news


The barren years are forecast to end as 5G profits close in

Cloud Money

Research from Gartner suggest the 5G spending boom is almost within the grasp of the beaten and battered vendors, with 5G infrastructure spend set to increase by 89% over the next 12 months.

The last three to four years have been a frustrating time for most of the network infrastructure vendors. Those selfish telcos halted the lavish spending on 4G infrastructure, choosing to try and muscle some ROI to keep investors happy, while 5G has seemingly been hovering on the horizon for an age and a day.

“5G wireless network infrastructure revenue will nearly double between 2019 and 2020,” said Gartner’s Sylvain Fabre. “For 5G deployments in 2019, CSPs are using non-stand-alone technology. This enables them to introduce 5G services that run more quickly, as 5G New Radio (NR) equipment can be rolled out alongside existing 4G core network infrastructure.”

Gartner is forecasting 5G spend from the CSPs will increase to $2.2 billion over the course of 2019, up from $612 million last year. In 2020, this number will jump 89% to $4.1 billion and then up-to $6.8 billion in 2021. There will of course be a significant spend on maintaining and improving 4G networks, though the vendors will want to gain returns on 5G R&D sooner rather than later.

The next two years are expected to be an increasingly aggressive scrap between the network vendors to secure valuable 5G contracts. With early launches of 5G networks in the UK, US, South Korea, Italy and Switzerland (amongst others) taking place this year, there will be a horde of fast followers over the next 12-18 months, before everyone else starts to catch-up.

These deployments will of course be focused on the larger cities to start with, though it won’t be long before some telcos start scaling. However, what is worth noting is the nationwide deployment of 5G will not be as fast as previous ‘Gs’.

“To maintain average performance standards as 5G is built out, CSPs will need to undertake targeted strategic improvements to their 4G legacy layer, by upgrading 4G infrastructure around 5G areas of coverage,” said Fabre. “A less robust 4G legacy layer adjoining 5G cells could lead to real or perceived performance issues as users move from 5G to 4G/LTE Advanced Pro.”

Although 4G spend will also increase to prepare the underlying networks for 5G, few of the vendors will complain as long as the dollars start flowing into their banks accounts not out of them. It does appear the barren years might be coming to a close.

And for the network vendors, the moment of 5G euphoria will bring with it a sense of relief, as you can see from the financial figures below.

2015 2016 2017 2018
Huawei Revenue 55.736 73.594 85.171 105.191
Net income 5.208 5.228 6.695 8.656
Ericsson Revenue 25.56 23.04 21.26 21.82
Net income 1.42 0.2 (0.65) (3.35)
Nokia Revenue 29.537 26.583 25.697 25.049
Net income 3.205 2.411 0.017 (0.065)
Cisco Revenue 12.8 12.6 12.7 12.8
Net income 2.3 2.8 2.4 3.8
ZTE Revenue 14.136 14.284 15.353 12.066
Net income 0. 527 (0.198) 759 (0.98)
Juniper Revenue 4.857 4.990 5.027 4.647
Net income 0.633 0.601 0.306 0.566

Figures in US Dollars (Billions), taken from Annual Reports

It is also worth noting that some of the numbers in this table are slightly misleading. For example, during the period above Huawei’s smartphone business surged, while Nokia’s numbers also include fixed line revenues. We’re not exactly comparing apples with apples; however, you can see there is a general slow-down across the vendor community.

Aside from a few exceptions, many of the figures above are not the end of the world. Executives will point to over-arching trends and suggest that while there is no growth, maintenance of revenues (or managing a slight decrease) is an acceptable performance. However, this cannot go on forever.

The likes of Rajeev Suri at Nokia or Chuck Robbins at Cisco have been keeping themselves employed by pointing towards the 5G bonanza. The telcos are sweating 4G assets for ROI while making preparations for the world of 5G; profits are on the horizon for many of these firms, they just need to hang-on a little bit longer.

You do get the impression some investors are starting to get a bit frustrated with the continued quest through the barren connectivity desert, though if Gartner is to be believed, there is an Oasis forming on the horizon. Let’s hope

  • 5G Network & Service Strategies

  • 2020 Vision Executive Summit

  • LTE Advanced Pro and Gigabit LTE: The Path to 5G

  • TechXLR8

  • BIG 5G Event

  • 5G North America

  • 5G World


Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

Should privacy be treated as a right to protect stringently, or a commodity for users to trade for benefits?

Loading ... Loading ...