With data traffic from video downloads and on-the-go web surfers clogging up telecoms networks, mobile equipment makers such as Alcatel-Lucent and Nokia Siemens Networks should be booming.
But while Apple's shareholders are waxing rich on a communications revolution driven by smartphones and tablet computers, those who make the infrastructure for the information superhighway are being squeezed.
Telecoms operators have to spend billions to upgrade to super-fast, high-capacity, fourth generation (4G) networks designed for video and data traffic, but the overall equipment market could actually shrink as they trim budgets for the slower 2G and 3G networks designed mainly for voice traffic.
This unhappy paradox of the telecom equipment sector has chased away shareholders and could force further consolidation to eliminate some of the current five global players.
The impact of low-cost Chinese competitors Huawei and ZTE is partly to blame, while 4G technology commands little price premium.
Struggling telecoms operators are wringing harder bargains from suppliers such as market leader Ericsson.
"Ericsson's 4G sales are going to expand very strongly in the coming years, but the drop in sales in GSM and 3G will be bigger than the growth in 4G," said Martin Nilsson, an analyst at Handelsbanken.
Handelsbanken reckons spending on 2G, 3G and 4G network equipment combined will shrink to $US45 billion a year by 2020, down from around $59 billion in 2011, even as 4G spending grows to more than half the total.
Data traffic overtook voice in early 2009 and is expected to be 15 times today's level by 2017, according to Ericsson, when there will be three billion smartphones in use, up from 700 million.
To cope, operators are expected to spend $US15 billion this year on upgrading networks to make them 4G-ready, according to Exane BNP Paribas. Next year, spending will reach $26 billion.
But as with the evolution of personal computers, each new generation of network does more for less.
Cut-price Chinese competition and technological advances have pushed prices down 10-15 percent a year in recent times, cancelling vendors' volume growth and efficiency gains.
As a result, the mobile network infrastructure market is hardly any bigger than the roughly $55 billion it was in 2000, despite huge increase in mobile phone subscriptions, mobile broadband use and smartphone sales.
"It hasn't grown in 12 years, despite the explosion of traffic we have seen over that period," Handelsbanken's Nilsson said.
"3G has come in, and 2G has dropped out. It is the same thing that is going to happen now."
In 2009 Nordic operator TeliaSonera led the world to roll out commercial 4G services. Now two in three Swedes has access to 4G at home. In Denmark it's three in four.
"It has happened within the existing capex budget," said Hakan Dahlstrom, president of TeliaSonera's Mobility Services unit.
While Telia expects a huge surge in data traffic, Dahlstrom doesn't see the company's investment budget increasing.
"As it is today, there is spare capacity in the 4G network," he said.
Outside the Nordic region, operators in North America, Japan, Korea and Australia have also been early adopters, but Ericsson reckons that only five percent of the world's population had access to a 4G network in 2011.
Many operators are likely to implement 4G gradually, upgrading 3G networks with 4G-ready technology, or rolling it out only in urban areas but spending plans could slow if economic conditions don't improve.
Regulatory pressure, competition and economic uncertainty have taken their toll on the industry for years.
Nortel Networks collapsed in 2009, and Motorola left the sector. Nokia and Siemens merged their equipment units in 2007, in search of critical mass, as did Alcatel and Lucent in 2006.
Over the last decade, Ericsson's shares have flatlined, while Apple stock is up 6,600 percent. Alcatel-Lucent's have dropped 90 percent since the merger.
Even China's upstarts are feeling the pinch.
Last week, ZTE, the world's fifth biggest telecoms equipment maker, said first-half profit could fall as much as 80 percent due to price pressure and slower spending by domestic operators.
ZTE shares are down 60 percent since the start of 2011.
"It is a simple case of too much capacity chasing too little capex," said Lars Soderfjell, analyst at Alandsbanken.
Nokia Siemens Networks and Alcatel-Lucent have been burning through cash and losing market share. NSN is already cutting a quarter of its staff, and its owners want to sell up.
Alcatel-Lucent's presence in the United States, where spending on 4G has been heaviest, did not stop its revenues falling 2 percent between 2010 and 2011. They have dropped 12 percent since the company was formed. It said on Tuesday it would miss its 2012 profit forecast and post a loss in the second quarter as operators reined in spending.
"It is not the transition to LTE, but rather the attritious Chinese price pressure combined with the European Union's macro situation that are killing NSN and Alcatel Lucent," said Alexander Peterc, analyst at Exane BNP Paribas.
"Whether they will both fold, merge, or are acquired ... is anybody's guess, but my money is on something along those lines happening before end [of 2015]."
Huawei and Ericsson, the top two players in telecoms equipment, are seen extending their lead into the 4G world.
Ericsson has deep pockets — 37.1 billion Swedish crowns in cash at the end of the first quarter — and a market share of 38 percent in mobile infrastructure.
Huawei has grown its market share to nearly 20 percent in just a few years, backed, critics say, by cheap money from the Chinese state that has allowed it to undercut rivals.
"4G will be an evolution around the 3G footprint," said Pierre Ferragu, analyst at Sandford Bernstein.
Reasons to be cautious
Even for the eventual winners in the sector, there are reasons to be cautious.
The European Union is at loggerheads with the Chinese over telecom subsidies, though the Chinese deny getting any unfair advantage.
The Chinese are already locked out of the US market over security concerns, and vendors like Ericsson and Nokia Siemens fear a trade war.
"There is at least as much to lose in China as there is to gain in Europe," said Bernstein's Ferragu.
Though data traffic is growing, operators have not found a way to get users to pay for higher usage, and voice traffic, which accounts for about 70 percent of revenues, is increasingly being undermined by free services like Skype.
With revenues under pressure, they are increasingly sharing the costs of new investment.
Vodafone and O2 said last month they would pool their 4G network spend, and some are also merging 2G and 3G networks to make savings.
Add to that the threat of a global downturn, sparked by the euro zone's debt problems, and the outlook appears bleak.
"Revenue growth for wireless operators around the world seems fairly slow," said Alandsbanken's Soderfjell.
"Against that backdrop, believing that operators will radically increase their capex, I don't think is realistic."
(Additional reporting by Olof Swahnberg; Editing by Will Waterman)
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