Though Perhaps 80% of "Rest of World" 5G Investment Remains Unfilled, U.S . and China have Passed the Peak

Revenue troubles at Ericsson, with growth rates mired at the one-percent to two-percent range, and generally mirrored at Nokia, but the global legacy telecom supplier chain has shrunk for at least a couple of decades. 

At least some of the trouble at the suppliers is that capital investment in new mobile networks follows a clear “S” pattern. 

Spending always ramps up at the onset of construction. It’s a brand new network, after all. At some point, when perhaps half of the population is covered, spending starts to slow, before tapering back down to a “maintenance” mode. 

source: Dell'Oro Group 

Looking back, AT&T spent heavily to build out its 3G network in the early 2000s, with spending peaking about 2006 and then declining. That’s normal. The same pattern held for 4G. 

AT&T spent $17.2 billion on capex for its 4G network in 2010, growing to about $26 billion by 2012. But that was the peak. By 2013 AT&T's capex fell to $23 billion, reflecting the fact that a substantial portion of the network had already been built. 

China Mobile spent $20 billion in capex in 2010 and peaking at about $26.5 billion in 2012. By 2013, China Mobile's capex had fallen to $23.4 billion. Again, the spikey pattern is dictated by the build schedule when creating a new network. 

Granted, the rest of world investments in 5G will continue. But much of the North American and China networks are substantially completed. 

The other issue for Ericsson and Nokia has been the emergence of Huawei and other suppliers including ZTE and others such as Samsung, plus specialists of all sorts that pose gross revenue and profit margin pressures for the legacy suppliers.

Market share is an issue. In 2021, for example, Ericsson had 23.5 percent share. Nokia had

22 percent. Newer supplier Huawei had 22 percent share, while ZTE captured about seven percent. Between them, Samsung, Cisco and Ciena had a combined market share of around 17 percent. 

Also, mobile service providers are always working on ways to reduce capex and increase the efficiency of their investments. Some of that also is at work. But competition and the maturation of newbuild activity likely explain much of the flattish revenue performance.