Telecom giants Ericsson and Nokia Siemens are being hit by a huge drop in GSM spending, a new gloomy report said.

Ericsson, the world's leading mobile phone network provider, and its Finnish-German rival Nokia Siemens is heading for a rough road ahead as a huge drop in GSM spending will drive mobile infrastructure market to a steep decline, Dell’Oro Group said in a report.

Despite a very strong growth in the 3G markets, the worldwide mobile infrastructure market revenue contracted 12 percent year-over-year in the second quarter of 2009, the analyst firm said.

“India and China continued to be the engine of the GSM market, but that engine is beginning to lose steam,” stated Scott Siegler, Senior Analyst of Mobile Infrastructure research at Dell’Oro Group.

The report shows that although GSM spending is expected to pick up in the second half of the year, and the WCDMA (Wideband Code Division Multiple Access) market is expected to continue to ramp, revenue for the total mobile infrastructure market is forecast to contract 10 percent in 2009.

Last month Ericsson said that its second-quarter operating earnings rose 47 percent to 6.9 billion kronor (€629 million, $914 million), excluding its loss-making joint ventures Sony Ericsson and ST-Ericsson.

Nokia Siemens experienced a difficult second quarter as sales fell 21 percent and its gross margins shrank to 28 percent from 31.5 percent a year earlier.