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Telecom’s biggest vendors - 2Q21 edition

What a difference a year makes. Vendor revenues in the telco network infrastructure market (telco NI) grew again in 2Q21, rising 5.1% YoY after a 10.0% jump in 1Q21. Overall for the first half of 2021, telco NI vendor revenues amounted to $110.4 billion (B), up 7.4% from the 1H20 period. Some of the growth is compensating for a weak 1H20 hit by COVID’s initial spread, and some of the growth is due to depreciation of the US dollar. But there is also an uptick in telco spending across multiple segments and geographies. Telco capex for the first half of 2021 rose to $151.1B, up 9.8% YoY.
Telcos are beginning to scale up their 5G networks and fiber access spending is strong; transport network spending is also looking up in markets where 5G penetration is high and traffic growth requires capacity increases further upstream. Vendors who help telcos migrate to cloud-based architectures and services are seeing strong demand. Deployment of stand-alone 5G core networks is just beginning, but as this spreads a number of vendors benefit, including those in the core/edge router market. Automation continues to be a key theme for telco investment as well, helping vendors with strong offerings in this area, especially those able to help telcos revamp processes to leverage new technologies.
Telco capex grew 15% YoY in 2Q21, opex up 14%
Telco NI vendor revenues are fed by a mix of telco capex and opex budgets. In 2Q21, global telecom operator capex grew at the surprisingly strong rate of 15% YoY, after a 5% climb in 1Q21. Opex (excluding depreciation & amortization) increased by 7% in 1Q21 and 14% in 2Q21. This growth is consistent with directions in the telco NI vendor market.
Within the overall telco opex budget, telcos are having success in cutting their sales & marketing and G&A spending, as telcos adjust to working from home and accelerate the migration of sales & support to digital platforms. Labor costs are a big part of telco opex (and rising), and automation is a key area of investment in 2021 for nearly all major telcos. 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 operators’ sales of software licenses to telcos are growing, and starting to bump up competitively against the more traditional telco-centric vendors like Amdocs and CSG.
Leaderboard largely unchanged but Huawei is slipping
The market share leaders in the global telco NI market remain Huawei, Ericsson, Nokia, and ZTE, who are also the top providers of 5G infrastructure. After these top 4, China Comservice took the fifth spot in 2Q21 due to services sales with domestic telcos. Cisco and...
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Matt Walker
Chief Analyst