NETWORK OPERATORS GENERATING BUSINESS FOR ODMs

Network operators will earn more than $10 billion this year from selling self-branded handsets made by ODMs, according to ABI Research.
That’s a nearly 25% jump from the prior year. Within four years, that segment could grow to about 10% of the total handset market, providing a lifeline for successful ODMs.
The latest example of this trend is Vodafone Group plc’s deals with Huawei Technologies Co. Ltd. and ZTE Corp.-Chinese manufacturers that, perhaps ironically, have aspirations to attain global brands of their own and OEM status-for low-cost 3G and 2G handsets, respectively.
“Huawei and ZTE are acting more as ODMs in the Vodafone deal,” said Shailendra Pandey, analyst at ABI Research. “They are happy to do so because a partnership with Vodafone means opportunities to extend their markets to many other countries without the investment in sales and distribution.”
According to Pandey, ZTE has struggled in its home market to compete with Nokia and Motorola. Thus its deal with Indian network operator Reliance for the latter’s “Classic” brand.
Operator-driven deals with ODMs generally will help fuel business for the latter segment of the industry, the ABI analyst said. Such deals improve design capabilities at the ODM and provide credibility for further deals. For the operators, the arrangement provides leverage to deal with the big-brand OEMs, which claim more than 80% of the global handset business.
“Mobile operators are not happy with the amount of control (exerted) by the top five vendors and Vodafone has openly raised concerns about this,” Pandey said. “The increasing operator use of private-branded handsets primarily helps ODMs.”