* Will large telco equipment vendors merge as well?
With their large carrier customers rapidly consolidating, is it incumbent upon the large telco equipment vendors to merge as well?
As carriers consolidate, there is a concurrent slowdown in capital spending. Two carriers, each with capex budgets in the $4 billion to $5 billion range, now become one with a capex budget of, say, $7 billion as redundancies are eliminated.
Carriers gain scale and buying leverage. They can be more selective in the equipment they purchase and from whom.
That means vendors entrenched in legacy voice switching gear and lacking the necessary components for next-generation wireline and wireless IP networks – Ethernet, PON, VoIP softswitches and the like – had best find a dance partner with these attributes or be left behind.
Conversely, those rich in IP but lacking ingredients to meld a legacy voice infrastructure to the next gen had best obtain these tools or risk not making the cut in The Big Network Transformation.
So are we on the cusp of seeing the NELAS – the Nortels, Ericssons, Lucents, Alcatels and Siemens – vie for the favors of Cisco and Juniper? Or of Motorola and Nokia?
Perhaps not. Consolidators will walk before they run. So expect more deals like Tellabs/AFC, and for someone to finally make a play for Sonus. In the mass marriage to come, the piece parts might be greater than the sum.
