Samsung reorganized its Telecommunications segment into the IT & Mobile Communications division, which includes Mobile Communications, Telecommunication Systems, IT Solutions and Digital Imaging. While Mobile Communications makes up the bulk of revenue and operating profit due to the sizable handset business, Telecommunication Systems continues to grow and profit from the sale of LTE equipment and related services. TBR estimates Telecommunication Systems revenue grew 8% year-to-year.
We believe Samsung's Telecommunications Systems business will benefit from the industry ramp up of LTE spend that will occur through 2012. With its end-to-end Smart LTE solution, Samsung is expected to win contracts from leading operators alongside larger network equipment providers (NEPS), such as Ericsson, Alcatel-Lucent and NSN. While Samsung would like to be selected as an exclusive equipment provider, it is typically selected as a secondary supplier, ceding the top position to its larger rivals. Revenue will continue to roll in from the company's portion of Sprint's Network Vision contract, which will shift into high gear in 2012, as Sprint doubles capex spend to $6 billion.
Although an acquisition would help Samsung compete with the larger vendors, it is unlikely to acquire in the telecom infrastructure space
With major infrastructure players NSN and Alcatel-Lucent struggling to grow revenue and make a profit, speculation is rampant that Samsung will acquire one of the European vendors. This is an unlikely scenario, as Samsung has stated that while it is open to acquiring, purchases would come in the fields of healthcare and energy. The company would prefer to organically grow its Telecommunication Systems business and not manage the integration of thousands of European-based employees into its ranks.