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Max Rapaport is a corporate and telecommunications attorney with an avid interest in the universe of small cell technologies, including pico cell, femto cell and microcellular networks, generally. He also publishes articles on the Website related to developments in these areas.... More
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  • Goldman Sachs Expects Explosive Growth In Small Cells - Sees Small Cells As A Top 10 Inflection Point For 2013 0 comments
    Jan 3, 2013 7:13 AM | about stocks: T, CSCO, RKUS, S, QCOM

    On January 3, Goldman Sachs released a report entitled "Americas: Communications Technology - Opportunities abound against a more bullish backdrop into 2013." The report's authors noted that "[h]eading into 2013, we are more bullish on the CommTech sector than we have been in the last two years, as two of the three end demand verticals (carrier capex and IT spending) are likely set to accelerate due to a combination of macro forces and sector-specific factors."

    The report listed 10 inflection points that its authors believed would be key growth factors for CommTech in 2013. Prominent among these points is the authors' belief that small cell and service provider Wi-Fi deployments are likely to accelerate.

    Key factors behind this likely acceleration, the authors noted, are the possibilities of "(1) strong mobile data growth, (2) broader deployment of LTE networks, and (3) Wi-Fi roaming capability with the Next Generation Hotspots (NGH) and Passpoint standards." These NGH and Passpoint programs promulgated by the Wireless Broadband Alliance and Wi-Fi Alliance respectively, offer large advantages, according to the report's authors, due to their ability to "enable automated discovery of hotspots and security protections, which allows users to roam seamlessly across hotspots." Moreover the report continues, "[w]e expect Service Providers to embrace these, technologies in 2013, making them two of the fastest growing markets within our space."

    Specific companies cited by the report AT&T, which "has laid out plans for investments in 40,000 Small Cells through its increased capex budget." This development is particularly significant in that it "will help make Small Cells mainstream in North America, and expect this to be an important catalyst in 2013."

    A second potential growth catalyst for small cells, is the authors' expectation that "Softbank's proposed merger with Sprint [is likely]to accelerate Small Cell and SP Wi-Fi adoption in the US." Moreover, the authors note, "Sprint has been at the forefront of Small Cell deployments in North America, primarily deploying femtocells so far (more than 1 mn), and it plans to invest in picocells to replace its distributed antenna systems (DAS) in 2013 and 2014." A key factor behind this expansion, the authors note, is that "Softbank has been an early and aggressive adopter of Small Cell and Wi-Fi technology to enhance its network coverage, having deployed over 250k Wi- Fi access points and over 300k Small Cells…[that it] provides… free of charge to its customers, targeting areas of high data usage."

    With respect to specific growth estimates, Goldman Sachs notes that "[w]e expect the Small Cell market (including SP Wi-Fi) to grow 33% in 2013." To this end, the report cites an Informa Telecoms & Media study showing that "there were 46 commercial femtocell deployments and 60 commitments as of December 2012, up from 37 and 46 respectively in December 2011." On this basis, the report concludes that "[w]e forecast Small Cell market revenues to grow 33% yoy in 2013, to reach $2.2 bn….[and we] expect Small Cells to reach 6% of total Radio Access Infrastructure (RAN) spending in 2013, up from 4% in 2012." Further, the authors surmise, "[w]e expect Service Providers to deploy Small Cells to improve indoor coverage and outdoor coverage, provide capacity in dense urban areas, and coverage to sparsely populated areas where macro coverage may be uneconomical. SP Wi-Fi to grow at an even faster 56% yoy. Finally, the authors note, that "[w]e expect SP Wi-Fi to be the strong growth market in 2013, with nearly 56% yoy growth[and that while] the market was relatively small in 2012 ($341 mn in revenues), we expect it to cross $1bn in 2015."

    A key catalyst behind this likely growth, the authors note, is the impending data crunch and the need for "[p]roviders to deploy Wi-Fi for mobile offload (to offload data users from 3G/4G networks), bandwidth wholesale (cable operators building out Wi-Fi networks and leasing to mobile operators), new cable services (such as video on demand), and managed services (Service Providers offering Wi-Fi as a service to Enterprises)." This trend in "SP Wi-Fi adoption is driven by the inability of the cellular network to handle the exponential growth in mobile data driven by rapid adoption of devices such as smartphones and tablets, as well as by its lower cost characteristics." Further, "[w]e estimate that the cost of SP Wi-Fi deployment, including capex and opex, is about 1/10th that of macro base stations."

    The primary beneficiaries of this need, the authors note, are likely to be Cisco and Ruckus. Cisco, the authors believe, is likely "to benefit from Small Cells and SP Wi-Fi, as they allow it to target the radio access network (RAN)." As a basis for this assertion, the authors cite statements made by Cisco management at its most recent analyst day, on December 7, 2012 indicating its expectation of explosive growth in SP Wimade at Fi, and its note that "it is winning 85-90% of deals." As indication of this impending strength, the authors cite figures indicating that "Cisco had 18% market share in SP Wi-Fi for the first nine months of 2012 (source: Dell¡¦Oro). " With respect to Ruckus, the authors note that they "also expect Ruckus to benefit from SP Wi-Fi, where it held a market leading 19% share for the first nine months of 2012." Other potential beneficiaries cited by the report include Qualcomm and Netgear.

    Stocks: T, CSCO, RKUS, S, QCOM
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