RAN market flat despite 5G opportunities

The global market for radio access networks (RAN) is no longer growing, and may even decline over the next five years, despite the fact that operators are still spending on 5G.

Dell’Oro Group’s latest RAN market predictions make for fairly sobering reading for suppliers in the telecoms industry, despite the analyst firm’s best efforts to show that operator 5G spending is unlikely to drop off as steeply after the initial rollout phase as it did with previous generations of mobile technology.

But the news comes as no surprise. Dell’Oro itself chartered the slowdown in the global RAN market in its quarterly reports throughout last year. And in mid-December Ericsson used the platform of its Capital Markets Day to reveal that it expects a flat RAN market over the next few years. As one of the industry’s biggest RAN vendors, it should have a pretty good insight into the state of the market.

Specifically, Dell’Oro predicts that the global RAN market will grow at a zero percent CAGR outside of China in the period to 2027. Growth will continue in less advanced regions, offset by mid-single digit CAGR declines in China and North America.

The analyst firm highlights “four years of extraordinary growth that propelled the radio access network (RAN) market to reach new record levels,” but it’s clear this is coming to an end. The RAN space is moving out of this latest expansion phase triggered by early 5G and into a slower growth period.

5G spending is still happening, of course, and the latest generation of mobile technology will buoy the overall market to an extent. Dell’Oro predicts a 25%-30% growth rate in 5G RAN by 2027, however, in its own words “this will barely be enough to offset steep declines in LTE.”

But for some of the more advanced operators, the massive investment push associated with 5G rollout is already coming to an end, while others will follow suit in the fairly near term.

T-Mobile US, for example, recently confirmed that its capex will likely come in at around $9 billion-$10 billion this year, which, even at the top end of that forecast range, is significantly lower than last year’s spend. The telco has yet to publish full-year numbers, but its guidance, updated in July, put 2022 capex at $13.5 billion to $13.7 billion. Peter Osvaldik, the operator’s finance chief, speaking at Citi’s 2023 Communications, Media & Entertainment Conference earlier this month, described 2022 as “the peak of intensity” when it came to 5G build-out

5G is following a similar investment trajectory to previous generations of mobile technology, with a decline in RAN investment following the initial growth phase. But 5G is different in that there are other elements to the rollout of the technology that will stop the fall from being as steep.

“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,” Pongratz said.

Fixed wireless and private 5G networks might help to stem that capital spending decline, but there’s clearly not enough there to meaningfully shift the needle in the overall RAN market.

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