US network makers to feel the brunt of consolidation

09 September 2014 | Kavit Majithia

US network markets are set to experience slower revenue growth in the second half of this year as the country’s operators prepare to settle on large scale mergers.

The halt in growth comes as large scale telcos, including AT&T, decide whether to upgrade their legacy wired networks and continue aggressive 4G roll-outs.

AT&T, like many others in in the US, is going through the motions of a large scale takeover, and analysts predict operators are unlikely to spend on network upgrades between now and the end of the year.

According to Reuters, vendor Ciena became the latest to cut quarter forecasts, and the slowdown is likely to last for two or three quarters. The company’s chief executive Gary Smith said that this trend in the market was putting a halt on the company’s existing projects.

AT&T is nearing completion of a deal to acquire DirecTV for $48.5 billion, while Comcast is looking to tie-up its deal to buy Time Warner Cable.

Deutsche Telekom owned T-Mobile US could also be subject to takeover, however speculation has cooled since Sprint ended its interest in the company.

Ciena, Juniper Networks and JDS Uniphase are three vendors in the market that have experienced a slowdown in growth, and analysts say this is typical of the industry when consolidation is occurring.

Those vendors in the US that have invested their efforts in the enterprise sector have come off slightly better, according to analysts. F5 Networks and Aruba Networks saw share prices rise by 11% and 21% between now and June.