Revenues of telecom network vendors have decreased 3.9 percent, amounting to $53.4 billion, in the first quarter of 2023, according to the latest report by MTN Consulting.
The report reveals that Huawei, Ericsson, and Nokia continue to dominate the telecom network market, collectively accounting for 37.4 percent of the total market in the annualized period of 1Q23, or 34.8 percent in 1Q23 alone. These three vendors have consistently held over 40 percent market share from 2016 to 2022.
All three giants face pressure from vendors in the cloud and IT services sector, such as Amazon, Microsoft, Alphabet, Dell, and VMWare.
Despite the decrease in market share, Huawei remains dominant due to its stronghold in China. On the other hand, Ericsson’s decline in market share can be attributed to reduced spending on radio access networks (RAN) by its largest customers as the pace of 5G rollout slows down. Ericsson anticipates offsetting this decline with new revenues generated from its recent acquisition of Vonage, a network API platform vendor.
Nokia has experienced a dip in market share due to slower 5G RAN rollouts. However, Ericsson managed to gain a slight increase in market share in 1Q23, thanks to a 45 percent growth in its optical networks business and catch-up sales resulting from supply chain challenges faced in 2022.
China Comservice and ZTE occupy the 4th and 5th positions, respectively, with China Comservice being owned by Chinese telecoms. Intel holds the 6th position, primarily driven by its involvement in data center, virtualization, edge computing, and other telecom projects, both directly and on an original equipment manufacturer (OEM) basis.
CommScope maintains the 7th position, while NEC surpasses Cisco in the latest annualized 1Q23 period. Cisco’s decline to the 9th position in telecoms network revenues during 1Q23 is concerning, especially as its largest market, the US, focuses increasingly on 5G core networks, an area Cisco previously identified as key to its telecoms revenue growth. Amdocs ranks 10th due to its strength in network software.
Although Huawei’s total market declined by 1.2 percent in the annualized 1Q23 period, the company has been actively investing in its software, services, and cloud groups to counteract the impact of sanctions imposed over the past three years. Huawei’s recent win of a significant contract worth $1.1 billion from China Mobile to build additional 5G base stations in 2023-24 further demonstrates its presence in the market.
Additionally, Huawei maintains accounts with major overseas telecom providers, including Etisalat, Telkom South Africa, Orange, and others. Many European telecoms, including Deutsche Telekom, have not completely ruled out Huawei, and the company continues to be a popular choice in various regions such as Asia, the Middle East, and Latin America.
The telecom industry faced significant challenges in the fourth quarter of 2022, as global revenues plummeted by 9.3 percent, reaching $429.6 billion. This decline marked the most substantial drop in over a decade and marked the fifth consecutive quarter of slumping revenues. Consequently, annual revenues for 2022 were recorded at $1,779.9 billion, reflecting a 5.9 percent decrease compared to the previous year.
Capital Expenditure (Capex), which serves as a primary driver for the telecom network infrastructure (NI) market, also faced a downturn. Spending on Capex decreased by 5.1 percent for the second consecutive quarter, amounting to $87.9 billion in 4Q22. As a result, annualized Capex for the quarter reached $322.1 billion, down from its peak of $330 billion in 2Q22.
Notably, the annualized capital intensity reached an all-time high of 18.1 percent in 4Q22. This increase was primarily driven by a few countries, particularly India, which were actively deploying 5G networks.
Spending Outlook
Despite the challenging circumstances, most major vendors in the industry maintain a cautious optimism regarding the spending outlook for Telecoms NI. MTN Consulting predicts that the telecom network market will start to stabilize in the upcoming quarters. It is projected that Telecoms Capex, which serves as the main driving force behind the Telecoms network market, will reach $330 billion in 2023, followed by a slight decline to $325 billion in 2024.
