Ericsson needs a range of industries to embrace 5G network services if the company is to get a long-term boost that would allow it to progress from cost-cutting to expansion.
The Swedish mobile network equipment maker struggled with flagging revenue since 4G sales peaked in the middle of the decade.
Ericsson expects that growth will then return as the pace of 5G network upgrades picks up early in the following decade.
It is pinning its hopes for revived growth on the emergence of new mobile businesses in 10 broad sectors such as manufacturing, energy and public safety.
It is betting that new business models enabled by 5G technology could drive an increase of up to 36 per cent in telecom industry services on top of current businesses.
Operator revenue from these businesses are likely to grow only a modest 1.5 per cent per year through 2026, reaching $1.74 trillion.
Half of the amount would come from mobile phone services and the rest from fixed-line and broadband, the company forecasts.
But new 5G-enabled businesses could drive up to $619 billion in incremental industry revenue by 2026, Christian Hedelin, head of strategy at Ericsson's networks business, said.
Hedelin said there are enormous possibilities to address.
It's up to us as an industry to make sure as much as possible of this potential value will materialise," Hedelin added.
Ericsson will not project how this may translate into growth for the company.
It is currently the world's second largest supplier of mobile network equipment after diversified telecom equipment giant Huawei of China and ahead of Finland's Nokia.
Hedelin noted that telcos historically have invested around two to three per cent of total revenue in mobile networks, which leaves between $35-$70 billion for gear makers.
Industry analysts project the mobile equipment market to return to very modest growth from 2020 as demand for next-generation 5G networks begins to take off.
However, most analysts say it is likely to take until the middle of the next decade before 5G revenues overtake prior generations of equipment.
They also say that 5G sales are unlikely to ever surpass spending on 4G equipment.
"No one is ready to break the bank," IHS Markit analyst Stéphane Teral said of budget-strapped operators' appetite for new network investments.
Hedelin confirmed he expects the market for radio access network (RAN) equipment to be flat through 2020 before beginning to grow.
Mobile network industry revenue has been in sharp decline since the middle of this decade.
In the middle of the decade, demand for current 4G network gear peaked after massive rollouts in China, the United States and other developed markets.
Industry research group Dell'Oro sees the RAN market rising by two per cent annually on average during the period 2017 through 2022, its analyst Stefan Pongratz said.
Teral sees lower 5G revenues than those from 4G as more advanced technology with additional software and commoditised hardware delivers more bang for the buck.
Pongrantz said forecasting any potential 5G uplift is difficult.
So far, there is no clear game-changing device or service to emerge to drive network demand the way the arrival of the Apple iPhone in 2007, followed by Android, he added.
Ericsson needs industries to embrace 5G
FE Team | Published: June 24, 2018 22:18:53
Ericsson needs industries to embrace 5G
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