high. Many operators are in the early phases of LTE deployment or still just at the planning stage. Even though coverage targets in the relatively mature markets such as North America are being reached, levels of demand elsewhere, such as in Brazil, India and China, are set to surge. In terms of size, some of these newer networks will be comparable with, or larger than, anything seen so far.

Commercial contractsCommercial contracts are the lifeblood for network equipment vendors, and the number of wins by one supplier relative to its competitors can be, and is, used as a means of establishing LTE market share. However, contract numbers alone provide no indication of key aspects such as the size or technical complexity of the challenge. The demands on the vendor will be that much greater in markets where innovation and scale combine, such as in the world’s most advanced mobile data markets of Japan, South Korea, Western Europe and North America.

All LTE vendors in the leading group can point to key engagements where demands have tested their capabilities to the full: Nokia Solutions and Networks has worked with Japan’s NTT DoCoMo since the inception of DoCoMo’s

ground-breaking LTE deployment; also in Japan, Huawei is supplying equipment for SoftBank’s TD-LTE rollout, which will help provide one of the first converged TDD/FDD networks in the world; and through its deals with leading US mobile operators, Ericsson has been involved in some of the largest-scale LTE deployments to date, with demanding timescales.

In terms of building a customer base, having a strong regional presence can reap dividends. The leading vendors have discovered that, as well as gaining an early foothold in certain markets, investment in staff and technical resources can help build relationships that lead ultimately to new business opportunities.

Alcatel-LucentAlcatel-Lucent has exploited the synergies between its wireless and fixed-line businesses to build a presence in Latin America, notably with regional operator, America Movil. With a foothold in North America, Alcatel-Lucent can expect to see the same effects of a maturing market as those experienced by Ericsson. However, apart from a strong presence in its home market of France and a recent large contract win in Spain, Alcatel-Lucent’s LTE-contract deals are fairly widely dispersed across Western Europe, Asia Pacific and Africa.

According to Alcatel-Lucent’s own company data, it had 34 commercial LTE contracts as of end-3Q13.

EricssonFollowing its initial US customer wins with Verizon and AT&T Mobility, Ericsson has built a strong foothold in North America, signing supply

deals with others in the big four group of US mobile operators, as well as with a host of smaller local carriers. However, with the LTE-network-coverage projects of its two major US clients having peaked in the first half of 2013, Ericsson will be among the first suppliers to feel the impact on its revenues of the move away from the capex-intensive drive for network coverage to the next phase of LTE deployment, which is likely to be more capacity-focused and hence selectively targeted.

With around a quarter of its contract revenues coming from its US, Ericsson will be looking to the vendor-selection process in large-scale emerging markets such as China, India and Russia, as well as to the high levels of network modernization in Western and Central Europe, to drive future growth.

According to Ericsson’s own company data, it had 164 commercial LTE contracts as of end-3Q13.

HuaweiHuawei has grown its business in many markets outside its home territory, often from modest foundations. In Western Europe, the company’s LTE customer base has grown to the point where, as of end-2Q13, it had 36 LTE contracts in the region, with 32 operators in 18 countries. Its most recent was to supply the UK’s first LTE network, for operator EE.

Elsewhere, Huawei has built a major presence in a number of key regions, including Southeast Asia and the wider Asia Pacific region, and in Eastern Europe, where a string of recent LTE-contract


announcements has included a number of major operators in Russia. As in the case of EE, Huawei has enjoyed particular success, with a growing number of operators opting for LTE1800.

According to Huawei’s own company data, it had 194 commercial LTE contracts as of end-3Q13.

NSNNokia Solutions and Networks says it has a greater market share in revenue terms than in terms of share of contract wins, and it says it is confident that it can secure its place among the top three vendors with its focus on mobile broadband. As evidence of its strength in LTE, NSN has won contracts in key markets such as Japan, South Korea and the US, and has emerged as one of the front-runners among non-Chinese vendors in China Mobile’s recent round of LTE-contract awards.

As part of its restructuring efforts, NSN has been exiting unprofitable markets in regions such as Africa and the Middle East, and focusing on a smaller number of key regional ones. The company says it needs to grow its LTE business in Latin America, and it is aiming to capture significant business through some of the major deals that are pending in Asia Pacific. It also expected to see revenues rise in Europe over 2013 as LTE networks were rolled out.

According to NSN’s company data, it had 96 commercial LTE contracts as of end-3Q13.

SamsungSamsung had early wins in the LTE market with equipment-supply contracts for two US operators, Sprint and Cellular South.

Subsequently it saw little success until 3Q12, when it won the contract to supply equipment for 3’s LTE rollout in the UK.

According to Samsung’s company data, it had seven commercial LTE contracts as of end-3Q13.

ZTEZTE’s key markets are in Western and Eastern Europe, Asia Pacific and Africa. The vendor has longstanding relationships with Hi3G in Sweden, for which it has supplied a dual-mode FDD/TDD network that supports interoperability among FDD, TDD and UMTS, and with CSL in Hong Kong, whose ZTE-supplied Single RAN network was employed to roll out CSL’s LTE services in 2010.

ZTE is also a supplier of LTE equipment to E-Plus, and recently won a five-year deal to operate and maintain the German mobile operator’s network.

According to ZTE’s company data, it had 17 commercial LTE contracts as of end-3Q13.

Fig. 28 shows the vendors’ shares of LTE contracts as of end-3Q13, based on the number of contracts declared by each of the vendors, or on publicly available contract data,

where the former is unavailable. The number of contracts is a solid indication of success in the value chain for each vendor but does not accurately represent market share, because they are not based on the value of the contracts. However, the contract-share figures illustrate the market’s polarization, with just three vendors dominating.

As part of its in-depth analysis of the market for LTE-infrastructure contracts, Informa has conducted an exhaustive process of validating all vendor contracts with operators, according to a strict set of criteria. For the purposes of this research, any contract that has been declared by a vendor but that Informa has been unable to establish as being linked to an operator’s imminent commercial LTE launch using licensed spectrum is classified as “not validated.”

The only exception to this rule is any commercial contract identified by the vendor as being under a nondisclosure agreement (NDA) that has not been the subject of a public announcement either by the vendor or the operator to confirm its existence. Most vendors include a number of such contracts as part of their declared total commercial contracts.

ZTE3%Samsung

1%NSN19%

Huawei38%

Ericsson32%

Alcatel-Lucent7%

Fig. 28: Share of declared LTE contracts by vendor, 3Q13

Source: Informa Telecoms & Media (based on vendors' declared LTE contracts)


Fig. 29 shows the vendors’ shares of LTE contracts as of end-3Q13, after removing both the unvalidated contracts and any that are identified by the vendor as being under NDA.

Although the contract-share figures illustrate vendors’ competence in attracting business, it does not show the relative size of each contract.

In order to understand the potential in terms of subscriber numbers for each contract, Informa used subscriber numbers from its WCIS database to rank vendors (see fig. 30).

This analysis produced the following result when subscriptions for all technologies including LTE were taken into account (see fig. 31):

Vendor scorecardIn order to evaluate the contribution made by the leading vendors toward the growth and development of LTE, Informa has compiled a scorecard that ranks companies according to their relative strengths in the following key areas:• productline• end-to-endsupport•marketstrengthinTD-LTE• contractshare• subscriptionshare• researchanddevelopment• standardscontributions• responsestoInforma’ssurveyof

leading operator CTOs

Each of these areas contributed to the scorecard in the form of a scoring system: The top vendor in each area received six points, the second vendor five points, etc. The scores were then added up to arrive at the final result. The following sections describe the methodology followed and results of the scorecard calculations.

Product lineQualitative analysis was undertaken in order to assess vendor strengths in terms of breadth of LTE-product line. The primary product area under consideration was network equipment, covering radio access (eNodeB), enhanced packet core and services. Huawei and Ericsson ranked the highest in this category (see fig. 32), since their product lines include RAN, core, services, small cells and Single RAN platforms. Huawei received an extra point due to its handset business

unit, which might at some point provide synergies with the network-infrastructure business units.

End-to-end supportThis category is based on consideration of the pros and cons in terms of both supporting the LTE market and vendor strategy. The former includes some assessment of chipset vendors’ capabilities, because many LTE and LTE-Advanced features or technologies require the support from chipset manufacturers, and also a

ZTE4%Samsung

2%

NSN17%

Huawei37%

Ericsson33%

Alcatel-Lucent7%

Fig. 29: Share of validated LTE contracts by vendor, 3Q13


Fig. 30: Subscriber metrics

Metric Description

Total mobile subscriptions Total mobile subscription count for a given operator. This demonstrates the growth potential for an LTE supplier, since most operators will be migrating their subscriber base to the LTE network, especially for data services.

Current LTE subscriptions The total number of LTE subscriptions is also an indicator of size of contract.


ZTE5%Samsung

4%

NSN24%

Huawei30%

Ericsson30%

Alcatel-Lucent7%

Fig. 31: Share of total subscriptions supported, by vendor, end-3Q13

Note: Based on operator's total subscription base (all technologies), using WCIS subscription data for live commercial LTE networks. Excludes unvalidated and NDA contracts. Source: Informa Telecoms & Media


qualitative classification of vendor equipment regarding the ability to operate in all kinds of environments. Vendor strategy has already been discussed under the heading of Commercial Contracts (above).

For the purposes of this section, the definition of end-to-end is primarily focused on networks, with some consideration of devices.

Huawei, Ericsson, ZTE and Samsung are vendors that provide end-to-end systems, including network,

device, chipsets and alignment with operator strategies (e.g., establishing innovation labs) (see fig. 33). Huawei received an extra point due to its handset and chipset division, which might be critical for the evolution of LTE and LTE-Advanced and its new initiatives for the SME and enterprise segments.

Market strength in TD-LTETD-LTE is becoming a strong driver for LTE, especially due to the emergence of China Mobile and ex-WiMAX operators that

are moving to the LTE evolution path. Most vendors now support TD-LTE and have used their WiMAX expertise to rapidly evolve toward advanced products. Huawei and Ericsson rank the highest (see fig. 34). For a complete description of the vendor ranking for TD-LTE, please refer to Informa’s previous report: TDD LTE Yearbook.

The process of estimating the contract share of each vendor, described above, enables Informa to rank the vendors profiled (see fig. 35).

A similar process was followed to rank the vendors in terms of subscription share (see fig. 36).

R&DIn order to compare R&D strength and commitment to research, Informa ranked each vendor’s investment by comparing them both as a percentage of total revenues and in terms of annual R&D budget (see fig. 37). A higher spend on R&D as a percentage of revenues was taken to represent a greater commitment to R&D. Investment figures were tracked over 2010-2012, which is a reasonable timeframe for which vendor data is published and available.

Calculations were based on R&D investment in network infrastructure and software as declared by vendors, or on an estimated proportion of overall R&D spending where this figure was not broken out by vendors. Other factors taken into account were upward or downward trends in actual R&D investment and in investment as a proportion of revenues over the tracked time period.

Fig. 32: Vendor rankings in terms of product-line breadth

Rank Vendor Score

1 Huawei ✱ ✱ ✱ ✱ ✱ ✱

2 Ericsson ✱ ✱ ✱ ✱ ✱

3 NSN ✱ ✱ ✱ ✱

4 Alcatel-Lucent ✱ ✱ ✱

5 ZTE ✱ ✱

6 Samsung ✱


Fig. 33: Vendor rankings in terms of support of end-to-end offering

Rank Vendor Score

1 Huawei ✱ ✱ ✱ ✱ ✱ ✱


3 ZTE ✱ ✱ ✱ ✱

4 Samsung ✱ ✱ ✱

5 NSN ✱ ✱

6 Alcatel-Lucent ✱


Fig. 34: Vendor rankings in terms of strength in TD-LTE

Rank Vendor Score

1 Huawei ✱ ✱ ✱ ✱ ✱ ✱


3 NSN ✱ ✱ ✱ ✱

4 ZTE ✱ ✱ ✱

5 Samsung ✱ ✱

6 Alcatel-Lucent ✱


Fig. 36: Vendor rankings in terms of subscription share

Rank Vendor Score

1 Ericsson ✱ ✱ ✱ ✱ ✱ ✱

2 Huawei ✱ ✱ ✱ ✱ ✱

3 NSN ✱ ✱ ✱ ✱


5 ZTE ✱ ✱

6 Samsung ✱


Fig. 35: Vendor rankings in terms of contract share

Rank Vendor Score

1 Huawei ✱ ✱ ✱ ✱ ✱ ✱


3 NSN ✱ ✱ ✱ ✱


5 ZTE ✱ ✱

6 Samsung ✱


Fig. 37: Vendor rankings in terms of R&D

Rank Vendor Score

1 Ericsson ✱ ✱ ✱ ✱ ✱ ✱

2 Huawei ✱ ✱ ✱ ✱ ✱

3 Alcatel-Lucent ✱ ✱ ✱ ✱ ✱

4 NSN ✱ ✱ ✱

5 Samsung ✱ ✱

6 ZTE ✱ ✱



Standards contributionThe vendors’ relative contributions to the standards process for LTE were assessed on the basis of the

number of proposals submitted to 3GPP’s RAN working group meetings by each vendor between the beginning of 2010 and end-2012,

and on the proportion that were approved for adoption by 3GPP (see fig. 38). The number of rapporteurs that were employees of each vendor was also taken into account to measure vendor involvement in the standards committees.

CTO surveyInforma’s ongoing operator CTO-perception survey includes a vendor assessment, including technology, pricing, managed-service capability, innovation and support. The classification is based on whether operators perceive vendors to be innovators, followers or laggards. Informa awarded two points to innovators, one point to followers and minus one point to laggards, to rank vendors according to the CTOs’ answers (see fig. 39).

Final market positionAfter combining and normalizing the above metrics and scores, Informa arrived at the following table and final scores (see fig. 40).

The following diagram illustrates the final score in a graphical format (see fig. 41).

Fig. 38: Vendor rankings in terms of standards contribution

Rank Vendor Score

1 Ericsson ✱ ✱ ✱ ✱ ✱ ✱

2 Huawei ✱ ✱ ✱ ✱ ✱

3 NSN ✱ ✱ ✱ ✱


5 Samsung ✱ ✱

6 ZTE ✱


Fig. 39: Vendor rankings in terms of CTO-perception survey

Rank Vendor Score

1 Ericsson ✱ ✱ ✱ ✱ ✱ ✱

2 Huawei ✱ ✱ ✱ ✱ ✱

3 NSN ✱ ✱ ✱ ✱

4 Samsung ✱ ✱ ✱

5 Alcatel-Lucent ✱ ✱

6 ZTE ✱


Fig. 40: Informa’s overall vendor ranking

Alcatel-Lucent

Ericsson Huawei NSN Samsung ZTE

Product line ✱✱✱ ✱✱✱✱✱ ✱✱✱✱✱✱ ✱✱✱✱ ✱ ✱✱

End-to-end ✱ ✱✱✱✱✱ ✱✱✱✱✱✱ ✱✱ ✱✱✱ ✱✱✱✱

TD-LTE ✱ ✱✱✱✱✱ ✱✱✱✱✱✱ ✱✱✱✱ ✱✱ ✱✱✱

Contracts ✱✱✱ ✱✱✱✱✱ ✱✱✱✱✱✱ ✱✱✱✱ ✱ ✱✱

Subscriptions ✱✱✱ ✱✱✱✱✱✱ ✱✱✱✱✱ ✱✱✱✱ ✱✱ ✱✱

R&D ✱✱✱✱ ✱✱✱✱✱✱ ✱✱✱✱✱ ✱✱✱ ✱✱ ✱

Standards ✱✱✱ ✱✱✱✱✱✱ ✱✱✱✱✱ ✱✱✱✱ ✱✱ ✱

CTO survey ✱✱ ✱✱✱✱✱✱ ✱✱✱✱✱ ✱✱✱✱ ✱✱✱ ✱

Total 20/48 44/48 44/48 30/48 16/48 16/48

Ranking 4 1 1 3 5 5


#144/48

#144/48

#330/48

#420/48

#516/48

#516/48

Fig. 41: Informa's overall vendor ranking



ConclusionsEricsson and Huawei rank highest in this vendor comparison, with both strong in all key areas. Ericsson’s slightly stronger showing in terms of subscriber share, R&D and standards contribution is matched by Huawei’s performance in terms of product line, end-to-end capability and TD-LTE, and in the number of validated commercial contract wins. Both companies remain favorites among CTOs.

They are followed by NSN, whose consistent performance in most of the key areas leaves the company well-placed after the recent restructuring and refocusing of its business. NSN is expected to gain in terms of contracts and popularity due to its commitment to advanced technology and to the expected increased focus of parent Nokia on network technologies.

Future outlook

It is clear that LTE is today’s fastest-growing radio-access technology, with networks and devices proliferating faster than expected. Several key operators, including Verizon Wireless, Deutsche Telekom, Vodafone, SKT and NTT DoCoMo, have reported substantial success

after launching LTE in terms of new revenues, ARPU uplift and subscriber retention. The growth of LTE is expected to continue, as developing markets or operators that have still not acquired spectrum licenses begin to deploy LTE in their respective markets.

Further advances in LTE technology will ensure that significant performance gains continue throughout the remainder of this decade and into the next. Far-higher speeds, much-improved capacity and reduced latency will flow from developments in MIMO capabilities and from LTE-Advanced features such as eICIC, CoMP and the introduction of relays.

In a recent survey of operators carried out by Informa, speed, latency and quality were identified as the main ways operators can differentiate LTE from 3G (see fig. 42).

The spectrum environment is also starting to show signs of consolidation, with key bands emerging as global roaming bands. Informa has identified 23 frequency bands either currently in use or expected to be deployed in LTE networks. The importance of the 1800MHz band is also increasing: Informa has identified more than 90

operators in 53 countries that have either launched or are planning to launch LTE in the 1800MHz band between 2011 and 2015, covering Africa, Asia, Australasia, Europe, Latin America and the Middle East. Major operator groups including Vodafone, Orange, T-Mobile and Hutchison are committed to adopting the band and are planning to launch LTE at 1800MHz in multiple markets.

Early deployments of carrier aggregation by operators in South Korea are already yielding significant performance gains, and will be followed by operators in Japan, the US and the UK, all of which are in the advanced planning stages. Meanwhile, operators in several other markets are trialing the technology, combining their spectrum resources to achieve improvements in both the downlink and uplink with headline speeds of 300Mbps, and even up to 1Gbps under laboratory conditions. Some operators are also considering the deployment of multistream carrier aggregation (MSCA), which consists of aggregating more than two radio channels into a single stream. LTE MSCA is positioned as the next logical step in downlink carrier aggregation, since it could enable even higher bandwidth compared with two-band carrier aggregation

Operators with both FDD and TDD spectrum assets are also exploring the benefits of combining the two duplex modes into a single LTE pipe, potentially tripling or even quadrupling their available spectrum. Combining the resources of FDD and TDD provides a better user experience and can enhance coverage, while full interworking between the duplex modes ensures service continuity.

Respondents (%)0 10 20 30 40 50 60 70 80 90

Price

No differentiation of 3G vs. 4Gis the best approach

Services

Range of services available

Premium quality

Speed and latency 81.6

25.2

20.2

12.9

9.8

8.0

Fig. 42: Survey question: How can operators best differentiate LTE from 3G?

Note: 163 operator respondents.Source: Informa Telecoms & Media


The progressive deployment of small cells and the creation of heterogeneous networks will be a key feature of future LTE growth, ensuring that network capacity and performance will continue to improve significantly as the radio environment adapts from the traditional macro model to one that is capable of handling the exponential growth in data usage. AT&T says small cells will account for half of its additional network capacity through 2015.

Informa expects these trends to continue to shape the LTE market, alongside more-established developments, such as network sharing and Single RAN. Operators in developed markets agree that most – if not all – of these technologies and concepts are necessary to maintain the sustainability of current and future networks. Cost savings and network agility are necessary to ensure that networks remain competitive while making sure that profitability is increased.

In terms of vendor competence, Informa’s analysis finds Ericsson and Huawei to be regarded as top contenders in the LTE market, with NSN and ALU following. Number of contracts, number of subscribers supported, R&D spend and standards contributions are just a few metrics that illustrate the long-term commitment of these vendors, and they also demonstrate why most operators commission the top three vendors for their LTE networks.


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