RAN market
NTT advert in WSJ: Why O-RAN Will Change Everything; AT&T selects Ericsson for its O-RAN
We cover both NTT’s Open RAN ad in the WSJ and AT&T’s selection of Ericsson as their primary Open RAN vendor:
This NTT-WSJ ad was a huge shock to me as I did not expect NTT to be so optimistic about Open RAN deployments as it would cannibalize their existing 3G/4G/5G RAN. Here’s the copy/paste of the WSJ advertisement:
Introduction:
With data consumption accelerating, and demand for high-speed data soaring, the growth of the global O-RAN alliance is taking the future of connectivity to the next level.
Allowing mobile network operators to share network integration costs and enabling interoperation between different vendors’ cellular network equipment are just two of the revolutionary benefits driving O-RAN’s adoption worldwide. As a pioneer in this ecosystem, Japanese operator NTT Docomo has established the OREX brand to deliver its O-RAN solution to mobile users anticipating the instantaneous communication that 6G will bring.
Innovating the Future of Connectivity:
The expanding O-RAN universe consists of more than 300 mobile operators, vendors and academic and research institutions worldwide. With consumer 5G connections alone predicted to reach 2 billion by 2025—doubling from 1 billion in 2022—and 6G technology in sight, further adoption of O-RAN plays a vital role in the future of global connectivity. As a co-founder of the global O-RAN alliance, Japanese operator NTT DOCOMO is one of the innovators transforming mobile connectivity through open, intelligent and interoperable mobile networks.
What is O-RAN?
An open-ended, non-proprietary version of the Radio Access Network (RAN) system used for mobile networks, O-RAN stands for open radio access network (Open RAN) and is an ecosystem and architecture for flexible networks capable of leveraging 5G—and beyond—wireless communications. Using radio waves to connect users (consumer or business) to the mobile network, it allows interoperation between different vendors’ cellular network equipment. It is also a connector for accessing key web applications. Whereas RAN technology currently comes as a single-vendor hardware- and software-integrated architecture, O-RAN is a multi-supplier solution that can disaggregate hardware and software with open interfaces and virtualization.
What Are the Business Benefits?
Put simply, O-RAN reduces the total cost and increases the flexibility of network ownership for the benefit of consumers and enterprises that use sensors, smartphones and similar remote wireless devices. A clear alternative to vendor lock-in, the sharing of network integration costs among a number of mobile network operators—instead of that cost being shouldered by a single operator—makes it more competitive. As well as increased connectivity for vendors and network operators, O-RAN offers greater accessibility, technological flexibility, supply-chain diversity, and scalable mobile networks. New features are introduced quickly via software, reducing maintenance time while also making further innovation and greater competition possible. NTT Docomo’s OREX has been established to deliver its O-RAN solution, providing robust support for international operators and a customized user experience.
Opening up Mobile Networks:
The global O-RAN alliance is expanding as the technology matures. Adoption is growing fastest in North America and Asia Pacific, where there is high data consumption, rising demand for high-speed data and the integration of AI and cloud computing. These two regions are predicted to dominate the global market over the next five years. In Europe, both Germany and the U.K. have established initiatives to develop and support their solutions. Leading telecom companies in the Netherlands, Spain, and Italy are developing O-RAN technology, as are two of India’s three major operators. More prospective markets exist in Asia, Africa and South America.
The Journey to 6G:
Designed to make cloud computing and the mobile internet ubiquitous, 6G-enabled technologies will greatly impact business when commercially available around 2030. Potentially 100 times faster than 5G, 6G is the next-generation technology that will enable lightning-speed device connections and O-RAN technology has the flexibility to adopt it. 6G will transform how companies communicate, process information, train employees and much more. NTT Docomo is leveraging the knowledge gained from its unique experience in building mobile networks with multiple equipment vendors since the 4G era, and its OREX offering integrates the strengths of 13 partners including Dell, Intel, Fujitsu, and others to offer a strong value proposition for the global shift to O-RAN.
……………………………………………………………………………………………….
AT&T selected Ericsson as its Open RAN equipment supplier, yet the Swedish network equipment vendor does not have any open RAN certifications with the O-RAN Alliance. AT&T said Open RAN will cover 70% of its wireless traffic in the United States by late 2026. Beginning in 2025, the company will scale this Open RAN environment throughout its wireless network in coordination with multiple suppliers such as Corning Incorporated, Dell Technologies, Ericsson, Fujitsu, and Intel.
“AT&T is taking the lead in open platform sourcing in our wireless network,” said Chris Sambar, Executive Vice President, AT&T Network. “With this collaboration, we will open up radio access networks, drive innovation, spur competition and connect more Americans with 5G and fiber. We are pleased that Ericsson shares our supp
“High-performance and differentiated networks will be the foundation for the next step in digitalization. I am excited about this future and happy to see our long-term partner, AT&T, choosing Ericsson for this strategic industry shift – moving to open, cloud-based and programmable networks. Through this shift, and with open interfaces and open APIs, the industry will see new performance-based business models, creating new ways for operators to monetize the network. We are truly proud to be partnering with AT&T in the industrialization of Open RAN and help accelerate digital transformation in the U.S.,” said Börje Ekholm, President and CEO, Ericsson.
AT&T will use this new collaboration with Ericsson to enhance its wireless network in North America and expand the most reliable 5G network.1 The expected spend under the Ericsson contract is below what the company expects to spend for wireless capital expenditure over the next 5 years. Given the interdependence between fiber and wireless, and the increasing desire for customers to have one connectivity provider across fixed broadband and wireless, the company sees economically attractive opportunities to expand its fiber footprint in the coming years as well.
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
References:
https://partners.wsj.com/ntt/innovating-the-future/innovating-the-future-of-connectivity/
https://about.att.com/story/2023/commercial-scale-open-radio-access-network.html
https://www.o-ran.org/testing-integration#certification-badging
NTT DOCOMO OREX brand offers a pre-integrated solution for Open RAN
Samsung in OpenRAN deal with NTT DOCOMO; unveils 28GHz Radio Unit (RU)
Another Open RAN Consortium: 5G Open RAN Ecosystem led by NTT
LightCounting & TÉRAL RESEARCH: India RAN market is buoyant with 5G rolling out at a fast pace
The India Wireless Infrastructure Report provides an update on the 5G radio access (RAN) developments in India, including geopolitics trends and technology. The report says that The RAN market in India is buoyant with a swelling local ecosystem that boasts big international ambitions.
Reliance Jio is rolling out 5G at a fast pace, followed by Bharti Airtel. As a result,1H23 RAN sales surged 300% YoY, and kept Ericsson in the driver’s seat, followed by Nokia and Samsung. Although the rollout pace has slowed down, 2023 is looking up, looks like the peak year, and we expect RAN equipment sales to more than double compared to last year, still driven by Jio and Airtel while BSNL will contribute with its 4G deployment.
“It’s a two-horse race, the near Jio / Airtel duopoly is quickly blanketing the country with 5G while the rest are struggling and catching up with 4G.” said Stéphane Téral, Chief Analyst at LightCounting Market Research and Founder of TÉRAL RESEARCH.
Source: LightCounting
………………………………………………………………………………………………………………………….
- 2024 is shaping up as a shift year from 5G network buildout to how to foster utilization and some midband FWA experiments.
- Due to the looming formation of a CSP duopoly, the looming merger of MTNL into BSNL, and Vodafone Idea’s unsustainable indebtment, our long-term forecast points to a lumpy RAN market. There is no surprise that India is a tough cellular market characterized by flat subscriber growth, ultralow ARPUs and low equipment average sales pricing.
- Open RAN is the brightest spot with a penetration of the total RAN market that will surpass 50% by 2028.
- At the same time, a mushrooming energetic local ecosystem is rising with great international ambitions enabled by strong ties between the U.S. and India.
…………………………………………………………………………………………………………..
References:
https://www.lightcounting.com/report/september-2023-india-wireless-infrastructure-217
https://www.lightcounting.com/report/september-2023-open-vran-market-213
Reliance Jio in talks with Tesla to deploy private 5G network for the latter’s manufacturing plant in India
OTT players in India struggle in telco partnerships
Communications Minister: India to be major telecom technology exporter in 3 years with its 4G/5G technology stack
India to set up 100 labs for developing 5G apps, business models and use-cases
Adani Group to launch private 5G network services in India this year
LightCounting: Wireless infrastructure market down in 2Q-23 (no surprise)
| Historical data accounts for sales of the following vendors: | |||
| Vendor | Segments | Source of Information | |
| Altran | vRAN | Estimates | |
| Amdocs | 5GC | Estimates | |
| ASOCS | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Baicell | RAN (RU) | None, supplies other RAN/vRAN vendors | |
| Benetel | Open RAN (RU) | None, supplies other RAN/vRAN vendors | |
| Cisco | EPC, vEPC, 5GC | Survey data and estimates | |
| China Information and Communication Technologies Group (CICT) | RAN | Estimates | |
| Comba Telecom | RAN/vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| CommScope (acquired Phluido vRAN patents, October 2020) | vRAN (RU, DU) | Estimates | |
| Corning | vRAN | Estimates | |
| Dell | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Enea | 5GC | Estimates | |
| Ericsson | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Estimates | |
| Fairwaves | RAN/vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| Fujitsu | RAN | Survey data and estimates | |
| HPE | 2G/3G core, 5GC | Estimates | |
| Huawei | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Survey data and estimates | |
| JMA Wireless | vRAN | Estimates | |
| KMW | RAN/vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| Kontron | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Mavenir (acquired ip.access, September 2020) | vEPC, vRAN, 5GC | Survey data and estimates | |
| Microsoft (acquired Metaswitch and Affirmed Networks, 2020) | 5GC, vEPC and 2G/3G core | Estimates | |
| Movandi | RAN/vRAN (RU/repeater) | Estimates | |
| MTI Mobile | vRAN (RU) | None, supplies other RAN/vRAN vendors | |
| Node-H | vRAN (small cells) | Estimates | |
| Nokia | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Survey data and estimates | |
| NEC (including Blue Danube Systems, January 2022) | RAN, vRAN (RU), EPC, 5GC | Survey data and estimates | |
| Oracle | 5GC | Estimates | |
| Parallel Wireless | vRAN (CU, DU) | Estimates | |
| Pivotal | RAN/vRAN (RU/mmWave repeater) | Estimates | |
| Quanta Cloud Technology (QCT) | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Qucell | RAN, vRAN | Estimates | |
| Rakuten Symphony (acquired Altiostar, August 2021) | vRAN (CU, DU) | Estimates | |
| Ribbon Communications | 2G/3G core | Survey data and estimates | |
| Samsung | RAN, vRAN, vEPC, 5GC | Estimates | |
| Silicom | Open RAN (DU) | None, supplies other RAN/vRAN vendors | |
| SuperMicro Computer | vRAN (DU) | None, supplies other RAN/vRAN vendors | |
| Verana Networks | RAN/vRAN (RU/mmWave) | Estimates | |
| ZTE | RAN, vRAN, 2/3G Core, EPC, vEPC, 5GC | Survey data and estimates | |
Dell’Oro: RAN market declines at very fast pace while Mobile Core Network returns to growth in Q2-2023
A new report from Dell’Oro Group says RAN sales declined at their fastest pace in nearly seven years during Q2-2023. According to preliminary findings from the market research firm, following the ‘intense ramp-up’ from 2017 through 2021. While RAN revenues stabilized in 2022 and 1Q23, market conditions worsened in the second quarter, resulting in RAN declining at the fastest pace in nearly seven years. The decline was not unexpected by Dell’Oro, yet the magnitude of the reversal was much steeper than anticipated.
………………………………………………………………………………………………………………………………..
The RAN market decline was surely expected by IEEE Techblog readers, as this publication has warned for years about the commercial failure of 5G mobile networks.
………………………………………………………………………………………………………………………………..
“It is tempting to point the finger at data traffic patterns, 5G monetization challenges, and the odds stacked against an economy struggling with persistent levels of elevated inflation,” said Stefan Pongratz, Vice President at Dell’Oro Group. “Although these are, of course, important factors, we attribute the poor performance in the quarter to the clouds forming in North America. Alongside challenging 5G comparisons, the decline was amplified by the extra inventory accumulated over the past couple of years to mitigate supply chain risks,” Pongratz added.
Additional highlights from the Q2-2023 RAN report:
- Top 5 RAN suppliers for 1H23 include Huawei, Ericsson, Nokia, ZTE, and Samsung.
- Nokia recorded the largest RAN revenue share gains between 2022 and 1H23.
- Huawei’s quarterly RAN share reached the highest level in three years. Huawei’s 2Q23 RAN revenue share outside of North America was as large as Ericsson and Nokia combined.
- Ericsson and Samsung’s RAN revenue shares declined between 2022 and 1H23.
- Regional projections are mostly unchanged; however, the short-term outlook has been revised upward in APAC excluding China and downward in the North American region.
- Global RAN revenues are expected to decline in 2023.
…………………………………………………………………………………………………………….
In a separate report, Dell’Oro says the Mobile Core Network (MCN) market returned to growth in 2Q 2023. The China region returned to growth and Europe, the Middle East, and Africa (EMEA) had the strongest quarterly growth rate since 3Q 2020.
“The MCN market shined on many fronts this quarter. The China region returned to growth with increased spending by two of the four Mobile Network Operators (MNOs). The EMEA region had its best quarterly growth rate since 2020, Huawei had record high revenues for the quarter, and Ericsson had its highest growth rate since 2Q20, as examples,” stated Dave Bolan, Research Director at Dell’Oro Group. “As a result, we are raising our outlook for 2023 year-over-year (Y/Y) growth rate from low single-digit percent to mid-single-digit percent.”
“As of 2Q 2023, we counted 44 Mobile Network Operators (MNOs) that have launched commercial 5G SA networks. One was added in 2Q 2023, Telefónica – Spain. The North America and EMEA regions of the 5G MCN segment Y/Y growth rates were in the triple-digit percent, signaling capacity additions to the 5G SA networks in both regions,” continued Bolan.
Editor’s Note: Despite years of promises, neither AT&T or Verizon has yet to deploy a 5G SA core network, without which no 3GPP defined 5G features/functions are possible.
…………………………………………………………………………………………………………………………
Additional highlights from the 2Q 2023 Mobile Core Network and Multi-Access Edge Computing Report include:
- The top MCN vendors worldwide for 2Q 2023 were Huawei, Ericsson, Nokia, and ZTE.
- The top 5G MCN vendors worldwide for 2Q 2023 were Huawei, Ericsson, ZTE, and Nokia.
- Five MNOs launched commercial 5G SA networks in 1H 2023.
References:
RAN Declines at the Fastest Pace in Seven Years, According to Dell’Oro Group
Mobile Core Network Market Returns to Growth in 2Q 2023, According to Dell’Oro Group
Dell’Oro: RAN Market to Decline 1% CAGR; Mobile Core Network growth reduced to 1% CAGR
Dell’Oro: OpenRAN revenue forecast revised down
through 2027
Dell’Oro: U.S. suppliers ~20% of global telecom equipment market; struggling in RAN business
Dell’Oro: RAN Market to Decline 1% CAGR; Mobile Core Network growth reduced to 1% CAGR
According to a newly published forecast report by Dell’Oro Group,the Radio Access Network (RAN) market is done expanding for now. Following the 40% to 50% ascent between 2017 and 2021, RAN revenues flattened out in 2022 and these trends extended to 1Q 2023.
“Even if it is early days in the broader 5G journey, the challenge now is the comparisons are becoming more challenging in the more mature 5G markets and the upside with the slower-to-adopt 5G regions is not enough to extend the growth streak,” said Stefan Pongratz, Vice President at Dell’Oro Group.
“Meanwhile, growth from new revenue streams including Fixed Wireless Access and enterprise LTE/5G is not ramping fast enough to change the trajectory. With 5G-Advanced not expected to trigger a new capex cycle, the question now is no longer whether RAN will grow. The question now is, rather, how much will the RAN market decline before 6G comes along?” Pongratz added.
Additional highlights from the Mobile RAN 5-Year July 2023 Forecast Report:
- Global RAN is projected to decline at a 1 percent CAGR over the next five years.
- The less advanced 5G regions are expected to perform better while the more developed 5G regions, such as North America and China, are projected to record steeper declines.
- LTE is still handling the majority of the mobile data traffic, but the focus when it comes to new RAN investments is clearly on 5G. Even with the more challenging comparisons, 5G is projected to grow another 20 percent to 30 percent by 2027, which will not be enough to offset steep declines in LTE.
- With mmWave comprising a low single-digit share of the RAN market and skepticism growing about the MBB business case, it is worth noting that our position has not changed. We still envision that the mmWave spectrum will play a pivotal role in the long-term capacity roadmap.
……………………………………………………………………………………………………………………….
Separately, Dell’Oro again lowered its forecasts for the Mobile Core Network market (which is now 5G SA core network), this time citing a slowdown in customer growth. It now predicts that the worldwide market for mobile core networks will expand at a CAGR of 1% over the next five years, having previously forecast a 2% CAGR as recently as January.
“We have reduced our forecast for the third consecutive time, primarily caused, this time, by an expected slowdown in subscriber growth,” said Dave Bolan, Research Director at Dell’Oro Group.
Dave said that Dell’Oro has reduced its expectations for the Multi-Access Edge Computing (MEC) market (which requires 5G SA core network). It now anticipates MEC will have a CAGR of 31%, noting that commercially-viable enterprise applications are taking much longer to come to fruition than many had hoped.
“Mobile Network Operators (MNOs) are concerned about inflation, a possible recession, and political conflicts. They are therefore being restrained in their capital expenditures, another factor weighing in on a more conservative forecast,” said Bolan. “As we continue refining our count of MNOs that have launched 5G Standalone (5G SA) eMMB networks, we note that only 4 MNOs have commercially deployed new 5G SA networks compared to six in the first half of 2022,” he added.
Additional highlights from the Mobile Core Network & Multi-Access Edge Computing 5-Year July 2023 Forecast Report:
- Year-over-year MCN revenue growth rates are projected to be flat in 2026 and turn negative in 2027.
- The North America and China regions are expected to have negative CAGRs, while Europe, Middle East, and Africa (EMEA), and Asia Pacific excluding China regions are expected to have the highest positive CAGRs.
Vodafone became one of those first-half 2023 launches, when it brought 5G Ultra to market in the UK in late June. In its latest Mobility Report, published around the same time, Ericsson noted that while around 240 telcos have launched commercial 5G services, only 35 of them have brought standalone 5G to market.
That should bode well for the mobile core market, and indeed it is faring better than the RAN space, in growth potential terms, at least.
Nonetheless, Dell’Oro predicts that year-on-year growth rates in mobile core network revenues will be flat by 2026 and turn negative the following year.
Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the RAN market by region – North America, Europe, Middle East & Africa, Asia Pacific, China, and Caribbean & Latin America, with tables covering manufacturers’ revenue and unit shipments for 5GNR, 5G NR Sub 6 GHz, 5G NR mmW and LTE pico, micro, and macro base stations. The report also covers Open RAN, Virtualized RAN, small cells, and Massive MIMO. To purchase this report, please contact us by email at [email protected].
Dell’Oro Group’s Mobile Core Network & Multi-Access Edge Computing 5-Year July Forecast Report offers a complete overview of the market for Wireless Packet Core including MEC for the User Plane Function, Policy, Subscriber Data Management, and IMS Core with historical data, where applicable, to the present. The report provides a comprehensive overview of market trends by network function implementation (Non-NFV and NFV), covering revenue, licenses, average selling price, and regional forecasts for various network functions. To learn more about this report, please contact us at [email protected].
Dell’Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, security, enterprise networks, and data center infrastructure markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell’Oro Group at +1.650.622.9400 or visit www.delloro.com.
References:
RAN Market to Decline at a 1 Percent CAGR Through 2027, According to Dell’Oro Group
Slower Subscriber Growth to Cut Mobile Core Network Market Growth, According to Dell’Oro Group
Dell’Oro: U.S. suppliers ~20% of global telecom equipment market; struggling in RAN business
According to Stefan Pongratz of Dell’Oro, U.S. suppliers collectively accounted for around 16% of the global telecom equipment market in 2022, underpinned by strong presence in broadband access, optical transport and Service Provider Routers. Not surprisingly, this global view is masking the progress to some degree. If we exclude China, we estimate that the 20+ American suppliers comprise ~20% of the broader telecom equipment market.
U.S. suppliers appear to be struggling more in the RAN market. Per Dell’Oro’s 4Q22 RAN report, the American-based vendors still accounted for less than 1% of the global RAN market in 2022. Even if China is removed, the aggregate revenue share remains in the same range.
…………………………………………………………………………………………………………………………………………………………………….
Editor’s Note: The big 5 have dominated the global RAN market for over 15 years. Huawei, Ericsson, Nokia, ZTE, and Samsung together have about 95% of the global RAN market. Pongratz expects global RAN revenues to decline at a low-single-digit rate for 2023, with a surge in spending from India-based operators to fuel their 5G plans offset by dropping demand in China, Europe, and North America.
“After four years of extraordinary growth that catapulted the RAN market to record levels in 2021, the RAN market is now entering a new phase,” Pongratz wrote. “Even with 5G still increasing at a healthy pace, comparisons are more challenging and the implication for the broader RAN market is that growth is decelerating.”
…………………………………………………………………………………………………………………………………………………………………….
Dell’Oro estimates that the collective RAN revenues for the U.S. suppliers had an increased of 60% in 2022 relative to 2020, in part because of the improved entry points with Open RAN. U.S. network equipment vendors are fairly optimistic about the growth prospects:
- Mavenir is targeting 30%+ growth in 2023. While the mobile core network continues to drive the lion’s share of its revenue mix, Mavenir’s 10,000+ macro-site brownfield pipeline is expected to play a pivotal role in reaching this $1 billion group revenue target for FY23.
- Celona is working with 100+ customers and has seen a 300%+ increase in the number of connected devices across its 5G installed base. The vendor is now targeting to more than double its revenues this fiscal year.
- JMA has not shared any growth objectives for its wireless business. Even so, the vendor has announced multiple DoD wins and believes its all-American team is well positioned to support advanced private 5G networks for the U.S. government.
- Verana Networks is set to work on a trial with Verizon later this year.
- Dell is planning to enter the vRAN market over the next year, allegedly.
- Airspan’s equipment and software revenue growth slowed in 2022. Still, trial activity is on the rise and Airspan remains hopeful that its 400+ private network wins will soon have a more meaningful impact on the topline.
At the same time, it is early days in this process of re-shaping the RAN. And even if global market concentration as measured by the Herfindahl-Hirschman Index (HHI) is actually trending in the right direction, vendors with smaller footprints are still trying to figure out the best near-term and long-term approaches to improve their respective RAN positions – some think that open RAN can be an entry point for brownfield macro opportunities while others believe the likelihood of winning is greater in greenfield settings (public or private).
Open RAN might help to open the door, but this movement does not change the fact that RAN remains a scale game and double-digit RAN revenue shares are still required to maintain competitive portfolios.
Currently, this vendor asymmetry between RAN and the broader telecom equipment market then also implies that the U.S. suppliers are actually doing rather well beyond the wireless scope. In fact, if we remove the RAN from the picture, we estimate that the U.S. vendors accounted for around a fourth of the global non-RAN telecom equipment market. Better yet, if we take it one step further and also strip out China, the data shows that the American team comprised around one third of the non-RAN telco equipment market excluding China.
Dell’Oro’s assessment is that the U.S. suppliers hold a strong position in the non-RAN telecom equipment market. When it comes to RAN, however, the data shows that the American-based suppliers are moving in the right direction, especially in private wireless. But the overall progress has been slow, and it is still a long road ahead before we can establish that the U.S. suppliers are back at full speed in the broader public plus private 5G RAN business
…………………………………………………………………………………………………………………………………………………………
Stefan Pongratz is a vice president at the Dell’Oro Group. He joined Dell’Oro in 2010 after spending 10 years with the Anritsu Company. Pongratz is responsible for the firm’s Radio Access Network and Telecom Capex programs and has authored advanced research reports on the wireless market assessing the impact and the market opportunity with small cells, C-RAN, 5G, IoT and CBRS.
References:
https://www.fiercewireless.com/wireless/what-state-us-ran-and-non-ran-suppliers-pongratz
Dell’Oro: Worldwide Telecom Equipment Market Growth +3% in 2022; MTN: +2% Network Infrastructure Growth in 2022
Dell’Oro: Private 5G ecosystem is evolving; vRAN gaining momentum; skepticism increasing
Dell’Oro: 5G RAN growing; total RAN growth is slowing over next 5 years
Dell’Oro: RAN Market Disappoints in 2Q-2022
Dell’Oro: Market Forecasts Decreased for Mobile Core Network and Private Wireless RANs
Ericsson warns profit margins at RAN business set to worsen
Ericsson on Friday reported lower than expected 4th-quarter core earnings as sales of 5G equipment slowed in high-margin markets such as the United States, sending the Swedish company’s shares to their lowest since 2018.
Ericsson is the latest tech company to show the impact of customers tightening belts amid concerns about a global economic slowdown. Others have been cutting staff, including Microsoft (10,000) and Google parent Alphabet (12,000) which have announced thousands of job cuts this week while Amazon had announce 10,000 layoffs several weeks ago.
Ericsson has already announced plans to cut costs by 9 billion crowns ($880 million) by the end of 2023.
Chief Financial Officer Carl Mellander told Reuters that would involve reducing consultants, real estate and also employee headcount. “It’s different from geography to geography, some are starting now, and we’ll take it unit by unit, considering the labour laws of different countries,” Mellander said, referring to the cuts.
Mellander declined to say if the job cuts would be similar to 2017 when Ericsson laid off thousands of employees and focused on research to return the company to profitability.
Last week, the company said it would book a 2.3 billion Swedish crown ($220 million) provision for an expected fine from U.S. authorities for breach of a settlement reached in 2019.
Ericsson’s net sales rose in the fourth quarter, but margins, net income and core earnings fell. Its gross margin for the fourth quarter of 2022 fell to 41.4% from 43.2%.
Ericsson said it expected a fall in margin in its Networks business to persist through the first half of 2023, but the effect of cost savings to emerge in the second quarter.
JPMorgan analysts said given the fall in margins and higher investments, they would expect 2023 earnings to decline by a double digit percentage.
Inge Heydorn, partner and fund manager at investment firm GP Bullhound, said: “The fourth quarter shows once again that the U.S. has a big impact on Ericsson’s margins.”
With U.S. customers such as Verizon tightening their purse strings, Ericsson is hoping newer markets such as India can provide some growth. Its South East Asia, Oceania and India market was the only one to grow in the quarter, rising 21%, accounting for 13% of the company’s business.
The company’s fourth-quarter adjusted operating earnings, excluding restructuring charges, fell to 9.3 billion Swedish crowns from 12.8 billion a year earlier. That was short of the 11.22 billion expected by analysts, Refinitiv Eikon data showed. Net sales rose 21% to 86 billion crowns, beating estimates of 84.2 billion.
A settlement of a patent deal with Apple (AAPL.O) last month resulted in revenue of 6 billion crowns, but Ericsson also took 4 billion crowns in charges, including a provision for a potential fine from U.S. regulators and divestments.
However, there was some good news.
- Ericsson said it expects significant patent revenue growth over the coming 18-24 months.
- Ericsson, outside China, remains the company to beat in 5G. Its share of the market for radio access networks (RANs) appears to have increased several years in a row – from 33% in 2017 to 39% now.
- Ericsson is healthily profitable, which could not be said when CEO Ekholm took charge in 2017.
- Boosted by recent takeover activity and a major licensing deal with Apple, its headline sales for the final quarter of 2022 were up 21%, to 86 billion Swedish kronor (US$8.4 billion), compared with the same period a year before.
However, Ericsson has experienced one of its biggest profit slumps since the first half of Ekholm’s tenure. Hurt by higher costs and SEK4 billion ($390 million) worth of one-off charges – relating to US fines, write-downs and divestiture – its net income dropped by 39%, to SEK6.2 billion ($600 billion). Worse, all the various profit margins thinned, with Ericsson’s closely monitored EBIT (earnings before interest and tax) margin shrinking to just 9.1%, from 16.1% a year earlier. And the outlook is frosty.
The mini-boom in 5G spending appears to be over – temporarily, at least. Last year, the market for RAN products, where Ericsson now generates about 70% of its revenues, grew by around 5%, according to data from Dell’Oro, a market research firm that Ericsson uses. This year, RAN market sales are expected to fall by 1%. And in North America, responsible for nearly 30% of Ericsson’s overall revenues, Dell’Oro predicts they will drop by a worrying 7%.
After investing heavily in network rollouts during the last couple of years, many operators are cutting their expenditure amid signs of an economic downturn, and reducing the equipment stockpiles they built up when supplies were tight. “We expect operators to adjust inventory levels as the supply situation eases and we plan for these trends to continue during the first half of 2023,” said Ekholm on Ericsson’s earnings call today.
“The first half is really where we’ll see the sizeable inventory adjustments,” said Ekholm, answering questions asked by analysts. “Operators can sweat assets for a couple of quarters but it cannot be done much more [than that] because of the traffic growth underneath. That is the way to model it.” Ericsson’s expectation is that total mobile data traffic worldwide will grow by a factor of five between 2022 and 2028.
Given the market slowdown, turbulence of the last year and seemingly endless difficulties at smaller units, it is easy to forget that Ericsson remains a solid and successful business. But it has become more reliant on RAN sales under Ekholm – generating more than 70% of its revenues in that market last year, compared with just 47% in 2016. Ekholm clearly restored Ericsson’s reputation as a RAN provider. Amid the slowdown in that sector (zero growth forecast by Dell’Oro through 2027), his big challenge now is to prove it can thrive elsewhere.
Andrew Gardiner, analyst at Citi, said the announcements demonstrated the “significant challenges” the company faced this year. “We view Ericsson’s outlook as one of fundamentals deteriorating in the next quarter or two, as it aims to improve in the second half and beyond,” he added.
References:
https://www.reuters.com/technology/ericsson-quarterly-earnings-miss-expectations-2023-01-20/
https://www.ft.com/content/dd5cb329-f5bd-4b78-bde1-ca7510daaa7a
Dell’Oro: 5G RAN growing; total RAN growth is slowing over next 5 years
According to a newly published forecast report by Dell’Oro Group, after four years of extraordinary growth that propelled the radio access network (RAN) market to reach new record levels, the RAN market is now transitioning from the expansion phase to the next phase in this 5G journey with more challenging comparisons and slower growth.
“It is still early days in the 5G journey but at the same time, the coverage and capacity phases that have shaped the capex cycles with previous technology generations still hold,” said Stefan Pongratz Vice President and analyst with the Dell’Oro Group. “Still, even with the expected changes in capital intensities as the operators reach their initial 5G coverage targets, the plethora of 5G frequencies taken together with the upside from FWA and eventually private 5G, will curb the peak-to-trough decline relative to 2G-4G,” continued Pongratz.
Editor’s Note: In December, Ericsson said it expects the RAN market to be flat with 5G build-out still in its early days.
Additional highlights from the Mobile RAN 5-Year January 2023 Forecast Report:
- Global RAN is projected to grow at a zero percent CAGR outside of China by 2027. See chart below.
- The less advanced MBB regions are expected to grow while RAN investments in both China and North America are expected to decline at mid-single digit CAGRs over the forecast period.
- 5G RAN is expected to grow another 25 percent to 30 percent by 2027, though this will barely be enough to offset steep declines in LTE.
- mmWave projections have been revised downward over the near term and upward in the outer part of the forecast to reflect the potential upside with higher EIRP solutions.
- Small cell RAN revenue growth has been outpacing macros for some time now and these trends are expected to extend throughout the forecast period, with small cell RAN revenues growing more than 20 percent by 2027.
Dell’Oro Group’s Mobile RAN 5-Year Forecast Report offers a complete overview of the Mobile RAN industry by region – North America, Europe, Middle East & Africa, Asia Pacific, China, and Caribbean & Latin America, with tables covering manufacturers’ revenue and unit shipments for 5GNR, 5G NR Sub 6 GHz, 5G NR mmW and LTE pico, micro, and macro base stations. The report also covers Open RAN, Virtualized RAN, small cells, and Massive MIMO. To purchase this report, please contact by email at [email protected].
Dell’Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, security, enterprise networks, and data center infrastructure markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell’Oro Group at +1.650.622.9400 or visit www.delloro.com
References:
5G RAN is Growing but Total RAN Growth is Slowing over Next Five Years, According to Dell’Oro Group
\
Strand Consult: Market for 5G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 31 European Countries
With its new report “The Market for 5G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 31 European Countries,” Strand Consult brings valuable evidence of the location, amount, and share of Chinese and non-Chinese equipment in European telecom networks. This report, the second of its kind, describes the respective amounts of 5G equipment from Huawei, ZTE, and non-Chinese vendors in European mobile networks and the share of such in equipment in the 5G Radio Access Network (RAN). Here are the highlights from the new report.
- There is little transparency about the amount, type, location, and share of 4G and 5G Chinese equipment in European networks.
- In 8 of 31 countries, more than 50% of the 5G RAN equipment comes from Chinese vendors. In 2020, it was 16 of 31 countries in which the 4G RAN equipment came from Chinese vendors.
- In one country, 100% of the 5G RAN comes from Chinese vendors. In 2020 there were 3 European countries with 100% 4G RAN equipment from Chinese vendors.
- Only 11 of 31 European countries can offer their users access to clean, non-Chinese networks.
- 41% of the mobile subscribers in Europe have access to 5G RAN from Chinese vendors. In 2020, 51% of European mobile subscribers had access to 4G RAN from Chinese vendors.
- The large European countries–Germany, Italy, Poland, Portugal, Austria, and Spain–purchase significant amounts of 5G equipment from Chinese vendors.
- Operators like Telenor and Telia in Norway, TDC in Denmark, 3 in Denmark and Sweden, T-Mobile Nederland’s, and Proximus in Belgium have switched out Chinese suppliers. None of those operators report increased networks cost or delay in 5G rollout.
- The data suggests that Germany appears not to take the security threat of China seriously. Nord Stream 2 was Germany’s debacle oil energy supplies from Russia; it appears that Germany sets up a similar scenario in the communications domain with Huawei and ZTE.
- As Germany accounts for 25% of European mobile customers, the German government’s lax approach to communications infrastructure creates a risk for Germany and all people who interconnect with German networks.
- Germany together with Italy, Poland, and Austria, comprise 50% of European mobile customers. These countries are heavily dependent on Chinese equipment, creating risk for their own nations and others which use their networks.
- In 2020, 57% of Germany’s 4G RAN came from Chinese vendors. In 2022, 59% of the 5G RAN in Germany comes from Chinese vendors.
- Huawei enjoys a higher market share in Berlin than in Beijing where it shares the market with ZTE and other vendors.
- US General Darryl A. Williams serves as the commanding general of the United States Army Europe and Africa (based in Wiesbaden, German) and commander of the Allied Land Command. He oversees more than 20,000 staff. Unwittingly when he uses a commercial mobile phone, the traffic is sent through a network built with Chinese equipment. Similarly when American military use their personal devices, they engage on a Chinese network at risk for intrusion.
Strand Consult’s report delivers detailed information about Chinese and non-Chinese network equipment in Europe at country level. The report highlights of the importance of the EU’s 5G toolbox and provides recommendations to improve its implementation. The toolbox applies to most of Europe’s 102 mobile operators across 31 countries serving some 673 million mobile customers. The report also provides valuable economic context to understand the market for RAN equipment.
The focus on 5G and 4G RAN reflects the shift of the security debate. There is consensus across most countries outside China that equipment provided by vendors owned and affiliated with the Chinese government and military poses unacceptable risk for the security and integrity of the core of the network. The discussion has evolved to whether and to what degree should such vendors be allowed to supply the RAN.
The 4G RANs studied in the 2020 report were purchased in the 12-year period of 2008-2020. Most of RANs were delivered and installed during 2009-2016 when operators upgraded their 2G and 3G networks to 4G networks. The main part of the 5G RAN was purchased, delivered, and installed after 2020.
When performing a financial analysis of the cost of restricting Huawei, one must consider that network upgrades will happen regardless of selection of vendor. There is a sunk cost to network upgrades which must be subtracted from the total cost of using a Chinese vendor.
Despite the widespread knowledge of the threat associated with using Chinese equipment, some of Europe’s largest operators have purchased and deployed Chinese 5G equipment in their networks after 2020. That decision could have major consequences for their shareholders if Europe’s policymakers conclude that it is not smart to depend on Chinese telecommunications infrastructure in the same way as it did for Russian gas.
The report is valuable for mobile operators and their shareholders, communications policymakers, security and defense analysts, network engineers, and other professionals in the field. Contact Strand Consult today to get your free copy of the report “The Market for 5G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 31 European Countries.”
References:
https://strandconsult.dk/field/reports/
Strand Consult: Open RAN hype vs reality leaves many questions unanswered
O-RAN Alliance tries to allay concerns; Strand Consult disagrees!
Strand Consult: What NTIA won’t tell the FCC about Open RAN
Strand Consult: MWC 2022 Preview and What to Expect
Strand Consult: 5G in 2019 and 2020 telecom predictions
Ericsson expects RAN market to be flat with 5G build-out still in its early days; U.S. cellular industry growth to slow in 2023
Ericsson is planning for a flat RAN market and is structuring its cost base and operations accordingly. Underlying the flat market is a technology shift to 5G from earlier generation. 5G build-out is still in its early days with only about 20% of all base station sites outside China installed with 5G mid-band. Because 5G is still in its early days, vendors like Ericsson and Nokia are seeing lower margins. Therefore, they are relying more heavily on patent royalties to boost profits. Because 5G is still in its early days, vendors like Ericsson and Nokia are seeing lower margins. Therefore, they are relying more heavily on patent royalties to boost profits.
Given the rapid increase in network traffic levels, operators’ investment in performance and capacity is expected to remain robust. The 5G RAN market is expected to grow by over 11% per annum over the next three years, with potential further upside from areas such as Fixed Wireless Access, Enterprise connectivity, XR and Mission Critical Services (which require URLLC which meets performance requirements in ITU M.2410).
In Networks, Ericsson expects to expand its global footprint and enhance gross income through continued investments in technology for performance and cost leadership and, in addition, improve productivity and capital efficiency across the supply chain. In particular the Segment will continue investing in enhanced portfolio energy performance, enabled by Ericsson Silicon and innovating next-generation open architecture, such as Cloud RAN – key areas of strategic importance for its operator customers. Cloud RAN also offers potential in the enterprise segment.
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
Separately, Morgan Stanley analysts forecast that the U.S. wireless industry growth will slow in 2023.
“Carriers could move to cut pricing in order to maintain their subscriber bases,” the Morgan Stanley analysts wrote in a report to investors issued Thursday. That could reduce the operators’ ability to make money, they noted. “A continued adoption of premium plans could also support wireless service revenue growth,” they added.
Morgan Stanley analysts expect the U.S. wireless industry – including Verizon, AT&T, T-Mobile, Dish Network and cable companies like Comcast and Charter Communications – to collectively add 8.7 million new postpaid phone customers during 2023. That’s down only slightly from 8.9 million during 2022 and just below the record 10 million that providers collectively added over the course of 2021.
“We see the biggest slowdown in 2023 adds at AT&T, while Verizon could grow adds modestly yoy [year over year] off a low base, and T-Mobile can do slightly better given this year saw the impact of the Sprint network shutdown,” the Morgan Stanley analysts wrote. “We will be watching the growing deployment of eSIM technology to see if it opens the door to higher switching activity, while it should also help carriers lower costs through an easier activation process.”
References:
https://www.prnewswire.com/news-releases/ericsson-capital-markets-day-2022-301704231.html
https://telecoms.com/519003/ericsson-expects-ran-market-growth-to-be-flat-for-years/