Telecom Outlook: Exodus from WiMAX Continues

by: Zacks Investment Research

The much-hyped next-generation (4G) technology of WiMAX is quickly losing ground to the alternative technology of Long-Term Evolution (LTE). Large telecom infrastructure equipment makers are gradually shifting from WiMAX to LTE, and as a result the WiMAX field is getting less crowded day by day.

This gives the smaller gear makers like PureWave Networks and Airspan Networks a chance to enter the WiMAX market.

Alcatel-Lucent (ALU) has scaled back its WiMAX R&D expenditures and now concentrates only on fixed WiMAX infrastructure deployment, rather than the complex mobile deployment. Nokia-Siemens Network, a joint venture of Nokia Corp. (NYSE:NOK) and Siemens AG (SI), has taken a strategic decision to shift its focus to other next-generation wireless technologies, such as LTE and HSPA+, and decided to outsource the WiMAX technology from Alvarion Ltd. (NASDAQ:ALVR). Fujitsu Ltd. has entirely stopped the development of WiMAX radio technology. Motorola (MOT) is also moving towards the LTE platform.

We believe WiMAX still enjoys commendable growth potential, especially within emerging markets. The technology provides a low-cost, open network system with an all-IP mobile Internet solution that enables efficient and scalable networks for voice, data, and video transmission. The government of India has decided to allocate spectrum for the WiMAX network together with 3G technologies.

Chunghwa Telecom (NYSE:CHT) of Taiwan, P.T. Telekomunikasi (NYSE:TLK) of Indonesia, Aria SPA of Italy and Mobitel Nigeria have decided to implement WiMAX broadband solutions. Millicom International Cellular (MICC), a leading telecom service provider in Central America and Africa, is also exploring an option to implement the WiMAX network as a niche alternative to cable and DSL networking.

In the U.S., WiMAX still generates enthusiasm among telecom service providers. Clearwire Corp. (CLWR) is on the verge of a nationwide WiMAX deployment. The U.S. government stimulus plan for Rural Broadband expansion has also encouraged several regional telecom operators to implement WiMAX. For example, Open Range Communications Inc. has decided to implement WiMAX network spanning 17 states, 546 rural communities, which may reach a population of 6 million.