Even as traditional European defence contractors grapple with the challenge posed by COTS manufacturers, they will also have to face intensifying competition from their U.S counterparts. "European militaries are awakening to the need for up-to-date information and communication technology," explains a Senior Frost and Sullivan defence analyst. "However, the advanced nature of U.S technology is a cause for concern for European contractors, as in parts of Europe, such as Eastern Europe, U.S. defence and non-defence firms have succeeded in creating a monopoly over the market through foreign military funding."

Despite these challenges, traditional market participants can still look forward to a host of growth opportunities. As European militaries increasingly focus on expeditionary operations and network-centric warfare (NCW), European nations are expected to boost investments in their strategic military communications markets to meet these evolving needs of warfare.

Developments in sensor technology, enabling the transmission of increasing amounts of data to create an efficient network in the battlespace, are also set to drive market expansion. These factors will fuel existent competition while pushing overall revenues from an estimated $1.91 billion in 2005 to $2.56 billion in 2014.

The switch from territorial defence to expeditionary warfare has resulted in greater need for data transmission, initiating an increased demand for military satellite communications (MILSATCOM). Accordingly, the MILSATCOM segment, which currently represents 50.0 percent of the total market revenues, is projected to grow strongly over the next ten years, with estimated earnings of $1,362.2 million in 2014.

"The MILSATCOM market will continue to mature due to the benefits of owning a dedicated military-specific communications satellite constellation," says Frost & Sullivan analyst. "Countries such as the United Kingdom, France, Germany, Italy and Spain possess, or have plans to procure their own dedicated military satellites, while countries such as the Netherlands, Turkey and Greece have procured their own ground stations to minimise costs and reduce the involvement of commercial companies, in their SATCOM."

The SATCOM market is likely to witness significant growth due to several impending national procurement programmes, such as the acquisition of the 600 SYRACUSE III-compliant terminals by France by 2009. Multi-band terminals in the MILSATCOM market segment have also matured and the availability of the X-band will rise, with second-tier countries such as Belgium and Portugal aiming to secure peer-leasing deals with France and the United Kingdom.

With the majority of European nations seeking to upgrade their fixed communication networks, the fixed communications market- currently the second largest segment and one dominated by national telecommunication companies - will also generate increasing revenues.

"The level of funding, the number of stakeholders, the identification of decision-makers and the selection of strategic partnerships: all these, and more, are necessary to prevent failure in this expanding market," explains Mr. Buker. "Without a true understanding of the hurdles that they need to overcome, market participants will struggle to achieve competitive success."

Despite a small reduction in market size in 2011, the fixed military communications market will enable the armed forces to fully incorporate Voice-Over-Internet Protocol (VoIP) into the network, which will enhance cost reduction, improve efficiency and lead the market to projected revenues of $1,042.9 million by 2014.

However, the long-range radio communications segment (comprising high frequency radios and associated networks), which represents the smallest of the sectors at 7.0 percent of the total market, may experience a decline in revenues. This downturn is likely to take place once the majority of European nations approach the completion of their high-frequency (HF) modernisation undertaken to align them with their NATO peers.

Also, the anticipated uptake of software-defined radio (SDR) will contribute to the diminishing demand for sole HF band radios. However, being cost-effective, the HF band will continue to provide an effective back-up option network to SATCOM and fixed networks. Moreover, with an increase in the number of Special Forces in NCW, the need for greater bandwidth usage, particularly the extremely high frequency band (EHF), will prompt increasing long-range communication.

Ultimately, the trend of investments in military communications in countries such as France, Germany and the United Kingdom, which account for an overwhelming majority of the actual investments in the European military communications market, will prime other nations to invest in developing their own strategic communication networks.

Frost & Sullivan
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