Telecom’s biggest vendors – 3Q19 edition

Telecom’s biggest vendors – 3Q19 edition
Telco NI vendor revenues fall YoY for third straight quarter, as Huawei dips again; 5G emerging slowly
By Matt Walker

The goal of this report series is to equip telecom industry decision-makers with a comprehensive view of spending trends and vendor market power in their industry. To do this we assess technology vendors’ revenues in the telecom vertical, across a wide range of company types and technology segments.

Scope

This report is focused on technology spending by telecommunications network operators (TNOs, or telcos).

Technology vendors record approximately $200B per year in sales of telecom network infrastructure (“Telco NI”) to this industry segment. Telco NI spending supports a supply chain of hundreds of vendors across the globe. That includes well over 100 selling directly to telcos some mix of hardware, software, and services.

We formally launched this quarterly “Telco NI” vendor market share series in April 2019, with a 4Q18 review. This report marks our fourth edition, extending coverage through September 2019 for a total of 27 quarters: 1Q13-3Q19. This edition expands the list of vendors to 119, including some non-active (acquired or bankrupt) companies. As with many markets, the Telco NI market has a long tail of smaller players. The largest 6 vendors accounted for over 60% of market revenues, for the 3Q19 annualized period.

Abstract – 3Q19

Market growth trending downwards, Huawei still dominates

Telco NI vendor revenues amounted to $52.5B in 3Q19, down 0.3% from 3Q18. That’s the third consecutive YoY drop in single quarter sales. Annualized (12 month rolling) revenues were $218.9B through 3Q19, up just under 1% from the year prior.

On an annualized basis, Huawei’s $44.4B in Telco NI revenues easily beats all rivals, and nearly exceeds the sum of the second and third ranked vendors Ericsson and Nokia. Cisco places fourth with just under half the revenues of Nokia. China Communications Services is fifth, and the only Engineering Services (ES) vendor in the top 10. ZTE ranks sixth due largely to its position in wireless infrastructure and optical  in China and emerging markets. NEC ranks 7th due to strong Japanese fixed networks and in global microwave and submarine markets. CommScope places 8th and is the only cabling & connectivity vendor in the top 10. Intel and Samsung round out the top 10 due to sales in telco data centers and 4G/5G networks, respectively.

Comparing 3Q19 annualized share with 2Q19, Huawei, Nokia, Samsung, Amdocs, Hengtong, Corning and a few others held steady. Ericsson, ZTE, NEC, CommScope, Intel saw modest improvements in share. Cisco, China Communications Services, and Fiberhome experienced modest declines. Cisco has been falling for some time in the telco segment, while Fiberhome and China Communications Services have been affected by relatively weak spending trends in China’s fixed network sector.

Capex, Opex, and Telco NI vendor revenues

The vast majority of Telco NI vendor revenues still draw on telco capex budgets, so capex remains a useful metric to track. Annualized telco capex was in the $320-330B+ range during the 4G/LTE construction boom, but is now below $300B.

Telco NI vendor revenues have not declined in concert with capex. The main reasons are vendor innovation and telco cost cutting. Vendors have developed more creative solutions to pitch to telcos beyond big capital projects; digital transformation support, for instance. Telcos have continued to outsource key aspects of their operations to vendors, in an effort to benefit from vendor scale and ideas, and increase their flexibility.

Further, capex is not the only consideration, opex is also relevant. Two trends have made it easier for telcos to resource their network infrastructure over the last few years. Both affect the capex/opex split.

One trend is telcos’ rising ability to rent network infrastructure assets, such as towers. Renting rather than building tower/data center capacity represents a shift from capex to opex. That has most clearly affected capex in China, where the three telcos now rent from China Tower, and these costs show up as an operational expense.

The rise of software is the other. Hardware products increasingly get much of their functionality from related software platforms. That allows more of a pay-as-you-grow approach, as telcos pay only for the licenses they consume, when features are turned on. Moreover, certain types of software arrangements count as opex, not capex.

The rise of cloud-based software options, not necessarily tied to an owned hardware platform, is also a factor. Telcos are shifting workloads to the cloud, as telcos seek to benefit from both the scale & software expertise of webscale. By moving work to the cloud, Amazon Web Services (AWS) says that “telcos not only accelerate their data center consolidation and migration to the cloud, but monetize their path to 5G by offering customers next-generation capabilities in mobile edge computing and IoT.” New service development is a major area of telco-webscale collaboration. For instance, Google Cloud’s Apigee platform has been adopted by a number of telcos for API development. GCP pitches its work with NTT DoCoMo explicitly as both “reducing costs and improving development efficiency.”

Constraints on telco spending

Market hype around 5G continues to build, yet actual spending budgets are constricted. Flat to negative growth in telco revenues is just one factor, and not new. Macroeconomics are not the main issue, either. Interest rates remain low and recession concerns are not severe. More important factors affecting many telcos today are: lack of suitable spectrum for wide-scale deployments; telco concerns about the cost of new spectrum needed for full buildouts; ongoing uncertainty about the fate of Huawei; vendors’ desire to buy market share, pushing down the size of contracts; the increasing maturity of open networking (O-RAN in particular); and, the rising ability of webscale/cloud providers and the carrier-neutral sector to help telcos fill out key portions of their network infrastructure.

By vendor type, the best growth over the last few quarters has come in the relatively small NSP (network software provider) and T&M (test & measurement) segments. NSPs have benefited from the multi-year trend of telcos preferring software-based functions & features when available. Prep work for 5G is largely responsible for the steadiness of the T&M vendors. For related reasons, the Engineering Services (ES) and Cabling & Connectivity (CCV) segments of companies have struggled as large network construction projects are less common nowadays. Wireless broadband is increasingly competitive with fixed, enabling telcos to spend less on costly fiber buildouts. Further, telcos are getting wiser about leasing tower & data center (and cloud) capacity rather than building it alone and capitalizing it onto their balance sheets. Finally, telco opex spend on digital transformation projects and service platform development and maintenance has benefited the ITSP group, which grew 4% in 3Q19.

The Huawei chaos will continue into 2020 and beyond

Those waiting for a grand resolution to US-China disputes surrounding Huawei will be disappointed – the company’s problems did not arise with Trump and his trade war. Concerns about Huawei’s private company origins and independence from the Chinese state are fairly bipartisan in the US, and shared by a number of European and Asian governments.

Yet Huawei certainly isn’t going anywhere; it has the broadest portfolio of products in the industry, and its 22% market share in Telco NI is just a bit lower than the sum of Ericsson and Nokia and Ericsson combined. Since its CFO’s arrest, the vendor has hardly backed away from its ambitions – and the Chinese government has made clear its support for Huawei’s long term growth.

The now clear connection between the Chinese state and Huawei, however, open up opportunities for competing vendors, including those with open RAN solutions. Most private telcos see clear downsides to relying on a technology supplier so clearly beholden to a state sponsor. For these vendors to leverage the situation, though, this is not the time to mince words.

Table of Contents

  1. ABSTRACT – Results commentary
  2. OVERVIEW – Report objective, scope, and vendor list
  3. TELCO NI – Totals through 3Q19
  4. TOP 20 VENDORS – Printable tearsheets
  5. Single vendor snapshot
  6. 5-vendor snapshot

Figure & Charts

Partial list:

 

  • Telco NI sales by segment ($B)
  • Vendor revenues by HQ country (2013 vs. 2018)
  • Telco NI sales of top 6 vendors vs. all others, 3Q19 annualized ($B)
  • Telco vertical as % of total revenues since 2013
  • Telco NI as % of corporate revenues – Top 20 vendors
  • Telco capex and vendor NI sales to telcos, annualized ($B)
  • Telco NI vendor revenues as % of TNO capex/opex
  • 3Q19 sales to telcos by vendor type (US$M)
  • Top vendors based on annualized sales to telcos through 3Q19 ($B)
  • Top vendors based on 3Q19 sales to telcos ($B)
  • Telco NI Revs ($B, annualized)
  • Annualized share: 3Q19 vs. 2Q19
  • Telco NI Revs (3Q19)
  • Telco NI YoY Sales Growth – 3Q19
  • For the top 20 vendors in Telco NI: How did each perform in 3Q19? What is the outlook for the rest of 2019?

 

Coverage

Company Segment
3M CCV
A10 Networks NEP
Accenture plc ITSP
Accton Technology NEP
ADTRAN NEP
ADVA Optical Networking NEP
Alcatel-Lucent NEP
Allied Telesis NEP
Allot Communications NEP
Altran Technologies ITSP
Amdocs NSP
Anritsu T&M
Arista Networks NEP
ARRIS International CCV
Atos Origin ITSP
Audiocodes NSP
Avaya ITSP
Aviat Networks NEP
Beijing Xinwei NEP
Broadcom Limited NEP
BroadSoft, Inc. NSP
Brocade Communications Systems, Inc. NEP
CA Technologies NSP
Calix NEP
Capgemini ITSP
Casa Systems NEP
Ceragon Networks NEP
Check Point Software NSP
China Communications Services Corporation Limited ES
Ciena Corporation NEP
Cisco Systems NEP
Citrix Systems NSP
Clearfield CCV
Comarch NSP
Comba Telecom NEP
CommScope Holding CCV
Commvault Systems NSP
Comptel NSP
Convergys ITSP
Coriant NEP
Corning CCV
CSG NSP
Cyan NSP
DASAN Zhone NEP
Datang Telecom Technology NEP
Dell Technologies NSP
DragonWave Inc. NEP
DXC Technology (aka CSC) ITSP
DyCom Industries ES
Eastern Communications NEP
Ericsson NEP
EXFO Inc T&M
Extreme Networks NEP
F5 Networks NEP
Fiberhome NEP
FireEye NSP
Fortinet NEP
Fujikura CCV
Fujitsu Limited NEP
Furukawa Electric CCV
General Cable CCV
Harmonic Inc. NEP
Hengtong Optic-electric CCV
Hitachi NEP
HPE ITSP
Huawei NEP
Huber+suhner AG CCV
IBM ITSP
Infinera NEP
Infosys ITSP
Inseego NEP
Intel NEP
Italtel NEP
ITOCHU Techno-Solutions Corporation ES
Juniper Networks NEP
Kudelski NEP
MasTec ES
Mavenir NSP
Mitsubishi Electric NEP
NEC Corporation NEP
NEC Networks & System Integration Corporation ES
Net Insight NSP
Netcomm NEP
NetScout Systems NSP
Nexans CCV
Nokia NEP
OPTIVA NSP
Oracle NSP
Pace plc NEP
Palo Alto Networks NEP
Prysmian CCV
Quantenna Communications NEP
Radcom NSP
Radisys NSP
Radware NSP
Red Hat NSP
Ribbon Communications NSP
Ruckus Wireless NEP
Samsung Electronics NEP
SAP SE ITSP
SeaChange International, Inc. NSP
Sopra Steria ITSP
Spirent Communications T&M
Sterlite Technologies CCV
Subex NSP
SYNNEX Corporation ITSP
Tata Consultancy Services ITSP
TE Connectivity CCV
Tech Mahindra ITSP
Technicolor NEP
Tejas Networks NEP
Transmode NEP
Trigiant Group CCV
Vubiquity ITSP
Westell CCV
Wipro ITSP
Wiwynn NEP
YOFC CCV
ZTE NEP

Visuals

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