The worst of the telecoms recession could be behind us

Analyst firm Dell’Oro has published its latest global RAN market report, which observed ‘revenues dropping at a double-digit rate year-over-year for the fourth consecutive quarter,’ but saw signs that we may be past the worst of the telecoms recession. Specifically North America has returned to strong growth and China is solid, but the rest of APAC, especially India, dragged global growth into the red once more.

“Even if the RAN market is still down at a double-digit rate in the first half, the second quarter offered some glimmer of hope that the nadir of this cycle with double-digit declines might now be in the past for the time being,” said Stefan Pongratz, of Dell'Oro. “This does not change the fact that the RAN market is expected to decline at a 2 percent CAGR over the next five years. But the pace of the decline should moderate somewhat going forward.”

So maybe it's not yet time to break out the bubbly but companies such as Ericsson and Nokia, who have been counting on a RAN market recovery starting in the second half of this year, will take some solace from this news. Having said that, Dell’Oro also reports that, relative to 2023, Huawei’s 1H 2024 revenue share is up, while Ericsson’s and Nokia’s are together down 3-4%.

When discussing its most recent earnings, Ericsson CEO Börje Ekholm warned that his company is “seeing sharply increased competition from Chinese vendors in Europe and Latin America.” This was generally interpreted as aggressive price competition, presumably accompanied by the very generous credit terms Chinese vendors are somehow always able to offer.

Elsewhere we learnt from Cisco’s earnings announcement this week that it reckons ‘inventory digestion’ is largely completed – i.e. using up stockpiled kit instead of buying more. Cisco noted that, as a consequence, it’s ‘starting to see normalization of demand patterns’. That’s what RAN vendors have been counting on but Dell’Oro is still forecasting the global RAN market outside of China (where non-Chinese vendors are effectively barred) will decline 8-12% in the short term.

We're told Huawei and ZTE now account for almost half of the global RAN market, despite the best efforts of the US and its allies, and momentum seems to be in their favour. So, while a return to CSP spending is good news for Ericsson and Nokia, it seems they have their work cut out getting hold of any of it in markets where they compete with Chinese vendors.