Satyam Kumar also contributed to this note

The communications equipment industry has experienced solid market growth over the past several years, after recovering from sharp spending cutbacks in 2001 and 2002 by the service providers. Over the years the growth in communication equipments industry has been led by its primary customers, the telecommunications service providers. However, if one takes a look at the recently concluded Sep07 quarter there are some interesting trends to watch for. Current growth in the industry is being fueled by the enterprise/government customers (Exhibit 1) as enterprises look to embrace more web-based business models and upgrade their existing networks.
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Given that NOK and MOT together hold almost 60% worldwide market share in the mobile devices business, it’s unsurprising that the competitive struggle between the two firms is intense. And with more than 1 billion mobile phones expected to be sold this year, the stakes are as high as it gets.
Both companies have recorded significant revenue and market share growth in the recent past (See Exhibit 1). In spite of the size of the mobile device market, we think that it offers enough growth opportunity for the top two vendors. In fact, since both MOT and NOK have grown market share virtually every quarter since Jun-05, it appears that the top two handset manufacturers have enjoyed market share gains at the expense of other vendors.
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