The next few weeks are earnings season for mobile infrastructure providers, and the situation looks volatile across the sector. this week, Ericsson announces figures for the second quarter of 2023Nokia will do the same on July 19th. Overall, the stock market has not treated both companies favorably, and radio access network (RAN) market forecasts may be a big part of the problem.
This week, the RAN market forecast report released news that raises concerns about slowing RAN infrastructure sales. The RAN market has been hot since the rollout of his 5G network globally in 2017. This particular niche in the telecom sector has posted 40% to 50% year-over-year growth until last year when sales were flat. Given the typical build cycle for next-generation mobile networks, that trend might have been expected. In other words, there may be no macroeconomic factors impeding RAN growth. It could simply be that the supplier in this sector has seized many of the low-hanging fruit in terms of customer demand between his 2017 and his 2021.
Also likely to add fuel to the notorious “FUD” factors of fear, uncertainty and suspicion is the growing momentum of alternative RAN solutions in the form of Open RAN (ORAN) and virtualized RAN. is that Many operators continue to trial these fragmented solutions. Still, there haven’t been many large-scale deployments, other than the greenfield network builds by Japan’s Rakuten Mobile and India’s Reliance Jio. Dish Networks, in particular, continues to struggle in the US market with its highly fragmented, cloud-native 5G network deployment. All these factors may contribute to a broader sense of caution.
Should investors hit the panic button? Don’t get me wrong, I’m a technology analyst, not a financial analyst or advisor, so I don’t give investment advice. However, from an industry perspective, both Ericsson and Nokia benefit from robust product roadmaps and highly diversified go-to-market strategies. With its Cradlepoint division, Ericsson has made significant inroads into the private networking space with a bifurcated private networking strategy. That way, you can potentially grab a sizable market share. in the meantime, Nokia revisits efforts to focus on enterprise marketAnd I like the potential created by Charter’s announcement in June to launch 5G mobile network offloads for cable operators entering the mobility space. On that latter point, stay tuned for a post in the coming weeks that will dive deeper into the Nokia and Charter partnership.
Broadly speaking, I don’t think you should worry about any of these companies. Ericsson and Nokia have strongly diversified their products and built a strong and deep portfolio. Additionally, both companies have strong leadership teams to weather the near-term RAN storm.
There are definitely concerns about future revenue growth across the RAN market, but as is often said here in Texas, this is not the first rodeo for Ericsson or Nokia. Cellular infrastructure sales are cyclical in nature, but can also tap into other profit pools and markets, such as the cable operator sector.
In fact, the projected decline in RAN infrastructure revenue over the next few years will drive Ericsson, Nokia, Samsung Networks and Huawei to invest in other parts of their businesses to drive innovation and revenue growth. I believe it could be a silver lining. Growth in logically adjacent markets for sales of enterprise solutions.
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