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TBR launches semiannual U.S. Telecom Operator Public Sector Market Landscape

TBR launches five mission systems-specific reports: Boeing Mission Systems, L3Harris Mission Systems, Lockheed Mission Systems, Northrop Mission Systems and Raytheon Mission Systems.

Telecom operators felt the effects from COVID-19 in 1Q20; the impact on telecom vendors will be more pronounced in 2Q20

Telecom market impact

COVID-19 impacted the telecom industry during 1Q20 on different levels, with telecom operators feeling the initial effects during the quarter. TBR believes telecom vendors were initially shielded from the early effects, but we anticipate a deeper negative impact on both operators and vendors in 2Q20 as the pandemic plays out.

Though company results and the broader ICT market are expected to be challenged further in the short term (over the next year) due to the crisis, TBR believes the near term (two to three years) and long term (three to five years) will be net positive on the ICT industry as the post-COVID era drives enterprises and governments around the world to double down on digitalization and invest in a broad range of technologies to evolve their businesses and increase safety in the new world.

Telecom edge compute

The COVID-19 virus will significantly impact the ICT infrastructure supply chain, and, more broadly, the global economy. This dynamic and evolving situation prompted TBR to revise its telecom edge compute market size in the recently published Telecom Edge Compute Market Landscape.

Though the virus will delay the ultimate build-out of the edge, the cumulative market size during the forecast period is expected to be larger and grow faster than originally anticipated once the dust settles from the virus.

TBR expects the virus to delay edge spend in 2020 and a portion of 2021. By mid-2021 TBR expects the supply chain to be fully operational again, at which time the industry will attempt to catch up to align with pent-up demand.

TBR expects governments and businesses around the world will reassess their disaster response and risk profiles to mitigate future risks to their societies and operations. This will drive investment in surveillance, drones, industrial automation, blockchain, AR/VR and other use cases that require edge resources to operate. As such, TBR increased the cumulative market size for edge infrastructure as it is expected that many governments, not just the U.S. and China, will justify these investments for national security and business resiliency purposes. It is expected that communication service providers (CSPs) will be key beneficiaries of this addressable market to support government and business initiatives in these areas.

Private cellular networks

Despite short-term issues, COVID-19 will ultimately be a net positive driver of the private cellular networks market over the near to long term.

U.S. 5G investment supports non-China-based vendors as Huawei and ZTE face increasing headwinds

Nokia and Huawei are well-positioned to win as operators overhaul architectures in the 5G era, but most of the spend to date is on 5G radios, with Ericsson at an advantage due to market perception of its software-upgradeable Ericsson Radio System RAN. The network must ultimately be overhauled to fully realize 5G’s potential, but it will take CSPs many years to evolve their networks end-to-end, and the current focus — and 5G-related capex spend — will be on 5G radios. In the 5G RAN space, TBR believes Ericsson leads in market share. Nokia and Huawei, however, have broad portfolios that enable them to enter 5G accounts from multiple domains.

Graph showing 3Q18 revenue, year-to-year growth and operating margin for vendors in TBR's Telecom Vendor Benchmark

 

 

The Telecom Vendor Benchmark details and compares the initiatives and tracks the revenue and performance of the largest telecom vendors in segments including infrastructure, services and applications as well as in geographies including the Americas, EMEA and APAC. The report includes information on market leaders, vendor positioning, vendor market share, key deals, acquisitions, alliances, go-to-market strategies and personnel developments.

Telecom vendor revenues trend upward as operators pull forward 5G investment

According to Technology Business Research, Inc.’s (TBR) 2Q18 Telecom Vendor Benchmark, revenue growth improved for the largest vendors as they capitalized on early 5G investment but saw reduced spend in China. Operators, particularly those in the United States, are pulling forward investment in 5G and deploying small cells to densify networks. However, the RAN market will decline in 2018 as operators in China reduce spend significantly following the conclusion of LTE coverage deployments.

TBR believes Ericsson has staked an early lead in 5G, but Nokia (NYSE: NOK) and Huawei can leverage their end-to-end portfolios to regain share. In 4Q17 and 1Q18 Ericsson (Nasdaq: ERIC) aggressively priced its Ericsson Radio System (ERS), which is software-upgradeable to 5G, undercutting competitors to gain market share ahead of commercial 5G build-outs. Nokia and Huawei remain well positioned in 5G due to their ability to leverage end-to-end portfolios as a one-stop shop for network transformation in the 5G era.

ZTE was banned from sourcing components from the U.S. for part of 2Q18, which drove the company to essentially cease operating, leading to drastically lower revenue and a deep operating loss. The company is once again operating, but its reputation was tarnished, particularly in Western markets.

Graph showing 2Q18 revenue, operating margin and year-to-year revenue growth

 

TBR’s Telecom Vendor Benchmark details and compares the initiatives and tracks the revenue and performance of the largest telecom vendors in segments including infrastructure, services and applications and in geographies including the Americas, EMEA and APAC. The report includes information on market leaders, vendor positioning, vendor market share, key deals, acquisitions, alliances, go-to-market strategies and personnel developments.