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Telecom’s biggest vendors - 4Q20 edition

The market for telecom network infrastructure (telco NI) vendor products and services declined by a relatively modest 0.6% in 2020, surprisingly, despite widespread economic downturns related to the COVID-19 pandemic. Telco investments to support this shift, and a broader move to the cloud, helped to offset the weak economic climate, as did telcos’ eagerness to deploy 5G and begin the search for new revenue streams.
For all reporting vendors, telco NI revenues in 2020 amounted to $216.4B, from $217.7B in 2019. For 4Q20 alone, telco NI vendor revenues saw 4% YoY growth to $61.2B on the back of a widespread pickup in 5G spending, driven by a year-long surge in China. Huawei, Ericsson and Nokia took the top three spots for the year, as usual, followed by ZTE, China Comservice and Cisco. The biggest share gainers in 2020 were Ericsson, ZTE, Intel, NEC and Dell Technologies/VMWare. Samsung, Nokia, China Comservice and several fiber-centric suppliers lost the most share in 2020.
Telco capex and opex both slightly down in 2020
Capital expenditures by telcos ended 2020 at approximately $293.4B, down about 2.0% from the 2019 total. China was up, but a large number of telcos in the Americas and Europe reported capex declines. Telco opex, excluding depreciation and amortization, fell by 3.6% in 2020 to $1,173B. Much of the decline was in the sales & marketing and G&A areas, however, as telcos adjusted to working from home and accelerated the migration of sales & support to digital platforms. Numerous telcos are reporting that network operations is taking up a larger portion of the opex pie. This is important because vendors are increasingly selling into opex budgets within their telco customers, not just capex budgets. That’s especially true on the services and software sides. Webscale providers’ sales of software licenses to telcos are also growing, and starting to bump up competitively against the more traditional telco-centric vendors like Amdocs and CSG.
For 4Q20 alone, telco capex and opex (ex-D&A) both increased on a YoY basis, up 1.0% and 0.2% respectively. A number of carriers did front-load capex more than usual in 2020, including AT&T and Verizon, but the capex split by quarter was in line with historic periods. As such, the end of year surge is mildly promising, as it suggests 5G network deployments are back on track.
Note that the capex and opex figures for the telco market in 4Q20 are preliminary; final results will be published shortly.
Winners and losers
In terms of overall share gains in 2020, the biggest winner was Ericsson, as it gained 0.73% from its 2019 base to extend its lead over third place Nokia. Huawei’s fortunes in 2020 were hampered significantly by supply chain sanctions and security concerns, giving both vendors an opening. In such cases, Ericsson and Nokia often shared 5G wins (e.g. dtac in Thailand), as exclusive deals are not common, but Ericsson tended to win more of the business on a revenue basis. And Ericsson’s strong presence in China also lifted its overall position.
The biggest losers of 2020 were Samsung and Nokia, dropping 0.55% and 0.54% in market share respectively, relative to their 2019 positions. Samsung’s decline is due mainly to the completion of initial 5G builds in Korea. The company has a number of recent 5G wins elsewhere, however: KDDI and NTT DoCoMo (1Q21), as well as SaskTel and Videotron in Canada and a big deal at Verizon announced late last year. Revenues for these deals haven’t hit yet, however. Meanwhile, Nokia’s move away from China impacted revenues, but it has also partnered with all the big cloud providers in 1Q21, and its support of open RAN differentiates it from Ericsson – these efforts should pay off for Nokia in the future.
Other important share movements in 2020 include
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Matt Walker
Chief Analyst