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Leading wireless service provider Ericsson (ERIC - Analyst Report) announced last Thursday that its Diameter Signaling Controller (DSC) has been selected by Telstra Corporation Ltd. (TLSYY) for expanding and developing its wireless network. Following the news, Ericsson’s shares gained 0.7% till Monday.

Ericsson’s DSC is a critical component of a network as it improves the operating efficiency and reliability by reducing pressure due to increased signaling control. DSC enables a mobile network to be more robust and resilient while also reducing the company’s capital and operating expenditures. It also protects the network from malicious malware and IP attacks.

Telstra expects to revamp and expand its existing network to meet the growing demand for mobile broadband by the smartphone and LTE (Long Term Evolution) device users.  Deploying DSC will enable Telstra to balance the load and enhance overload protection during the peak hours; thus limiting the threats for network failure. The requirements for signaling control is expected to rise as an increasing number of operators are deploying LTE to enhance their networks.

According to Ericsson's Mobility Report on Nov 11, 2013, it is predicted that the total mobile subscriptions will grow to 9.3 billion by 2019. Smartphone subscriptions are expected to triple to 5.6 billion whereas smartphone traffic is expected to increase 10 folds in the period of 2013 to 2019. Also, increasing demand will require as much as 90% of global networks to be covered by WCDMA/HSPA by 2019 as more than 65% of the world population is expected to use 4G/LTE services. Therefore, leading LTE mobile operators are testing the technology to explore this business potential.

Ericsson is the world’s largest supplier of LTE technology with approximately 13% market share. To date, Ericsson has established about 150 LTE networks worldwide and has made communication easier and more convenient by providing high-speed data for mobile phones and data terminals.

Ericsson currently has a Zacks Rank #3 (Hold). Other stocks operating in the same industry and worth considering include ShoreTel, Inc. (SHOR - Snapshot Report) and Ubiquiti Networks, Inc. (UBNT - Snapshot Report), both of which carry a Zacks Rank #1 (Strong Buy).

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