Mobile Equipment Vendors Caught in MNO CapEx Downdraft

Major mobile equipment vendors, Ericsson (NASDAQ: ERIC) and Nokia (NYSE: NOK), reported similar performance in their respective 2Q23 earnings results. The long and short of it is that significant declines in sales to mobile network operators in North America were offset by increased demand in India and growth in private networks.

Both companies are major suppliers to the U.S. Big 3 MNOs – Verizon (NYSE: VZ), T-Mobile (NASDAQ: TMUS) and AT&T (NYSE: T) – and have big financial exposure to each MNO’s network build out plans. As Inside Towers reported at the end of 2022, AT&T and Verizon completed Phase I of their C-band license build outs and T-Mobile finalized the integration with the Sprint network. Those winddown activities precipitated a substantial drop in overall MNO capex in the U.S. and led to a decline in North American sales for both companies. 

Despite the capex “pause,” the pace of U.S. wireless network construction is expected to pick up towards the end of 2023 and into 2024. MNOs with C-band licenses will embark on Phase II deployments along with buildouts in 3.45 GHz and 3.5 GHz CBRS spectrum among MNOs and cable companies alike. 

Furthermore, interest is on the rise in deploying private networks using both licensed and unlicensed spectrum in a number of commercial and industrial vertical markets. Both companies’ results reflected the U.S. market situation. Ericsson’s Networks business unit recorded 2Q23 sales of $4.1 billion, down eight percent on a year-over-year basis from $4.5 billion in 2Q22. Much of that drop was attributable to the North American market where Ericsson’s overall sales in the region nosedived 37 percent YoY to $1.4 billion in 2Q23 from $2.2 billion in 2Q22. The Networks BU product sales accounted for 75 percent of Ericsson’s total sales in North America for the quarter. 

Nokia’s global sales to MNOs were up just over one percent YoY to $2.9 billion. In North America, however, total sales for the quarter came in at $1.4 billion, down 42 percent from $2.5 billion in 2Q22. Mobile network sales accounted for 46 percent of Nokia’s overall sales in the region.

The good news is that both vendors are experiencing significant growth in two main areas that offset the decline in North America. 

India is a growth market for both companies. The two leading MNOs, Bharti Airtel and Reliance Jio, are charging ahead with their respective 5G deployments and expect to cover all regions in India by the end of 2023, Inside Towers reported. 

Ericsson’s sales to its Southeast Asia, Oceania and India region jumped 74 percent YoY to $1.3 billion from $772 million in the year ago quarter, driven by what it says is a “record build-out speed” in India. Similarly, Nokia’s sales in India skyrocketed 333 percent to $1.2 billion in 2Q23 from $269 million in 2Q22.

Private networks are another growth area for both companies. Private networks offer enterprises control over their voice and broadband communications, security, and operating cost efficiencies. With the availability of spectrum for private network use and custom network designs that utilize RAN and core gear from both vendors, Ericsson and Nokia are realizing significant opportunities in this segment. 

Worldwide, Ericsson’s private network sales jumped 275 percent to $619 million YoY compared to $165 million in 2Q22. At the same time, Nokia recorded a 25 percent YoY increase to $570 million in its Enterprise segment sales. In its quarterly earnings call, Nokia indicated it is seeing continued strong growth with both enterprise and webscale customers. The company claims to have more than 635 private wireless customers globally with the addition of 90 new Enterprise customers in the quarter.

By John Celentano, Inside Towers Business Editor

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