Continuing Decline in Base Station TAM and ASP

ABI: Global. Wireless base station equipment prices continue to decline. The downward pressure on base station TAM and ASP is the result of a number of factors that don't, individually, produce dramatic results. But their cumulative effect is severe. First, he says, wireless service providers are focused on their bottom lines as never before. The days when it was just a matter of signing up more subscribers than your competitor are over. Now, cost-savings are center stage, and operators are much more careful about how and where they spend their money. Secondly, the huge network buildout in the industrialized countries is largely complete. We've had a pretty good 15-year run on that, but it's not going to continue forever. You still see a lot of base station upgrades, but not many greenfield installations, where the big money is to be made. The air interface mix has changed, too. As mentioned, the 2G and 2.5G buildout in the industrialized world is more or less complete. This means that the millions of GSM/GPRS 2G/2.5G base stations that have been installed represent the peak of the wave. Good opportunities exist for WCDMA, but in voice mode it is typically much more efficient than GSM, and since wireless data is still waiting to take off, that means fewer new installations than in the past. Finally, wireless ARPU is still falling, despite some minor successes among 3G operators. Individually, these developments do not have horribly profound effects but when you add them together, they do. These trends will continue over the current five years of the forecast, and will affect all players in the market. However the prognosis contains a wildcard: the services business is growing faster than the ASP and TAM trends are falling. Equipment vendors are acutely aware of this. So they are moving as rapidly as possible to provide services to their customers in addition to hardware. Managed Services for Mobile Wireless Networks."

Publ 20060111