Samsung faces challenging customers in LTE market

Reliance Jio sources 4G LTE BTS from Samsung in Rs 7,500 crore dealSamsung is facing tough conditions in the global LTE market, but traction among early 5G adopters is encouraging, says Patrick Filkins, analyst at TBR.

The TBR said Samsung’s LTE business declined as it faced higher competition and mobile operators decreased Capex (capital expenditure) outlays.

Even as Samsung announced its first public LTE contract win in over a year, TBR estimates Samsung Networks’ business declined 2.1 percent year-to-year, as previously signed large-scale LTE contracts are post-peak. Samsung is pursuing new LTE contracts in Southeast Asia, but the market is increasingly flooded by large competitors including Huawei, Ericsson and Nokia, limiting Samsung’s ability to win.

Samsung is aggressively courting U.S.-based Tier 1 customers by participating in 5G trials and field tests, which include engagements with Verizon, AT&T and T-Mobile. Samsung’s traction with these operators is largely tied to the 5G fixed-wireless opportunity, an emerging use case Verizon plans to begin deploying in 2017. Additionally, Samsung’s domestic advantage provides a test bed for its solutions, as KT and SK Telecom leverage Samsung’s portfolio to test 5G and meet aggressive deployment timelines.

Samsung aligns with HPE in a bid to jump-start its NFV business

Samsung’s nondomestic NFV business remains low volume as the majority of publicly announced contracts are with domestic carriers. To drive higher volume, in September Samsung announced a joint go-to-market alliance that combines Samsung’s virtualized network functions (vEPC, vIMS and VNF manager) with Hewlett Packard Enterprise’s (HPE) OpenNFV platform and MANO. The partnership also includes incorporation of third-party solutions, leveraged from the HPE OpenNFV Partner Program.

The two entities note they are already working with customers to provide the combined solutions. TBR believes this is a win for both entities as Samsung gains access to HPE’s global reach and systems integrations expertise, while HPE will have greater access to operators in South Korea, where spending for NFV/SDN is strong.

Additionally, as information and communications technology (ICT) convergence threatens to disrupt pure play networking and IT providers, the complementary nature of the partnership will benefit both companies as they approach customers with a more well-rounded solution.

Southeast Asia is becoming an LTE battleground, as Samsung Networks and larger rivals focus on winning contracts in the region.

As LTE volume in South Korea is post-peak and a majority of LTE contracts elsewhere are dominated by Huawei, Nokia and Ericsson, Samsung is shifting to focus on opportunities in Southeast Asia, where pockets of investment persist. Many operators in this region have yet to adopt LTE, providing an opportunity for Samsung to sell its portfolio as operators upgrade from 2G and 3G to LTE.

In June Samsung announced its first LTE coverage contract since 2014, with Malaysia-based operator YTL. Samsung will encounter increased competition as its aforementioned competitors also target Southeast Asia. For example, Ericsson’s revenue declined in all of its reported regions in 3Q16, with the exception of Southeast Asia and Oceania, as it signed LTE contracts with Taiwan- and Indonesia- based operators.