The telecoms infrastructure market is still in decline, and vendors banking on 5G to kickstart the market and get revenues back on track are going to have to wait a couple more years before that happens, according to Technology Business Research (TBR).
The analyst firm’s latest telecom infrastructure services (TIS) market forecast (covering 2017-2022) says the global market did manage to grow in 2017 to $96.8 billion – but that’s only a 0.6% increase year-on-year. And that’s as good as it will get as revenues slide from now until 2020, which is when TBR expects spending on 5G deployments will bring growth back.
From the release:
“Payment recognition for maintenance contracts and other services-related work that covered LTE and fixed gear that was deployed in China over the past few years provided a significant boost to the TIS market and spurred overall market growth in 2017 rather than the expected market decline,” said TBR Telecom Senior Analyst Chris Antlitz. “TIS spend in China is now post-peak, which will have significant implications for key vendors that have exposure to the country and will be a drag on the overall market for the next few years. This will be offset by 5G and transformation-related investments.”
TBR adds that CAGRs in all subregions in APAC will decline during the forecast period due to the impact of M&A activity in India and post-peak LTE spend in the region, driven by China.
If TBR’s forecast is anywhere near accurate, that’s not good news for vendors like Nokia, who reported an 87% plunge in operating profits for its network business for Q1 2018. CEO Rajeev Suri said he’s confident that with 5G arriving sooner than expected, and with high-profile 5G launches expected by operators in the US and China scheduled for the end of the year, the next-gen technology will push network equipment revenues back up.
However, TBR isn’t the only analyst firm skeptical of the notion of 5G as a capex bonanza for vendors. Earlier this year, Rethink Research issued a report which found that for the most part, operators aren’t prepared to sink that much money into 5G when the business case for it isn’t clear – they’re more interested in getting the most out of their existing 4G networks. So while they will be spending money on next-gen architectures, virtualized RANs, hyper-densification, and massive MIMO antenna arrays, most will deploy them in existing 4G networks.
That may be why Huawei Technologies – who has been leading the 5G hype brigade for the last few years – is now dialing down the “5G is now” marketing message and focusing more on beefing up 4G to serve in the overall 5G ecosystem whenever operators are ready to go the full monty.
Meanwhile, the TBR forecast also expects professional services to be the fastest-growing services segment through the forecast period, driven by operator transformation efforts. TBR also says investments in NFV, SDN, cloud and automation will reduce the volume of product-attached services.
TBR also noted that software-centric vendors will relatively outperform hardware-centric vendors on a relative basis “because they will be best able to withstand as well as capitalize on the opportunities that NFV, SDN and cloud provide.”