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EXECUTIVE SUMMARY

In this Industry Strategic Outlook, we review the telecom equipment sector’s 3Q.2008 results with a particular emphasis on revenues and market shares.

3Q.2008 results saw a slowdown in revenues led by a 15% YoY decline in GSM revenues. This fall in GSM revenues was marked by the first decline in GSM revenues in Europe since 1Q06. The already extensive GSM coverage and improvements to WCDMA technology are pushing for a shift in spending by mobile operators towards WCDMA 3G networks at the expense of GSM and CDMA spending. This shift in spending is exemplified by WCDMA maintaining its stellar revenue growth with a 67% YoY rate. The shift in spending has also seen CDMA continue its fall with -31% YoY revenue decline in 3Q08. The slowdown in revenues was broad based as EMEA saw its revenues fall 18% YoY while North America fell 22% YoY. Even Asia-Pacific fell to 6% YoY in 3Q08 from 24% YoY in 2Q08, although some of this decline was probably from delayed Chinese spending around the Olympics and the wireless restructuring.

In terms of market shares, the main gainer was Huawei, reaching 11% in 3Q08. This increase came at the expense of Nokia Siemens Network, Alcatel-Lucent, Nortel and Samsung. Huawei’s dominance of the WCDMA segment with 45% of new UMTS/HSPA contracts in 2007 is helping the company increase its market share as the sector is moving towards wider implementation of 3G networks incorporating WCDMA technology.

The companies covered in this industry outlook include Ericsson, Nokia Siemens Network, Alcatel-Lucent, Huawei, Nortel, Motorola, Samsung, NEC, and Matsushita.

TABLE OF CONTENTS

Slowdown in the wireless infrastructure market led by a 15% YoY decline in GSM revenues

Sharp fall in GSM revenues led by 26% YoY decline in Europe

WCDMA maintains stellar revenue growth with 67% YoY

CDMA continues its fall with -31% YoY revenue decline in 3Q08

Huawei the main market share gainer at the expense of Nokia Siemens Network, Alcatel-Lucent, Nortel and Samsung

EMEA and US both weak with -18% YoY and -22% YoY respectively while Asia is also decelerating

Charts:

Chart 1: Wireless infrastructure revenues by technology: WCDMA maintaining its stellar growth with 67% YoY ($M), 1Q00 – 1Q08

Chart 2: Trailing 12 months wireless infrastructure revenues by technology: WCDMA spending increasing while CDMA is decreasing ($M), 4Q00 – 4Q07

Chart 3: Wireless infrastructure revenues by region: North America and Europe continue to see decline in revenues ($M), 1Q01 – 1Q08

Chart 4: YoY revenue growth: North America and EMEA seeing negative revenue growth YoY while Asia-Pacific and the Rest of the World remain on the positive side, 1Q02 – 1Q08

Chart 5: Wireless infrastructure market share: Huawei’s market share is increasing while Ericsson maintains its lead in the market (%), 1Q00 – 2Q08

Chart 6: Market share gain/(loss) in 3Q08: Huawei the biggest gainer in market shares in 3Q08 while NSN is the biggest loser (%), 3Q08

Chart 7: GSM market share: GSM market still belongs to Ericsson and NSN despite increase in shares by Huawei (%), 1Q00 – 2Q08

Chart 8: GSM market share gain/(loss) in 3Q08: Ericsson the biggest gainer in GSM market shares in 3Q08 while NSN is the biggest loser (%), 3Q08

Chart 9: WCDMA market share: Huawei gaining market shares in WCDMA at the expense of NSN and Ericsson (%), 3Q02 – 3Q08

Chart 10: WCDMA market share gain/(loss) in 3Q08: Huawei the biggest gainer in WCDMA market shares while Ericsson is the biggest loser in 3Q08 (%), 3Q08

Chart 11: CDMA market share: Alcatel-Lucent still the market leader in CDMA market shares while Huawei continues to gain shares (%), 1Q00 – 1Q08

Chart 12: CDMA market share gain/(loss) in 3Q08: Huawei and Alcatel-Lucent the biggest gainers in market shares in 3Q08 while Motorola is the biggest loser in CDMA market (%), 3Q08

Tables:

Table 1: Revenues and Revenue Growth YoY (Ericsson, Nokia Siemens Network, Alcatel-Lucent, Huawei, Nortel, Motorola), 3Q07 – 3Q08

Table 2: Market Share (Ericsson, Nokia Siemens Network, Alcatel-Lucent, Huawei, Nortel, Motorola), 3Q07 – 3Q08