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Ericsson Aims to Accelerate Network API Market Development via New Venture with Leading Global Telcos

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TBR Perspective

Ericsson’s Enterprise Wireless Solutions unit is exhibiting strong revenue growth and serves as a bright spot amid the company’s broader challenges. Ericsson has a compelling 5G-related portfolio that addresses the unique needs of enterprises ranging from SMBs to large industrial entities. Ericsson’s focus on enhancing its enterprise portfolio in areas including private cellular networks (PCNs), neutral host networks, fixed wireless access (FWA) and IoT will generate new revenue that will help to partially offset declining consolidated revenue, which is being negatively impacted by most Tier 1 operators decreasing network capex as they enter the later stages of 5G deployments.

 

Ericsson’s Enterprise segment has experienced challenges, however, namely declining revenue within its Global Communications Platform division, which includes Vonage. Ericsson appeared to overpay ($6.2 billion) for its acquisition of Vonage, which fits awkwardly within Ericsson’s historical core business and was primarily considered a down payment on developing a network API business with an unproven business model when it closed in 2022, and Ericsson has essentially confirmed that notion.

 

In October 2023 the company booked an SEK 32 billion ($3 billion) impairment charge on Vonage’s goodwill, writing off half of the acquisition price. The company took a further SEK 11.2 billion ($1.1 billion) noncash charge on the Vonage acquisition in July 2024. TBR believes Ericsson is correcting course, however, by more deeply collaborating with industry partners through its new network API joint venture, which will reduce fragmentation in the market and make it easier for developers to innovate and create new apps and use cases.

 

The joint venture will also provide Ericsson with a more risk-averse approach to tackling the network API opportunity by pooling funding and resources from the partners as the long-term market size for network APIs is uncertain. Ericsson will need to split proceeds from the joint venture with its partners, however, which will limit long-term revenue potential.

Ericsson Realizes the Need to Collaborate with Industry Partners to Accelerate Network API Development

The composition of Ericsson’s new network API joint venture, which currently does not have a formal name and is expected to close in early 2025 pending regulatory approval, entails Ericsson holding 50% equity in the venture, with the following telecom operators holding the remaining 50% of equity: America Móvil, AT&T, Bharti Airtel, Deutsche Telekom, Orange, Reliance Jio, Singtel, Telefonica, Telstra, T-Mobile, Verizon and Vodafone.

 

Vonage and Google Cloud will serve as channel partners for the joint venture, providing access to their ecosystems of millions of developers as well as their partners, and additional communication service providers (CSPs) and channel partners will be invited to join the entity in the future (Ericsson would maintain its 50% share in the venture if additional CSPs join). The goal of the joint venture is to create a platform that will provide network APIs to an ecosystem of developers, including hyperscalers, Communications Platform as a Service (CPaaS) providers, systems integrators and independent software vendors. The joint venture will be in alignment with existing industry network API initiatives, including the GSMA’s Open Gateway and the Linux Foundation’s CAMARA Project.

 

TBR believes the main benefit of the joint venture will be incentivizing developers to focus on the network API market by providing them with a simpler way to create apps at scale. For instance, developers currently need to engage with CSPs on a one-on-one basis to procure network APIs, which can be a slow and complex process. The joint venture aims to accelerate market development by providing combined common APIs that can work from any location or network. Reduced fragmentation will also speed market development as developers will be able to more fully concentrate on new use cases and applications rather than spending time modifying existing applications to make them compatible with networks on an operator-by-operator basis.

 

Industry projections for the network API market are wide ranging, with Ericsson citing McKinsey & Co.’s projections that the market will generate around $100 billion to $300 billion in incremental connectivity and edge computing-related revenue for operators by 2030 and that an additional $10 billion to $30 billion in revenue will be generated from the APIs themselves.

 

TBR believes the market size of the segment will mainly hinge on network APIs being able to provide developers with differentiated and compelling capabilities that are distinct from existing 5G capabilities that are available independent of network API access. Enhanced capabilities enabled by network APIs include differentiated connectivity, device-based location, security (e.g., authentication) and network insights.

 

Current primary use cases for network APIs include simplified secure login for devices and advanced network authentication to strengthen fraud prevention. Other main use cases include enabling enhanced location verification and more reliable connectivity to support point-of-sale platforms, as well as optimizing the user experience for entertainment services such as video streaming and gaming applications.

 

Ericsson’s joint venture will create competitive pressures for Nokia, which is providing network API solutions via its Network as Code platform. Nokia has at least 14 Network as Code CSP partners as of June and aims to have more than 30 partners by the end of 2024. Nokia may be challenged in meeting this goal, however, due to potential CSP partners possibly being swayed by the ecosystem and benefits provided by Ericsson’s joint venture. Ericsson’s CSP partners are not tied exclusively to the joint venture, however, and have the option to join Nokia’s ecosystem as well.

For IT Services Companies and Consultancies, the New Joint Venture Could be a Promising Change Agent in the Broader Ecosystem

From the perspective of global IT services companies and consultancies, such as Accenture, Infosys and Deloitte, Ericsson’s event theme, “Capture the value of enterprise 5G,” remained focused on Ericsson’s opportunities with and through telco operators while providing a modest opening for increased go-to-market and alliance activity.

 

Based on the event presentations, sidebar discussions with Ericsson leaders, and TBR’s analysis of Ericsson over the last two decades, we see two opportunities for Ericsson to enhance its ecosystem plays with IT services companies and consultancies that align well with Ericsson’s overall strategy.

 

First, TBR’s recent Voice of the Partner research shows that cloud and software vendors, OEMs, and IT services companies see 5G as a promising source of near-term growth, nearly on par with generative AI. To address their enterprise clients’ growing 5G needs, IT services companies and consultancies will need closer alliances with incumbent telcos and OEMs, including Ericsson. IT services companies and consultancies will not try to sell their own connectivity solutions but will readily partner to bring those solutions to their enterprise clients if informed, aligned and incented, particularly if the five-to-eight-times revenue multiplier applies to services attached to Ericsson’s hardware.

 

Second, TBR’s ecosystem reports, which cover a dozen leading global IT services companies’ relationships with Amazon Web Services (AWS), Google Cloud, Microsoft Azure, Adobe and Salesforce, confirm that scale remains a key differentiating characteristic, both for alliances managers across the ecosystem and enterprise clients looking for multiparty, well-orchestrated technology solutions. Ericsson’s joint venture with Google and the 12 operators could be highly appealing as an alliance partner, bringing IT services companies and consultancies into contact with new personas within their enterprise clients, which will create an expanded playing field for professional and managed services companies. In short, Ericsson’s new joint venture could be an ecosystem catalyst, provided the joint venture finds a go-to-market focus and well-led partnerships with the right IT services companies and consultancies.

Ericsson Launches Private 5G and Neutral Host Network Solutions Under its Ericsson Enterprise 5G Segment

At Ericsson Enterprise Industry Analyst Day in September, Ericsson reintroduced its Ericsson Enterprise 5G portfolio, which includes three solutions:

 

  • Ericsson Private 5G: A converged LTE/5G PCN solution with industry and licensed spectrum support
  • Ericsson Private 5G Compact: A U.S. CBRS-based solution designed for enterprises requiring connectivity that is more reliable than Wi-Fi. The solution was previously branded as Cradlepoint NetCloud Private Networks.
  • Ericsson Enterprise 5G Coverage: A turnkey neutral host solution that features certification from all Tier 1 U.S. operators. The solution can support up to three carriers per radio.

 

The relaunch of the Ericsson Enterprise 5G portfolio, in addition to the legacy Cradlepoint business now branded under this segment, will help Ericsson strengthen its messaging within the PCN market and better compete against Nokia, which TBR estimates is the second-largest PCN vendor by revenue globally (behind Huawei) and the largest when excluding China.

 

Ericsson Enterprise 5G Coverage is certified by AT&T, T-Mobile and Verizon, which will be a significant benefit as Ericsson aims to gain headway within the neutral host networks market. Neutral host networks are gradually gaining traction as they are easier to deploy compared to legacy distributed antenna systems (DAS) and can provide significant cost savings as they enable a single neutral host network to support customers from multiple operators without requiring each operator to deploy its own separate infrastructure.

 

Industrial sites, schools and hospitals are the primary locations where neutral host networks are initially being deployed, and Ericsson’s early customers for the solution include Toyota Forklifts in Indiana and engine manufacturer Cummins in New York.

Conclusion

TBR believes Ericsson is effectively positioning to capitalize on 5G-based solutions within the telecom enterprise space, including network APIs, PCNs and neutral host networks. Ericsson is aware that industry collaboration is essential for these segments to reach their peak potential, evidenced by the vendor’s initiatives including the formation of the network API joint venture and gaining certification from AT&T, T-Mobile and Verizon for its neutral host network solution.

 

Ericsson’s success in areas including network APIs, PCN and multi-access edge computing will be impacted by coopetition from hyperscalers within these segments. Though Ericsson has established partnerships with AWS, Google Cloud and Microsoft Azure within multiple portfolio segments, the company’s revenue opportunities will be limited as hyperscalers take a portion of revenue from enterprise deployments.