Network infrastructure market to become more competitive as 5G rolls out
As second quarter results were revealed, network infrastructure vendors Ericsson and Nokia both reported a growth in revenue, driven by increased sales in North American and interest in 5G technology.
Ericsson’s sales adjusted for comparable units and currency increased by 7%, while reported sales grew by 10%.
Nokia saw a 7% rise in revenue from the previous year, maintained its forecasts of full-year earnings per share at 0.25-0.29 euros, and 2020 EPS of 0.37-0.42 euros and experienced a net sales increase of 5%.
Nokia’s Q2 success came somewhat as a surprise, causing the company to reevaluate previous 2019 predictions, which initially expected a flat market, mostly due to the continued decline of smart phone sales. Now, the company expects slight market growth in 2019.
Chinese telecommunications equipment and electronics company Huawei did not fare as well. While it is true that the company saw a modest growth in the second quarter of 2019 when compared to the same period last year, it’s overall share is down almost 2% in Europe, mostly likely the result of the Trump administration’s mixed messages about the Huawei ban.
The anticipation for 5G promises to introduce a whole new market for network and device upgrades, providing the perfect opportunity for telecom infrastructure vendors to experience significant growth.
All three companies are looking to make gains in the 5G space as rollouts and intrigue continue to mount. To date, Nokia CEO Rajeev Suri has cited 45 commercial 5G deals, while Ericsson has publicly announced 23 5G contracts. Ericsson holds contracts with T-Mobile, Verizon, SK telecom, and Vodafone UK just to name a few. Huawei currently has 50 5G contracts, 60% of which are with operators in Europe. Europe has been resisting influence from the U.S. to ban Huawei products, making the European market a crucial one for the Chinese telecom company.
“Competitive intensity could increase in some accounts as some competitors seek to take share in the early phases of 5G,” Nokia stated. “Some customers are reassessing their vendors in light of security concerns, creating near-term pressure to invest in order to secure long-term benefits,” Nokia added.
Similarly, Ericsson said last week that the company expected a battle for new contracts to hit profit margins in the second half of the year.
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