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Nokia posted a decline in sales but said a RAN recovery is coming
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Meanwhile Ericsson's CFO predicted more possible lay-offs
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Are the northern lights of the comms industry dimming further?
This morning Finnish radio access network (RAN) vendor Nokia reported another dour quarter and year-end results but predicted that there would a be a recovery in the second half of 2024.
Nokia posted fourth-quarter net sales of 5.7 billion euros ($6.3 billion), a 23% annual decline. Operating profit fell 27% year-on-year to 846 million euros ($921.2 million)
Looking ahead, we expect the challenging environment of 2023 to continue during the first half of 2024,” said CEO Pekka Lundmark during a video on the results. “However, we are now starting to see some green shots...we believe there will be a strong improvement in network sales growth in the second half of 2024.
Nokia has already announced 14,000 job cuts over the next few years and started to divest some of its smaller business units. The Finnish vendor is obviously stlll smarting over AT&T’s decision to move its multi-year RAN contract to its Scando rival Ericsson.
Ericsson also reported this week. Its net sales were down 16% to 71.9 billion Kronor as it continues to face up to the RAN decline in North America and beyond. Chief Financial Officer Carl Mellander warned of more possible layoffs coming, following Ericsson’s staff cut of around 9,000 employees last year.
“No doubt the RAN market has seen better days,” Dell’Oro Group analyst Stefan Pongratz told Silverlinings this week
He said that the RAN market declined in 2023 after years of strong growth. “Market conditions will remain challenging in 2024 as the regional dynamics shift and 5G activity slows in India. But at the same time, the pace of the decline should moderate somewhat this year,” he added
“Even if the North America RAN/capex ratio is reaching new lows, North America is still an important market,” Pongratz continued. “And the AT&T deal will of course have a major impact on the vendor dynamics.”
The RAN market is not in rude health anywhere on globe, Pontgratz said, but many markets are at least healthier than North America. “We actually estimate that the RAN market excluding North America is growing in 2023,” the analyst said.
Other analysts added to the wider RAN portrait:
“The Chinese vendor rip/replace cycle is just about played out now, so that is part of what we are seeing in North America and to some extent Europe,” commented Appledore analyst Robert Curran in an email. “We still have a lot of 5G [standalone] to be deployed, and densification with small cells and rural infill, those are not going to be at the scale of nationwide rollout of a new generation.”
“Generally, we expect that RAN spending will continue to be weak,” Roy Chua, an analyst at AvidThink told us. “Most network-focused infrastructure spend for telcos will likely not recover in 2024 as the carriers find ways to monetize their existing investments and eke out more cost savings on the OpEx front with automation and use of AI/ML.”
Chua agreed with Curran that No. 1 global RAN vendor Huawei and Chinese rival ZTE aren’t now exposed to North American woes, but notes that China has largely completed its 5G rollout. “Huawei could suffer but they have enough diversification in value added services beyond RAN, from enterprise vertical solutions to cloud offerings, plus their push into MENA could buffer them,” he said