Highlights of FiberConnect 2024: PON-related products dominate
The Fiber Broadband Association’s flagship conference, FiberConnect 2024, concluded July 31, 2024, in Nashville, Tennessee. It featuring 275 speakers and 286 exhibitors in the Expo Hall, with about half the attendees from operators and half representing vendors. The show provided a great opportunity to gauge the pulse of the fiber based broadband industry in North America.
China Unicom-Beijing and Huawei build “5.5G network” using 3 component carrier aggregation (3CC)
Huawei says it has deployed an “ultra large-scale 5.5G network” (there is no definition, 3GPP approved specs, or ITU-R recommendations/standards for 5.5G) operated by China Unicom in Beijing. The network uses three component carrier (3CC) aggregation to provide 70 percent coverage within Beijing’s 4th urban ring road. Huawei says China Unicom will offer comprehensive 5.5G service (again undefined) across stadiums, metro stations and tunnels, residential areas, scenic spots, business districts, and universities in key areas within the city’s 4th Ring Road and Beijing Municipal Administrative Center.
Editor’s Note: At the 5G Advanced Forum during MWC Shanghai 2023, Huawei’s President of ICT Products & Solutions, Yang Chaobin said, “In 2024, Huawei will launch a complete set of commercial 5.5G network equipment to be prepared for the commercial deployment of 5.5G.” Many believe that 5.5G is another name for 3GPP defined 5G Advanced, which is expected to bring new wireless technology innovations that improve speed, coverage, mobility, power efficiency, and sustainability. 3GPP Release 18 in 2024 is the beginning of 5G Advanced. The second and major release of 5G Advanced, Release 19, will be completed by the end of 2025. This release will focus on enhanced performance and the 5G system’s ability to meet commercial deployment needs.
In the Beijing Action Plan for Promoting 5G-A Technology Evolution and Application Innovation (2024-2026), Beijing Municipal Communications Administration hammered home the importance of Beijing’s role in pioneering 5.5G development. China Unicom Beijing is striving to do its part, with a large-scale 5.5G network demonstration at the beginning of 2024 followed by the ultra-large-scale commercial 5.5G network deployment of recent months, in helping Beijing become a “dual 10 Gbps” city that sets the bar for network construction, device development, and industry enablement. With the first version of 5.5G standards frozen in June 2024 and more than 20 commercial 5.5G devices now on the market, a mature 5.5G industry ecosystem is taking shape.
“Full 5.5G coverage” in Beijing’s core urban areas and the Beijing Municipal Administrative Center. Photo: Huawei
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In August 2022, China Unicom Beijing and Huawei commercialized the world’s largest 3.5 GHz 2CC network, which has brought 200 MHz 2CC coverage to more than 85% of Beijing’s urban area while providing comprehensive coverage for Beijing’s core areas and the Beijing Municipal Administrative Center. In 2023, this was further augmented when China Unicom Beijing and Huawei completed a 2.1 GHz band deployment targeting key urban scenarios. These deployments substantially improved the network experience of users in Beijing while laying a solid foundation for the future evolution to 5.5G, and this year’s 5.5G 3CC deployment paves the way for larger-scale 5.5G deployments in the coming years.
The ultra-large commercial 5.5G 3CC network consists of more than 4,000 base stations and covers well-known landmarks in Beijing, such as Wukesong, Capital Indoor Stadium, Workers’ Stadium, Beijing Railway Station, Guijie Street, Panjiayuan, and Beijing University of Technology. Featuring 5.5G capabilities, the network provides powerful support for services such as immersive video, UHD live streaming, and cloud gaming. In addition to consumer scenarios, China Unicom Beijing is proactively pursuing innovations in UHD shallow compression encoding, IoT, and XR split rendering, unlocking the full potential of 5.5G networks to enable various industries.
Yang Lifan, Deputy General Manager of China Unicom Beijing, remarked: “We have the world’s largest 200 MHz 5G network and it makes our 3CC carrier aggregation much easier. 5.5G 3CC coverage will be extended to match that of our current 200 MHz 5G network. With Huawei’s advanced technologies and our smart operations, we will provide users with a much better network experience.”
David Li, President of Huawei Wireless Network 5G<E TDD Product Line, said: “We are honored to mark a groundbreaking milestone in 5.5G network construction with China Unicom Beijing — large-scale commercial 5.5G. We will continue to innovate and provide more efficient, smarter, and greener network solutions, enabling users to enjoy a superior, smooth experience with 5.5G networks.”
References:
https://www.huawei.com/en/news/2024/7/5ga-beijing-3cc#
Huawei pushes 5.5G (aka 5G Advanced) but there are no completed 3GPP specs or ITU-R standards!
https://blog.huawei.com/en/post/2023/11/14/5-5g-whats-in-a-number
5G Advanced offers opportunities for new revenue streams; 3GPP specs for 5G FWA?
Nokia, BT Group & Qualcomm achieve enhanced 5G SA downlink speeds using 5G Carrier Aggregation with 5 Component Carriers
T-Mobile US, Ericsson, and Qualcomm test 5G carrier aggregation with 6 component carriers
Finland’s Elisa, Ericsson and Qualcomm test uplink carrier aggregation on 5G SA network
Verizon Business sees escalating risks in mobile and IoT security
Verizon Business released its 2024 Mobile Security Index (MSI) report outlining the top threats to mobile and IoT device security. This year’s report, in its seventh iteration, goes beyond employee-level mobile usage and extends into the usage of IoT devices and sensors and the security concerns the growth of these devices can present especially as remote work continues to be a trend. This expanded view of mobile security concerns for organizations showcases the evolving threat landscape that CIOs and other IT decision makers must contend with.
This annual report surveyed 600 people responsible for security strategy, as well as employee-level mobile usage, the report looked at the use of IoT devices and sensors and the security concerns that come with them as remote work continues to be a trend.
Highlights:
- 80% of responding organizations consider mobile devices critical to their operations, while 95% are actively using IoT devices.
- 96% of critical infrastructure respondents use IoT devices, with % having experienced a significant mobile or IoT device-related security incident.
- 77% of respondents anticipate that AI-assisted attacks, such as deep fakes and SMS phishing, are likely to succeed.
Employees are using more mobile and IoT devices, leading to increased cyber risks
The survey finds that 80% of respondents consider mobile devices critical to their operations, while 95% are actively using IoT devices. However, this heavy reliance comes with significant security concerns. In critical infrastructure sectors, where 96% of respondents report using IoT devices, more than half state that they have experienced severe security incidents that led to data loss or system downtime.
“These findings highlight the continued friction that employers face as more and more work is done on personal mobile devices,” said Phil Hochmuth Research VP, enterprise mobility at IDC. “This is why we are seeing more and more employers move from a pure bring-your-own-device model to employer provided devices where CIO’s can have greater governance to protect critical infrastructure from cyber attacks.”
Additionally, Hochmuth says, organizations should adopt robust frameworks such as Zero Trust and the National Institute of Standards and Technology’s Cybersecurity Framework (NIST CSF) 2.0, and comply with mandates like the European Union’s NIS2 Directive.
Emerging AI cyberthreats meet new AI defenses
Emerging artificial intelligence (AI) technologies are expected to exacerbate the mobile threat landscape, but it also presents opportunities for defense. A striking 77% of respondents anticipate that AI-assisted attacks, such as deepfakes and SMS phishing, are likely to succeed. At the same time, 88% of critical infrastructure respondents acknowledge the growing importance of AI-assisted cybersecurity solutions.
Accounting for IoT growth in cybersecurity planning
With companies increasingly deploying IoT devices, their digital landscapes are evolving, creating a need for cybersecurity strategies to evolve in kind.
“The Industrial Internet of Things (IIoT) is giving rise to a massive expansion in mobile device technology that goes well beyond phones, tablets and laptops. Enterprise networks now include all sorts of sensors and purpose-built devices that monitor, measure, manage and control commercial tasks and data flow,” said TJ Fox, SVP of Industrial IoT and Automotive, Verizon Business. “That IIoT growth brings with it a proportionate need for more knowledge, awareness and IT solutioning to ensure the security of those increasingly sophisticated networks. The growing importance that IoT plays in our customer’s technology ecosystem underscores why it should be a component in any sound cybersecurity program.”
What business leaders should know
The 2024 MSI helps inform cybersecurity decisions for leaders of businesses of all sizes and in key sectors. As mobile and IoT threats rise, the need for robust security measures has never been greater. In response to these growing threats, 84% of respondents have increased their mobile device security spending over the past year, with 89% of critical infrastructure respondents planning further increases.
This year’s MSI includes contributions from Verizon’s partners including Ivanti, Lookout, Jamf among others. Help your organization lower cyber risks by deploying comprehensive security protections, continuous employee education and advanced threat detection capabilities.
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Quotes:
Phil Hochmuth Research VP at IDC said: “These findings highlight the continued friction that employers face as more and more work is done on personal mobile devices. This is why we are seeing more and more employers move from a pure bring-your-own-device model to employer-provided devices where CIOs can have greater governance to protect critical infrastructure from cyber attacks.”
TJ Fox, SVP of Industrial IoT and Automotive, Verizon Business added: “The Industrial Internet of Things (IIoT) is giving rise to a massive expansion in mobile device technology that goes well beyond phones, tablets and laptops. Enterprise networks now include all sorts of sensors and purpose-built devices that monitor, measure, manage and control commercial tasks and data flow.
“That IIoT growth brings with it a proportionate need for more knowledge, awareness and IT solutions to ensure the security of those increasingly sophisticated networks. The growing importance that IoT plays in our customer’s technology ecosystem underscores why it should be a component in any sound cybersecurity program.”
References:
Verizon Business 2024 Mobile Security Index
https://www.telecoms.com/security/verizon-warns-of-escalating-risks-in-mobile-and-iot-security
IEEE/SCU SoE Virtual Event: May 26, 2022- Critical Cybersecurity Issues for Cellular Networks (3G/4G, 5G), IoT, and Cloud Resident Data Centers
IoT Sensor Standards Are Absolutely Essential for Security
IoT Disappoints: Security, Connectivity and Device Onboarding Cited as Top Challenges
AI winner Nvidia faces competition with new super chip delayed
The Clear AI Winner Is: Nvidia!
Strong AI spending should help Nvidia make its own ambitious numbers when it reports earnings at the end of the month (it’s 2Q-2024 ended July 31st). Analysts are expecting nearly $25 billion in data center revenue for the July quarter—about what that business was generating annually a year ago. But the latest results won’t quell the growing concern investors have with the pace of AI spending among the world’s largest tech giants—and how it will eventually pay off.
In March, Nvidia unveiled its Blackwell chip series, succeeding its earlier flagship AI chip, the GH200 Grace Hopper Superchip, which was designed to speed generative AI applications. The NVIDIA GH200 NVL2 fully connects two GH200 Superchips with NVLink, delivering up to 288GB of high-bandwidth memory, 10 terabytes per second (TB/s) of memory bandwidth, and 1.2TB of fast memory. The GH200 NVL2 offers up to 3.5X more GPU memory capacity and 3X more bandwidth than the NVIDIA H100 Tensor Core GPU in a single server for compute- and memory-intensive workloads. The GH200 meanwhile combines an H100 chip [1.] with an Arm CPU and more memory.
Photo Credit: Nvidia
Note 1. The Nvidia H100, sits in a 10.5 inch graphics card which is then bundled together into a server rack alongside dozens of other H100 cards to create one massive data center computer.
This week, Nvidia informed Microsoft and another major cloud service provider of a delay in the production of its most advanced AI chip in the Blackwell series, the Information website said, citing a Microsoft employee and another person with knowledge of the matter.
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Nvidia Competitors Emerge – but are their chips ONLY for internal use?
In addition to AMD, Nvidia has several big tech competitors that are currently not in the merchant market semiconductor business. These include:
- Huawei has developed the Ascend series of chips to rival Nvidia’s AI chips, with the Ascend 910B chip as its main competitor to Nvidia’s A100 GPU chip. Huawei is the second largest cloud services provider in China, just behind Alibaba and ahead of Tencent.
- Microsoft has unveiled an AI chip called the Azure Maia AI Accelerator, optimized for artificial intelligence (AI) tasks and generative AI as well as the Azure Cobalt CPU, an Arm-based processor tailored to run general purpose compute workloads on the Microsoft Cloud.
- Last year, Meta announced it was developing its own AI hardware. This past April, Meta announced its next generation of custom-made processor chips designed for their AI workloads. The latest version significantly improves performance compared to the last generation and helps power their ranking and recommendation ads models on Facebook and Instagram.
- Also in April, Google revealed the details of a new version of its data center AI chips and announced an Arm-based based central processor. Google’s 10 year old Tensor Processing Units (TPUs) are one of the few viable alternatives to the advanced AI chips made by Nvidia, though developers can only access them through Google’s Cloud Platform and not buy them directly.
As demand for generative AI services continues to grow, it’s evident that GPU chips will be the next big battleground for AI supremacy.
References:
AI Frenzy Backgrounder; Review of AI Products and Services from Nvidia, Microsoft, Amazon, Google and Meta; Conclusions
https://www.nvidia.com/en-us/data-center/grace-hopper-superchip/
https://www.theverge.com/2024/2/1/24058186/ai-chips-meta-microsoft-google-nvidia/archives/2
https://news.microsoft.com/source/features/ai/in-house-chips-silicon-to-service-to-meet-ai-demand/
AI wave stimulates big tech spending and strong profits, but for how long?
Big tech companies have made it clear over the last week that they have no intention of slowing down their stunning levels of spending on artificial intelligence (AI), even though investors are getting worried that a big payoff is further down the line than most believe.
In the last quarter, Apple, Amazon, Meta, Microsoft and Google’s parent company Alphabet spent a combined $59 billion on capital expenses, 63% more than a year earlier and 161 percent more than four years ago. A large part of that was funneled into building data centers and packing them with new computer systems to build artificial intelligence. Only Apple has not dramatically increased spending, because it does not build the most advanced AI systems and is not a cloud service provider like the others.
At the beginning of this year, Meta said it would spend more than $30 billion in 2024 on new tech infrastructure. In April, he raised that to $35 billion. On Wednesday, he increased it to at least $37 billion. CEO Mark Zuckerberg said Meta would spend even more next year. He said he’d rather build too fast “rather than too late,” and allow his competitors to get a big lead in the A.I. race. Meta gives away the advanced A.I. systems it develops, but Mr. Zuckerberg still said it was worth it. “Part of what’s important about A.I. is that it can be used to improve all of our products in almost every way,” he said.
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This new wave of Generative A.I. is incredibly expensive. The systems work with vast amounts of data and require sophisticated computer chips and new data centers to develop the technology and serve it to customers. The companies are seeing some sales from their A.I. work, but it is barely moving the needle financially.
In recent months, several high-profile tech industry watchers, including Goldman Sachs’s head of equity research and a partner at the venture firm Sequoia Capital, have questioned when or if A.I. will ever produce enough benefit to bring in the sales needed to cover its staggering costs. It is not clear that AI will come close to having the same impact as the internet or mobile phones, Goldman’s Jim Covello wrote in a June report.
“What $1 trillion problem will AI solve?” he wrote. “Replacing low wage jobs with tremendously costly technology is basically the polar opposite of the prior technology transitions I’ve witnessed in my 30 years of closely following the tech industry.” “The reality right now is that while we’re investing a significant amount in the AI.space and in infrastructure, we would like to have more capacity than we already have today,” said Andy Jassy, Amazon’s chief executive. “I mean, we have a lot of demand right now.”
That means buying land, building data centers and all the computers, chips and gear that go into them. Amazon executives put a positive spin on all that spending. “We use that to drive revenue and free cash flow for the next decade and beyond,” said Brian Olsavsky, the company’s finance chief.
There are plenty of signs the boom will persist. In mid-July, Taiwan Semiconductor Manufacturing Company, which makes most of the in-demand chips designed by Nvidia (the ONLY tech company that is now making money from AI – much more below) that are used in AI systems, said those chips would be in scarce supply until the end of 2025.
Mr. Zuckerberg said AI’s potential is super exciting. “It’s why there are all the jokes about how all the tech C.E.O.s get on these earnings calls and just talk about A.I. the whole time.”
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Big tech profits and revenue continue to grow, but will massive spending produce a good ROI?
Last week’s Q2-2024 results:
- Google parent Alphabet reported $24 billion net profit on $85 billion revenue.
- Microsoft reported $22 billion net profit on $65 billion revenue.
- Meta reported $13.5 billion net profit on $39 billion revenue.
- Apple reported $21 billion net profit on $86 billion revenue.
- Amazon reported $13.5 billion net profit on $148 billion revenue.
This chart sums it all up:
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References:
https://www.nytimes.com/2024/08/02/technology/tech-companies-ai-spending.html
https://www.axios.com/2024/08/02/google-microsoft-meta-ai-earnings
https://www.nvidia.com/en-us/data-center/grace-hopper-superchip/
AI Frenzy Backgrounder; Review of AI Products and Services from Nvidia, Microsoft, Amazon, Google and Meta; Conclusions
Massive layoffs and cost cutting will decimate Intel’s already tiny 5G network business
Huge Loss & Restructuring:
In its August 1st press release detailing a $1.6 billion 2Q-2024 loss (mainly from it’s foundry business) [1.] Intel announced it was cutting more than 15% of its workforce by 2025 with most of those coming by year end. The company is also suspending its dividend starting in the fourth quarter of 2024.
Note 1. Intel Foundry, which reported a $2.5bn operating loss during the first quarter of 2024, lost an additional $2.8bn in Q2-2024. That business is seen as a U.S. strategic asset in a major move to bring back chip making to the U.S. from Taiwan, China and South Korea.
“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation,” said Pat Gelsinger, Intel CEO. “These actions, combined with the launch of Intel 18A next year to regain process technology leadership, will strengthen our position in the market, improve our profitability and create shareholder value.”
CEO/CFO Earnings Call prepared remarks:
“We are targeting a headcount reduction of greater than 15% by the end of 2025, with the majority of this action completed by the end of this year. We do not do this lightly, and we have carefully considered the impact this will have on the Intel family. These are hard but necessary decisions. Our actions will reduce OpEx (operating expenses) to approximately $20 billion in 2024, and we see a bigger impact next year, with 2025 OpEx targeted at $17.5 billion, more than 20% below prior estimates. We expect further benefits in 2026, with OpEx to decline in absolute dollars yet again. Even as we lower overall spending, we will continue to fund the investments needed to deliver our strategy.”
The company’s latest filing with the Securities and Exchange Commission (SEC) stated there were 124,800 employees as of December 2023, down from 131,900 a year before. Therefore, a 15% reduction could translate to the loss of 18,720 employees and we wouldn’t be surprised by total job cuts exceeding 20,000! In addition to layoffs, Intel is pushing older employees to retire.
CEO Pat Gelsinger wrote in a letter to Intel employees:
“Next week, we’ll announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures. I believe that how we implement these changes is just as important as the changes themselves, and we will adhere to Intel values throughout this process.”
The objective is to greatly reduce various operational costs (research and development plus marketing, general and administrative expenses) to about $20 billion this year and $17.5 billion in 2025, “with further reductions planned in 2026,” said Intel. That $17.5 billion would be about $4.2 billion less than Intel booked for these expenses in 2023, according to its last annual SEC filing, and a reduction of $7 billion compared with the figure for 2022.
Fitch Ratings downgraded Intel’s Long-Term Issuer Default Rating to ‘BBB+’ from “A-,” citing execution risks and potential negative rating actions. Fitch also affirmed Intel’s Short-Term IDR and commercial paper rating at ‘F2’. Fitch believes execution risk remains significant for Intel and that missteps could result in further negative rating actions.
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Analyst Comments:
Rosenblatt Securities analyst Hans Mosesmann reiterated his sell rating on Intel stock with a price target of 17. “We anticipate that the company (Intel) will continue to lose share to AMD as its manufacturing roadmap is tepid compared to that of the leading-edge player,” Mosesmann said in a client note.
Bernstein analyst Stacy Rasgon was particularly grim about Intel’s prospects.
“The company’s issues are now approaching the existential,” he said in a client note. “In other circumstances we believe we would now be having ‘going concern’ conversations with clients.”
Impact on Intel’s 5G Business:
The company’s website states: “From Cloud to Network to Edge: 5G Is Powered by Intel Intel-powered 5G networks deliver a powerful data-centric future where compute is fluid, intelligent, and pervasive—creating an evolutionary leap in agility and scalability.”
PHOTO Credit: Intel
Intel incorrectly states, “Intel is embedded throughout the 5G value chain, offering flexible performance, Intel® Xeon® Scalable processors, custom RAN configurations, accelerators, software, and a common toolchain.” Does anyone really believe that?
Intel wants 5G network equipment vendors to switch from custom ASIC silicon they design to its general-purpose processors (GPPs). But there has been very limited adoption of those processors in the radio access network (RAN) to date. Many telco executives remain unconvinced GPPs, especially based on x86, can measure up. Arguments about using the same platforms for multiple needs look spurious when most RAN compute is at the mast site, where it cannot realistically be shared with anything else.
Of the big three 5G kit vendors, only Ericsson says Intel is a good option for Layer 1 (PHY), the category of most demanding RAN software. Huawei and Nokia remain vehemently opposed to using Intel silicon in this area. As expected, most of Ericsson’s 5G products today are based on its own custom silicon, not Intel’s GPPs.
References:
https://www.intel.com/content/www/us/en/newsroom/news/actions-accelerate-our-progress.html#gs.d2jtpn
https://download.intel.com/newsroom/2024/corporate/Earnings-Call-2Q2024-080124.pdf
https://www.intel.com/content/www/us/en/wireless-network/5g-overview.html
AT&T’s leads the pack of U.S. fiber optic network service providers
AT&T and Verizon are spending billions of dollars to grow their existing fiber-optic networks and add to the millions of broadband clients they already serve, mostly in regions covered by their historical landline-telephone infrastructure. Meanwhile, T-Mobile has five partnerships with fiber-optic internet providers that could serve millions of customers in the coming years. There are other fiber based internet providers that mostly serve business customers. Those include Comcast Business, Frontier Communications, Lumen, and Google Fiber (which also serves residential customers).
AT&T’s fiber business has remained incredibly strong, with fiber revenues growing almost 18% YoY. That led to strong top line EBITDA and EBITDA margin growth in 2Q-2024. There were 239,000 AT&T Fiber net adds in the quarter. AT&T has posted 200,000+ net fiber adds for 18 consecutive quarters – quite an enviable record. The company has managed to grow to 8.8 million total fiber subscribers, as average fiber revenue has gone up to almost $2 billion quarterly.
According to Seeking Alpha (subscription required), AT&T is substantially more reliable than Comcast, offers symmetric up and down bandwidth, and has no data caps. That makes it a much more pleasing experience. The company has worked to chase synergies with its AT&T mobility business, with not only fiber subscriptions growing, but the % of customers with AT&T mobility has grown as well. That ratio is now almost 40%.
“For the past four years, we’ve delivered consistent, positive results that have repositioned AT&T. Our solid performance this quarter demonstrates the durable benefits of our investment-led strategy,” said John Stankey, AT&T CEO. “AT&T is leading the way in converged connectivity as customers increasingly seek one provider who can seamlessly connect them in their home, at work and on the go. This is proving to be a winning strategy. Today, nearly four of every 10 AT&T Fiber households also choose AT&T wireless service. As the nation’s largest consumer fiber builder, we see this as an opportunity to continue to grow subscribers and revenues, while deepening customer relationships.”
Fiber investment drives valuable convergence opportunities:
• Wireless penetration of fiber subscribers has increased more than 400 bps since 2Q21
• Expansion of fiber footprint enables increased opportunities to sell into high quality cohort
• Converged customers are valuable and durable, with longer customer lives
“Our combined customers are happier customers,” AT&T CEO John Stankey said on a call with analysts. “Why a race to convergence? Because that’s a good way to make money, and it’s a good way to keep customers in the fold.”
AT&T CEO John Stankey meeting with fiber-optic workers at an Evansville, Ind., job site in 2022. Photo: Scotty Perry/Bloomberg News
References:
https://www.labs.att.com/story/2024/q2-earnings.html
https://seekingalpha.com/article/4708956-att-earnings-highlights-continued-recovery-potential
https://www.wsj.com/business/telecom/t-mobile-fiber-optic-internet-connection-380957ef
AT&T’s fiber business grows along with FWA “Internet Air” in Q4-2023
AT&T Internet Air FWA home internet service now available in 16 markets
T-Mobile posts impressive wireless growth stats in 2Q-2024; fiber optic network acquisition binge to complement its FWA business
T-Mobile US today reported a 4% year-over-year YoY) increase in service revenues, to about $16.4 billion, for the recent second quarter. Total sales increased 3%, to almost $19.8 billion. The un-carrier’s profitability metrics were even better. Adjusted earnings (before interest, tax, depreciation and amortization) rose 9%, to nearly $8.1 billion. T-Mobile’s adjusted free cash flow rocketed 54%, to about $4.4 billion. There were also several positive changes to full-year guidance, which included raising the outlook for free cash flow by $150 million (at the midpoint), to $16.8 billion.
“It was another industry-leading quarter for T-Mobile as our continued focus on delivering customers more value and a superior network experience enabled us to outperform our peers in the marketplace and translated into outsized financial growth,” said Mike Sievert, CEO of T-Mobile. “Our formula is continuing to work and we’ve got a lot of room to run including pursuing new growth opportunities that bring the Un-carrier experience to more customers and new markets. This incredible momentum makes us even more excited for what’s next for T-Mobile, and our confidence is reflected in our raised guidance for the full year ahead.”
Peter Osvaldik, T-Mobile’s chief financial officer, boasted “unmatched capital efficiency” on today’s call with analysts. “While our longer-term expectations continue to be in the $9 to $10 billion range annually, as we discussed before, 2024 is a bit lower given certain capital-efficient network activities such as spectrum re-farming and deploying additional 2.5GHz licenses from Auction 108, benefiting from the significant 5G radio deployments during our merger integration,” he said, referring to a previous frequency sale and the $26 billion merger with Sprint in 2020. Site upgrades and build activity is planned in the fourth quarter, he said.
Other T-Mo Highlights:
Industry-Leading Customer Growth Fueled by Best Network and Best Value Combination (1)
- Postpaid net account additions of 301 thousand, best in industry
- Postpaid net customer additions of 1.3 million, best in industry, crossed 100 million postpaid customers milestone
- Postpaid phone net customer additions of 777 thousand, best in industry, highest Q2 in company history, and postpaid phone churn of 0.80%
- High Speed Internet net customer additions of 406 thousand, best in industry, highest share of industry net additions ever
Translating Industry-Leading Customer Growth Into Industry-Leading Financial Performance
- Service revenues of $16.4 billion grew 4% year-over-year, best in industry growth
- Postpaid service revenues of $12.9 billion grew 7% year-over-year, best in industry growth
- Net income of $2.9 billion grew 32% year-over-year, best in industry growth
- Diluted earnings per share (“EPS”) of $2.49 grew 34% year-over-year, best in industry growth
- Core Adjusted EBITDA (2) of $8.0 billion grew 9% year-over-year, best in industry growth
- Net cash provided by operating activities of $5.5 billion, record high and grew 27% year-over-year
- Adjusted Free Cash Flow (2) of $4.4 billion, record high and grew 54% year-over-year
- Returned $3.0 billion to stockholders in Q2 2024, including repurchases of $2.3 billion of common stock and a quarterly dividend payment of $759 million
Overall Network Leader with Largest, Fastest and Most Advanced 5G Network:
T-Mobile’s network breadth, depth and technology leadership is expected to keep the company years ahead of the competition with total 5G and Ultra Capacity 5G coverage area that continues to far exceed that of the next closest competitor. The company’s unique multi-layer approach to 5G, with dedicated standalone 5G deployed nationwide across 600MHz, 1.9GHz, and 2.5GHz, delivers customers a consistently strong experience and 87% of 5G traffic is on sites with all three spectrum bands deployed.
T-Mobile’s 5G leadership has translated into overall network leadership, with the company continuing to earn third-party recognition for its overall network performance:
- Ookla: In its Speedtest Connectivity United States 1H 2024 report, T-Mobile ranked as the top network performer in seven categories, including wins for fastest overall and 5G network and most consistent overall network, along with best overall and 5G mobile video experience, best gaming experience and highest ranking consumer sentiment.
- Opensignal: In its latest USA Mobile Network Experience report, T-Mobile ranked first for all overall network experience metrics while also earning additional wins for 5G with the fastest 5G download speeds, best 5G coverage experience and best 5G availability.
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Notes: See 5G device, coverage, and access details at T-Mobile.com. Ookla awards: Based on analysis by Ookla® of Speedtest Intelligence® data for the U.S., 1H 2024. Ookla trademarks used under license and reprinted with permission. Opensignal Awards: USA: Mobile Network Experience Report July 2024, based on independent analysis of mobile measurements recorded during the period March 1 – May 29, 2024. © 2024 Opensignal Limited. |
- The 5G availability gap between T-Mobile and its competitors measures “what proportion of time people have a network connection, in places they most commonly frequent.” T-Mobile scored 67.9% on average. AT&T managed only 11.8%, while Verizon was on a lousy 7.7%. That gap between one player and the other two on such a seemingly important metric may concern investors in AT&T and Verizon.
- 87% of T-Mo’s 5G traffic is now carried at sites where equipment supports all three of the 600MHz, 1.9GHz and 2.5GHz spectrum bands. AT&T and Verizon, by contrast, rely partly on airwaves in much higher ranges, including frequencies in and around the 3.5GHz band. Often described as a sweet spot for 5G, combining decent propagation with sufficient capacity, this “C-band” has come in for heavy criticism from Moffett. “Put simply, C-band isn’t very good spectrum,” he said in a research note issued earlier this month.
- T-Mo’s CAPEX had decreased and likely will continue to do so. That’s partly why free cash flow is high and rising. Capital expenditure fell from $14 billion in 2022, to $9.8 billion last year, and a dip below the $9 billion mark is now forecast for 2024.
- Net postpaid phone additions were up 777,000 in the second quarter, which resulted in T-Mobile having more than 77.2 million postpaid subs in total. For comparison, AT&T has 88 million postpaid subscribers and 19.3 million prepaid subscribers. Verizon has 94 million wireless retail +30.2 million business postpaid connections for a total of 124.2 million postpaid subs.
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Fiber Optic Network Opportunity:
Historically a pure-play wireless company, T-Mobile is on a fiber binge. In April, it announced intentions to acquire Lumos through a joint venture with investment firm EQT. More recently, it’s teaming with KKR to invest $4.9 billion for a 50% equity stake in Metronet in a joint venture with KKR. When combined, these deals position T-Mobile to reach about 10 million homes with fiber by the end of 2030. That’s on top of the fiber foray it’s doing with open access network operators like Intrepid Fiber, SiFi Networks and Tillman FiberCo.
T-Mo’s fiber appetite is an adjunct to its fixed wireless access (FWA) service. That’s its high-speed internet service that uses extra capacity on its mobile network. T-Mobile ended Q2 with 5.6 million high-speed internet customers. “We sell fixed wireless access in places in the network where we have excess capacity that won’t be consumed either now or in the future by normal mobile usage,” said T-Mobile Marketing President Mike Katz on the earnings call.
“That’s where we sell fixed wireless. In places where we deploy fiber, there’s an opportunity for us take some of the demand that we’re seeing in fixed wireless where those excess capacity pockets don’t exist and move them to fiber, so there’s really a bunch of complementary features to it,” he continued.
“One thing we feel very strongly about is that these (fiber optic network) transactions are not defensive of our mobile business,” CEO Sievert said. “We believe that our mobile business stands strongly alone. Consumer choice has been made very clear that wireless is a deeply considered sale. It’s the primary purchase decision in a connected life and that people will choose the wireless company that is right for them and we believe we will compete effectively as a pure play wireless company regardless of our simultaneous participation in broadband.”
Put together with its 5G broadband service, T-Mobile’s expanding web of physical fiber lines could help the company reach more than 17 million homes by 2030, according to New Street Research. That would trail AT&T and Verizon, which could respectively cover 38 million and 25 million homes with a fixed-line or wireless broadband offering, the research firm says.
“Because they’re in the game, they’re closing the gap with Verizon and AT&T, but they’re well behind,” New Street analyst Jonathan Chaplin said of T-Mobile. “If they really want to build a business the size of AT&T, they’d have to buy a Comcast or a Charter [Communications].”
“It’s kind of a land grab,” said BNP Paribas telecom analyst Sam McHugh, adding that telecom companies are rushing into neighborhoods where residents aren’t happy with their cable provider and don’t yet have fiber-optic service available. “Investors are worried that the more they invest in fiber, the more they become like AT&T and Verizon both in terms of financial profile and business mix,” McHugh said. Any aggressive moves could also drive up the prices of potential deal targets.
“If the whole fiber industry realizes, ‘Hey we have this big monster coming in and buying up fiber,’ it’s probably not the word they want on the street,” said Armand Musey, president of telecom advisory firm Summit Ridge Group. “Suddenly, all the sellers would have their antennas up.”
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References:
https://www.lightreading.com/5g/t-mobile-results-pile-5g-humiliation-onto-at-t-and-verizon
https://www.verizon.com/about/sites/default/files/Verizon_Fact_Sheet.pdf
https://www.t-mobile.com/news/network/t-mobile-kkr-joint-venture-to-acquire-metronet
https://www.wsj.com/business/telecom/t-mobile-fiber-optic-internet-connection-380957ef
T-Mobile to acquire UScellular’s wireless operations in $4.4 billion deal
T-Mobile & EQT Joint Venture (JV) to acquire Lumos and build out T-Mobile Fiber footprint
T-Mobile US, Ericsson, and Qualcomm test 5G carrier aggregation with 6 component carriers
Ookla: T-Mobile and Verizon lead in U.S. 5G FWA
T-Mobile combines Millimeter Wave spectrum with its 5G Standalone (SA) core network
Despite U.S. sanctions, Huawei has come “roaring back,” due to massive China government support and policies
On March 30th we wrote that Huawei Technologies was back, with its net profit more than doubled from the same period last year (2023). Today, a Wall Street Journal (WSJ) news story reaffirmed that with reasons which were really no surprise! Huawei’s profit more than doubled last year, the largest jump in at least two decades. Roughly two-thirds of its revenue comes from domestic (China) clients.
Five years ago, the U.S. sanctioned Huawei, cutting off the Chinese company’s access to advanced U.S. technologies like semiconductors and the Android OS for its smartphones. Initially, the company struggled. In 2021, its revenue dropped almost 30% from the year before. Its core telecom equipment business was suffering. Apple’s iPhone was taking over Huawei market share in smartphones.
Yet in the last year, Huawei has come roaring back, boosted by billions of dollars in China government support. Huawei has expanded into new businesses, boosted its profitability and found fresh ways to curb its dependence on U.S. suppliers. It has held on to its leading position in the global telecom-equipment market, despite American efforts to squeeze Huawei out of its allies’ networks. Also, it’s making a big comeback in high-end smartphones, using sophisticated new chips developed in-house, such that it has captured 15% market share in China (knocking Apple out of the top five smartphone brands).
“The U.S. government’s campaign against Huawei is inadvertently bolstering the company’s resilience, echoing the age-old adage that what doesn’t kill you makes you stronger,” said Sameh Boujelbene, an analyst at research firm Dell’Oro Group.
China state support has paid off big time! After the U.S. imposed restrictions, Huawei and China’s government grew closer. Soon, Huawei leaders declared that every product they made going forward should be able to rely entirely on components developed by Chinese companies. China government contracts and company registration records, as well as WSJ interviews with former and current employees, reveal that billions of dollars flowed from the Chinese government to Huawei through preferential buying contracts and subsidies. State-owned enterprises, government agencies and Communist Party bodies sought Huawei chips, smartphones, cloud services and software, with some procurement contracts calling for Huawei gear by name.
Local governments have bought Huawei businesses, providing cash injections. Once reliant on Google’s Android for its consumer devices, Huawei built its own operating system. It has even made a foray into electric vehicles, a task that Apple gave up on, and developed its own version of Bluetooth. Huawei still faces challenges. Its most advanced semiconductors remain a step behind industry leaders such as Nvidia, whose chips are made by TSMC in Taiwan, which Huawei no longer has access to due to U.S. sanctions. U.S. export restrictions, which effectively barred Huawei from using American technology anywhere along the chipmaking process, meant the Chinese company could no longer source its chips from TSMC. Some analysts believe it will be hard for Huawei to keep innovating without access to more advanced Western technologies, especially chip making equipment and software.
One current U.S. official said Washington is closely tracking Huawei’s efforts to make its own semiconductors, in case more actions are needed to block China from manufacturing artificial-intelligence-focused chips that can give Beijing a military edge.
On May 16, 2019, China’s local government in Shenzhen, where Huawei is based, registered an investment company Shenzhen Major Industry Investment Group (SMII), focused on semiconductors, investing in foundries, manufacturing equipment and materials that would help ensure Huawei was supplied with enough domestically made chips and other technologies. Two companies established by SMII, including a chip foundry, employed former Huawei executives, according to people familiar with the matter. One received around a dozen patented technologies transferred from Huawei. Huawei human-resources managers had asked company researchers if they would work at that entity, promising them they could keep their benefits if they moved, according to people familiar with the matter. Shenzhen’s imports of semiconductor manufacturing equipment surged after SMII’s inception, official data shows. Through various state-backed funds, the Chinese government has invested in more than two dozen chip-related startups, over the past five years, according to corporate database Tianyancha.
That’s in addition to government investments in Huawei’s HiSilicon chip unit (more below), which made the silicon used in the company’s popular Mate 60 Pro smartphone. HiSilicon became an independent, wholly owned Huawei subsidiary in 2004. It was founded in 1991 as Huawei’s ASIC Design Center.
A majority-owned Shenzhen company also bought Huawei’s Honor smartphone business, which was struggling because of the U.S. sanctions. The deal was worth several billions of dollars, a person familiar with the transaction said. The cash allowed Huawei to focus on other businesses, including its higher-end Mate series of phones.
“We’ve been through a lot over the past few years. But through one challenge after another, we’ve managed to grow,” Huawei said in a written statement, adding that the company owed its survival and development to the trust and support of global customers, partners and “all sectors of society.” Sustaining R&D investment will be crucial going forward, the company said.
“We’ve been through a lot over the past few years, but through one challenge after another, we’ve managed to grow,” Huawei said in a written statement, adding that the company owed its survival and development to the trust and support of global customers, partners and “all sectors of society.” Sustaining R&D investment will be crucial going forward, the company said.
Huawei focused on building out more of its own supply chain and expanding into new areas that could generate revenue to help keep the company going, including cloud computing and other services, according to Chris Peirera, a former Huawei senior director in public affairs. “In the past, we chased the ideal of globalization, determined to serve mankind. What are our goals now? It’s to survive. We will make money wherever we can,” Huawei founder Ren Zhengfei later told the company’s staff in an internal letter.
Huawei received over $1 billion in China government grants in 2023, more than quadruple the amount it received in 2019, according to Huawei’s financial reports. In all, Huawei received nearly $3 billion in the past five years, accounting for 3% of its total R&D expenses.
Source: Huawei via WSJ
China’s government directed state agencies to buy more of Huawei’s software, chips and mobile devices, a policy that boosted Huawei while reducing China’s reliance on American companies, including Apple, whose iPhones are no longer allowed in the workplace for many government employees. A Chinese government research unit named Huawei as one of four tech giants spearheading the nation’s push to wean itself off foreign technology, while another government body singled out Huawei as a preferred state supplier of AI chips, servers and other enterprise software.
Though Huawei is still seeking to sell its products abroad in places such as Southeast Asia and Africa, it is more reliant on China’s market than ever, with 67% of revenue last year coming from domestic clients. The company often portrays itself as a national champion that gives priority to serving China.
Source: Huawei via WSJ
A WSJ investigation found more than 300 government procurement contracts worth around $5 billion specifically calling for the purchase of servers and other tech infrastructure powered by Huawei’s Kunpeng central processing units, or CPUs, in 2023. Other contracts listed Huawei CPUs among a handful of preferred local vendors. All of this was a sharp contrast to five years ago, when government agencies specifically requested products from U.S. chip makers Intel or AMD.
China’s buy-local policy is even more pronounced in the telecom-equipment space, Huawei’s largest revenue source. State-owned Chinese wireless carriers have largely stopped buying equipment from Huawei’s foreign rivals, Sweden’s Ericsson and Finland’s Nokia, even when one of them priced their contracts more cheaply than Chinese companies. The shift came while Sweden and other European countries indicated that they would cut Huawei and another Chinese equipment maker, ZTE, from their networks. Ericsson and Nokia held about 15% of China’s cellular network equipment market before 5G began rolling out in 2019. In China’s current 5G cellular-equipment market, Huawei holds about 4% to 5%, according to market research firm Dell’Oro.
They peg Huawei’s 2023 global telecom market share (#1) at 30% – double that of #2 Nokia as per this pie chart:
With so much government support, Huawei was able to avoid massive job and spending cuts that would have gutted its R&D or led to a talent exodus. Huawei boosted R&D spending to almost 165 billion yuan, or $23 billion, last year, up from 102 billion yuan in 2018. More than half of Huawei’s 207,000 employees are in R&D.
Huawei is now at the vanguard of China’s push to develop cutting-edge chips to wean reliance on Nvidia and Intel, as the Biden administration seeks to curb China’s ability to develop advanced chips and technology that could aid its warfare and surveillance. U.S. chip juggernaut Nvidia singled out Huawei as a top competitor in February.
Huawei is leading a government-funded project to develop memory units for advanced AI chips, people familiar with the matter said, with at least 11 national AI data centers now using Huawei chips. WSJ reports that last summer, a group of Huawei researchers gathered at a barbecue restaurant on the outskirts of Beijing to congratulate engineers who worked on the Mate 60 Pro chip set at Huawei owned HiSilicon.
“You HiSilicon people kick ass,” one of the Huawei researchers said, according to a person who attended. “Managers tell us daily that our work helps the country fight against foreign oppression,” a HiSilicon engineer who was present responded. “We’re becoming more and more like a state-owned company, aren’t we?” another researcher chimed in.
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References:
https://www.wsj.com/business/telecom/huawei-china-technology-us-sanctions-76462031
Huawei is back – net profits more than doubled in 2023!
Dell’Oro: 2023 global telecom equipment revenues declined 5% YoY; Huawei increases its #1 position
Huawei to revolutionize network operations and maintenance
Huawei pushes 5.5G (aka 5G Advanced) but there are no completed 3GPP specs or ITU-R standards!
China’s mobile data consumption slumps; Apple’s market share shrinks-no longer among top 5 vendors
China Telecom with ZTE demo single-wavelength 1.2T bps hollow-core fiber transmission system over 100T bps
China Telecom, along with its partners [1.], says it has launched the world’s first live single-wavelength 1.2T bps hollow-core fiber optics transmission system with unidirectional capacity over 100T bps.
Note 1. ZTE, Yangtze Optical Fibre, Cable Joint Stock Limited Company and Huaxin Design Institute were also involved in the project, which was deployed over a transmission distance of 20km in the live network of the All-Optical Network Technology and Application in the Intelligent Computing Era seminar of the CCSA TC618/NGOF.
ZTE optical transport equipment was used for project, alongside some improvements in spectral efficiency, baud rate optimization, and amplification optimization technologies. The system extends 41 C-band 1.2T bps and 64 L-band 800G bps wavelengths, and archives unidirectional transmission capacity of over 100T bps and a transmission distance of 20km in the field network.
This demonstration completed the hollow-core fiber deployment and large-capacity transmission between China Telecom’s Hangzhou Intelligent Computing Center and Yiqiao IDC. As a key node of China Telecom’s intelligent computing power layout “2+3+7+M”, the Hangzhou Intelligent Computing Center has been deployed with the 1k GPUs computing power of the China Telecom Cloud. It also hails ‘breakthroughs in hollow-core fiber fusion splicing technologies,’ such as low-power discharge and mode field matching related to the demonstration.
To meet the requirements for distributed computing power with large bandwidth and low latency of optical networks, ZTE used its advanced high-speed optical transport equipment. Combined with improvements in spectral efficiency, baud rate optimization, and amplification optimization technologies, the system extends 41 C-band 1.2Tbit/s wavelengths and 64 L-band 800Gbit/s wavelengths. It achieves a unidirectional transmission capacity of over 100Tbit/s and a transmission distance of 20km in the field network.
The hollow-core fiber cable, independently developed by YOFC, is deployed in the field network with multiple waterproofing solutions. For instance, water-blocking glue and double-layer plastic caps are used at the cable ends to isolate the atmosphere, a pulling unit with a swivel is employed for cable deployment to minimize wear on the end caps, and a horizontal waterproof cable closure is utilized at the fusion splice point. Additionally, breakthroughs in hollow-core fiber fusion splicing technologies, such as low-power discharge and mode field matching, have achieved 0.05dB fusion splice loss between hollow-core fibers and 0.25dB fusion splice loss with 54dB return loss between hollow-core fibers and standard solid-core single-mode fibers.
China Telecom’s Zhejiang branch said: “We have always maintained the leading position in the field of basic transmission networks. By undertaking the national key R&D project, we have demonstrated and verified the hollow-core fiber and 1.2Tbit/s transport system in the field network, and can offer detailed engineering data and demonstration applications. In the future, we will further cooperate with the industry to conduct research on a larger scope, and provide practical scenarios for the interconnection of distributed intelligent computing centers.”
China Telecom says they will continue to expand the hollow-core optical cable environment and build a platform for testing and verifying new technologies and applications oriented towards intelligent computing scenarios. This effort aims to continuously promote technological innovation and application expansion in the telecommunications industry.
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Separately, China Telecom received four awards at the “Asia’s Best Managed Companies Poll 2024” by FinanceAsia, a reputable financial magazine in Asia:
⚫ “Best Investor Relations in China” – Gold Award
⚫ “Best Managed Company in China” – Silver Award
⚫ “Best Telecommunication Services Company” – Silver Award
⚫ “Best Large-Cap Company in China” – Bronze Award
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References:
https://www.telecoms.com/fibre/china-telecoms-claims-a-world-s-first-hollow-core-fibre-demonstration
https://www.chinatelecom-h.com/en/media/news/p240730.pdf
ZTE reports higher earnings & revenue in 1Q-2024; wins 2023 climate leadership award
ZTE and China Telecom unveil 5G-Advanced solution for B2B and B2C services
China Telecom, ZTE jointly build spatiotemporal cognitive network for digital transformation
China Mobile & ZTE use digital twin technology with 5G-Advanced on high-speed railway in China