Velocity vs. Reality: The State of the Mobile Industry
March 2023
INTRODUCTION
In 2023, the Mobile World Congress (MWC23) was entitled ‘Velocity’ to symbolise the rapid advance of technology in the mobile industry. However, this storyline was at odds with the keynote speeches of the CEOs of Mobile Operators, which focused on the economic recession they are facing, their struggle to monetize heavy 5G investments, and their calls for new regulations to level the playing field with Cloud Hyperscalers.
In this coverage of MWC23, we will examine the state of the mobile industry and its sustainability efforts:
Mobile industry: the weaknesses of mobile operators, the transformation of vendors, telecom Cloud platforms, and the convergence of terrestrial and satellite networks
Sustainability: UN sustainable development goals, energy efficiency, and device circularity
Credit: GSMA
THE STATE OF THE MOBILE INDUSTRY
This chapter discusses the status and the presence of the various players in the mobile industry: mobile operators, hyperscalers, telecom vendors, and LEO satellite providers.
Mobile operators must find ways to monetise their substantial 5G investments, which require collaboration and transformation, and European telcos called for regulatory reforms at MWC23.
Hyperscalers such as AWS, Google Cloud, and Azure enjoy success with their cloud solutions for 5G networks, prompting telecom operators to consider in-house solutions or other cloud deployment models.
Traditional vendors such as Nokia and Ericsson focus their efforts on Enterprises to compensate for the sluggish operators’ market ; whilst Open RAN vendors such as Rakuten and Mavenir face financial troubles as Open RAN suffer from deployment and integration issues. Meanwhile, Samsung benefit from Huawei's difficulty in maintaining its technical lead without advanced semiconductors.
Finally, satellite and terrestrial networks are converging, as evidenced by LEO direct-to-handset technology on display, as well as the new regulatory framework announced by the FCC at MWC23.
MOBILE OPERATORS under pressure
This section provides an overview of the challenges faced by the telecom industry, which were apparent at MWC23, such as rising energy costs and monetising 5G investments. It also describes some regional disparities, such as North America's lead in 5G adoption and Asia's focus on finding new applications and services, while Europe faces strict regulations and requests a level playing field with digital providers – a call that the EU may answer. Finally, this section highlights the need for collaboration and transformation to create new sources of value.
Challenges facing mobile operators
Governments have provided telecom operators with record subsidies in digital infrastructure, which were initiated in response to pandemic lockdowns.
However, the tense economic, social, and geopolitical climate have led to rising wage and energy costs. As a result, mobile operators are facing stagnant revenue growth, and inflation is causing mobile and internet subscription plan prices to increase in 2023.
Also, according to the 2022 Mobile Economy report from the GSMA, "mobile operators are facing a capex investment requirement of over $600 billion worldwide between 2022 and 2025, roughly 85% of which will be in 5G networks"... And operators find it hard to monetise their 5G investments.
In search of funding, telcos are considering spinning off tower, fibre, and data centres (or already have). Yet, disposing off their assets may prevent them from enabling new services and differentiated offering.
Regional Overview
Europe
European operators face stricter M&A and digital regulations. Indeed, they cannot consolidate and they struggle to monetize their networks whilst cloud and application service providers benefit from it.
Orange CEO Christel Heydemann highlighted that “Consumers always expect to pay less and get more. In the meantime, telcos are facing pressure to squeeze capex while coping with exponential traffic growth, mainly concentrated from a handful of digital players.”
Europe is lagging behind in terms of 5G coverage. In its keynote speech, Deutsche Telekom CEO Timotheus Hoettges noted the 5G coverage rate is 73% in Europe, compared with 96% in the US and around 90% in the Asian Pacific.
North America
Although North American operators lead in 5G adoption, they are highly indebted due to expensive spectrum auctions, intensive customer acquisition campaigns, and fierce competition. Thus, major service providers (e.g. Verizon and AT&T) are fully or partially offloading assets (e.g. Yahoo, Warner Media, DirectTV) in order to improve their financial statements. Now, AT&T is thought to be seeking to undo its $600m acquisition of cybersecurity firm AlienVault, which was completed 5 years ago.
Asia
5G was first launched in South Korea in 2019, and Asian operators have been searching for new applications and services to drive sales. However, it is still unclear what these services will be, and ARPU erosion has resumed after an initial uptick.
EU regulation
CEOs of Mobile Operators criticize Europe's regulatory environment
At MWC23, Deutsche Telekom CEO Timotheus Hoettges, Telecom Italia CEO Pietro, and Orange CEO Christel Heydemann called for the European Union to:
Create a level playing field with digital providers and make them pay a fair share towards connectivity costs
Relax Mergers & Acquisitions and consolidation
Allow switching off legacy systems
Make devices more affordable
Whilst this cry for change is not new, it may get traction this year, as we will see in the next paragraph.
EU Commission consultation
The European Commission may make significant changes to how internet connectivity is funded across the EU.
Indeed, on 23 February 2023, the EU Commission launched a 12-week consultation to “gather views on the changing technological and market landscape and how it may affect the sector for electronic communications”.
Furthermore, in a keynote speech at MWC23, the EU internal market commissioner, Thierry Breton, emphasized the need for a financing model to distribute the considerable investment required to ensure access to fast and reliable Gigabit connectivity for EU citizens and businesses by 2030. Breton also highlighted the necessity to discuss “the possible existing obstacles to cross-border consolidation of electronic communications providers in the EU as well as the benefits of an integrated radio spectrum market”.
Netflix disagrees
During his keynote speech, Greg Peters, Co-CEO of Netflix, rejected the idea of streaming providers funding broadband networks and infrastructure, stating that increasing internet usage is an opportunity for everyone involved. He highlighted that Netflix has invested more than $60 billion in content over the last five years, which is equivalent to more than 50% of its revenue. Peters also mentioned that internet traffic has grown consistently by around 30% annually over the past five years, and ISPs have managed this growth by using efficiency gains within the network. He emphasized that taxes on entertainment companies would have a significant adverse effect and added that Netflix has commercial partnerships with over 160 telcos and ISPs around the world, many of which bundle Netflix directly into their consumer offerings.
The need for a baseline and a broader policy agenda
Whilst commenting on MWC23, Mohammad Chowdhury, Founder and CEO of Long Street Advisors, suggested that operators compile a fact-based file in order to support their call for new regulation.
He also highlighted that digital inclusion is at risk and recommended that governments:
• “Reframe ‘connect the unconnected’ policy measures into a significantly broader agenda to ‘digitise the undigitised’.”
• Adopt “strong, cross-sectoral policy approaches that move beyond the siloed sector-based machinery of government created during the Industrial Revolution.”
Collaboration and Transformation
Mobile operators face a critical challenge in the new era of connectivity: how to deploy advanced networks like 5G while maintaining profitability. To overcome this challenge, operators must seek out new sources of value, such as IoT and cloud services, and make strategic decisions about where to invest their resources.
Partnerships are also key. At MWC23, Vicki Brady, Chief Executive Officer at Telstra, stated that mobile operators need to change their mindset and be “brilliant at collaborating to co-create solutions on top of our network”. He added: “We may not control all parts of the solution end-to-end, and we’re OK with that. That’s what true collaborative innovation is about.”
Orange CEO Christel Heydemann noted there was a need to step aside and take a fresh look at the industry, alongside promoting the open, collaborative approach across the industry with initiatives such as the GSMA Open Gateway Initiative.
Thus, mobile operators have realised the need for change. In fact, PwC’s 26th Annual Global CEO Survey, published in January 2023, revealed that nearly 40% of Telecom CEOs believe their businesses will not be economically viable in ten years if they fail to transform.
Hyperscalers offering Telecom Cloud Platforms
The Telecom Cloud refers to the use of cloud computing technology in the telecommunications industry, which enables the delivery of on-demand services such as voice, data, and video to end-users, and provides the flexibility to deploy and scale network services quickly and at a lower cost than traditional hardware-based networks.
Key players in the Telecom Cloud market include Amazon Web Services, Microsoft Azure, which have established telecom-specific business units staffed by telecom veterans to pursue telecom customers.
At MWC23, these Hyperscalers promoted their public/hybrid clouds as viable platforms for operating 5G core and RAN networks, and emphasized the cost-saving benefits of cloud-based network rollouts. The congress saw announcements from AWS, Azure, and Google Cloud:
AWS announced a Proof-of-Concept with Swisscom and Ericsson to explore the deployment of Ericsson 5G Core on AWS, as well as a partnership with Melon Digital to provide a SaaS-based solution via AWS. Nokia and AWS showcased a Cloud RAN solution that provides carrier-grade RAN performance.
Azure announced several new services, including Azure Operator Nexus, Azure Communications gateway, and Azure private MEC. Microsoft and Dell also expanded their partnership to support organizations in acquiring, deploying, and maintaining new technologies in the telecom space.
Google Cloud launched three new products, including Telecom Network Automation, Telecom Data Fabric, and Telecom Subscriber Insights.
The Hyperscalers are not the only players in this field, as competitors such as VMware and Red Hat have also been promoting their cloud solutions.
As a result, most telecom operators are currently observing the situation and considering their strategic options, which encompass in-house solutions and other cloud deployment models.
In this section, we will begin by reviewing the MWC23 announcements of the three hyperscalers, and then provide an outlook of the telecom cloud industry.
AWS announcements at MWC23
Amazon Web Services (AWS) has an early lead against Microsoft Azure and Google Cloud in the Telecom Cloud market, and this showed at MWC23. Indeed, its "Level Up with AWS" banner was displayed at the entrance of the event, its AWS Studio allowed telecom and AWS experts to meet and exchange ideas, and its recent solutions were showcased.
Swisscom trialling the deployment of Ericsson 5G Core on AWS
At MWC23, Swisscom and Ericsson announced their collaboration with Amazon Web Services (AWS) to explore the deployment of Ericsson 5G Core on AWS in a Proof-of-Concept (PoC). The PoC objective is to examine the use cases that take advantage of the flexibility and elasticity of hybrid and public cloud, where capacity is not constantly needed, and efficiency is essential. For example, AWS can be used to offload and complement Swisscom's private cloud during maintenance activities or traffic peaks. The project is part of Swisscom's effort to change the way its networks will be built and operated, with strategic partnerships being a key to its success. The collaboration is also aimed at making best use of HCP agility and cloud economy of scale to deliver a hybrid cloud solution that meets the strict requirements of the telecoms industry.
Melon Digital partnering with Amdoc via AWS SaaS solution
Meanwhile, Melon Digital launched in South Africa, partnering with Amdoc’s Digital Brands Suite as a Service to provide customer care and monetization capabilities via a SaaS-based solution powered by AWS, giving customers more flexibility and control.
Nokia and AWS Cloud developed a Cloud RAN solution
At MWC23, Nokia and AWS showcased a solution that combines Nokia’s Cloud Native RAN Software and In-Line Cloud RAN SmartNIC with AWS's infrastructure, observability, automation, and infrastructure services.
The solution addresses the complexity of integrating and deploying a disaggregated hardware and software product stack, provides carrier-grade RAN performance with high radio density in a single server, and simplifies and accelerates the process of configuring and maintaining the RAN solution after deployment.
Communication service providers can also use data analytics and AI/ML services, such as Amazon QuickSight and Amazon Redshift, to enhance their network assurance capabilities.
The joint solution will enable customers to configure and continuously maintain the RAN solution, accelerating deployment time and reducing costs.
Azure Announcements at MWC23
At MWC23, Microsoft Azure announced a range of services designed to meet the requirements of mobile operators and their Enterprise clients. The new offerings will be available to telcos utilizing its Azure cloud services, and Microsoft stated that they would concentrate on "ubiquitous computing from cloud to edge."
In addition, Microsoft held sessions with industry experts to discuss topics ranging from 5G acceleration to AI to the metaverse.
Azure Operator Nexus
Microsoft announced Azure Operator Nexus, a hybrid cloud platforM that allows mobile operators to operate their workloads either on-premises or on the Azure platform. AT &T remains Azure's primary reference customer as it runs its 5G standalone core on the platform, while Ericsson, Nokia, and Mavenir have all made their mobile core applications available via the Nexus platform.
Azure Communications gateway
Microsoft also released the Azure Communications gateway managed service, which directly links a telco’s PSTN network to Microsoft Teams, and Azure Operator Voicemail, a managed service that enables operators to shift their voicemail platform to the Azure platform.
Azure private MEC
Additionally, Azure private MEC and Azure Private 5G Core are now generally available, with private MEC solutions already being offered to enterprise users by several telecommunications giants, such as BT, Deutsche Telekom, Etisalat, STC, and Telefónica.
AIOps services
Microsoft introduced two new automated products for telcos: Azure Operator Insights, to collect and analyse network data through machine learning, and Azure Operator Service Manager, to provide “seamless management” of services across hybrid cloud sites.
These services will be directly available to operators, Network Equipment Providers, and System Integrators to handle workloads in operators’ networks, Azure, and hybrid environments. Microsoft believes these new AIOps services will bring operators valuable opportunities in the future.
Microsoft is also enhancing its AI expertise through its partnership with OpenAI.
Azure also provided a preview of its radio access network observability feature, which merges RAN key performance indicators with online dashboards to offer partners and enterprise customers with network insights and analytics for private 4G or 5G networks from a single Azure portal.
Microsoft and Dell partnership
Microsoft and Dell Technologies Inc. have expanded their partnership to support organizations in acquiring, deploying, and maintaining new technologies in the telecom space. At MWC23, Dennis Hoffman, Senior Vice President and General Manager of the Telecom Systems Business at Dell Technologies, stated that the telecom network of the future will heavily rely on cloud technology including a hybrid component, and that “the beauty of 5G is it’s the first cloud-native cellular standard”.
Google announcements at MWC23
Google Cloud launched three new products at MWC23, which will offer communication service providers with a unified cloud solution that combines traditional and cloud-native elements, making it easier to process and analyse data.
Google Telecom Network Automation
At MWC23, Google introduced Telecom Network Automation, a service designed to expedite network and edge deployments by utilizing cloud-native automation based on Kubernetes and the progress made by Nephio, the open-source project established by Google Cloud in collaboration with the Linux Foundation in 2022.
Bell Canada is already using Telecom Network Automation in its 5G network.
Google Telecom Data Fabric
Google also launched Telecom Data Fabric to assist operators in migrating workloads to the cloud more quickly and effectively, as well as a telecom analytics platform called Telecom Subscriber Insights.
RAN functions on Google Distributed Cloud Edge
Furthermore, Google Cloud announced that they can now run the radio access network (RAN) functions as software on Google Distributed Cloud Edge, offering telcos a common and agile operating model from the core of the network to the edge, with programmability, flexibility, and low operating expenses.
Google Distributed Cloud Edge (GDC Edge), which was launched in 2021, extends a consistent operating model from public Google Cloud regions to the customer's premises.
Four Asia-Pacific operators partner with Google Cloud
Faced with narrow margins due to low average revenue per user, Asia-Pacific operators are seeking new monetization opportunities and carriers are leveraging cloud-based AI and network modernization to deliver superior experiences and unique offerings to drive new revenue.
During the congress, Google Cloud published a blog about its partnership with four Asia-Pacific operators:
StarHub is launching the next phase of its 5G network, transitioning its 5G core network to cloud-based edge networks in partnership with Google Cloud and Nokia.
Indosat has developed a software-as-a-service marketplace to help micro-to-medium-sized businesses digitize their offerings and operations.
Chungwha Telecom, the largest mobile operator in Taiwan, has developed its smart voice assistant products through a partnership with Google Cloud.
Optus, Australia's second largest carrier, is using Google Cloud's Call Center AI to direct and manage calls automatically using AI.
Telecom Cloud Outlook
Hyperscaler strategies
Cloud providers aim to host the telecom network infrastructure, including radio, core, and operating and business support systems. Azure, AWS, and Google are positioning themselves in the market with various strategies. Azure and AWS intend to sell their own network functions and to enter the enterprise private wireless network market, putting them in direct competition with telcos in the long term, as private networks are seen as an opportunity for telecoms to offset their ongoing enterprise legacy losses. AWS is leveraging its edge products to get a foothold in the market. The 2020 acquisitions of Metaswitch and Affirmed demonstrated Microsoft's commitment to offering pre-integrated 5G solutions and utilizing its enterprise go-to-market channels. Unlike Azure and AWS, Google Cloud does not want to develop its cloud-native 5G SA core network or other cloud networking software to avoid partner conflict.
Benefits and Risks for Telcos
The benefits of telecom operators transitioning to the public cloud, include the potential cost efficiencies, speed of time to market of new services, and access to established client and developer ecosystems that the Cloud can offer.
However, challenges such as telco fragmentation, scale of undertaking, expertise required, and cost structure can make this transition challenging. Additionally, the deployment of telco software in a public cloud comes with significant risks, including the costly repurposing of network functions, latency issues with certain network domains, concerns about the resilience of public cloud providers, and the threat of losing control over the network.
Early Adoption versus Opposition
Many telecom network operators worldwide are partnering with public cloud providers to offer cloud computing services to their business customers or for direct connections to the cloud.
Some telecom executives believe that the public cloud is also the optimal place to run network functions. Early telco adopter of hyperscalers for their network functions include DISH and Swisscom with AWS, AT&T with Microsoft Azure, Bell Canada and Telenet with Google Cloud.
However, most telcos, including Verizon Business, T-Mobile and Vodafone, are generally opposed to moving their core network functions to a third-party cloud environment, due to concerns about reliability, resiliency, and expertise.
The recent Sylva initiative, which aims to develop an open-source Telco Cloud software framework to reduce fragmentation of the cloud infrastructure layer for telecommunications and edge services, is the latest sign of European telco resistance against public cloud.
Yet, some analysts predict that more telecom operators will migrate their telco workload to the public cloud.
Telco options
Migrating to the cloud without a clear strategy may lead to increased complexity that could hinder the benefits. Telecom operators can migrate to public cloud, maintain the status quo with existing private/hybrid/public clouds, or choose a hybrid approach. When assessing these options, they need to consider issues such as inter-cloud migration and vendor lock-in, data privacy, cybersecurity, performance, and cost.
Will telecom operators regret putting their network functions into the public cloud or is it a necessary step in their evolution? This question will remain a headline of telecom and cloud news for a while.
The network of telecom operators risks to be subsumed by the cloud and to become connectivity plumbing. Nevertheless, if telcos fail to seize the opportunity to utilise the cloud as a resource to evolve their services, other providers will capitalise on these opportunities instead. Hyperscalers are challenging telcos’ core connectivity business, and if telcos do not adapt, they may risk losing out. Indeed, the telecom cloud market is predicted to grow from $11.5bn in 2022 to $32.5bn by 2027, according to research from Markets and Markets.
In the short term, the telecom and cloud computing industries are battling against an economic recession, with Hyperscalers like Google, Amazon, and Microsoft having to cut thousands of jobs. Additionally, Meta has stepped back from the networking infrastructure and telecom sector following its own round of layoffs. It is uncertain how this will impact the relationship between the two industries as they increasingly become intertwined.
Vendor Transformation
Vendors have been seeking alternative segments to overcome the challenges faced in the mobile operators' market. This section describes the status of the telecom equipment providers, as well as their participation at MWC23. It presents the following stories:
The re-branding of Nokia and the re-organisation of Ericsson to better serve enterprises
Samsung's latest developments in network connectivity and its recent entry into the 5G satellite connectivity space.
Huawei's highly visible presence and the innovation awards it received at the conference, despite being banned in the US.
Rakuten’s ‘Mobile as a Software’ approach, amidst financial losses.
Mavenir’s next generation OpenBeam, following its recent capital raise and staff layoff.
Finally, this section provides an outlook on the telecom vendors, including the challenge to deliver on the 5G hype amidst the technology prowess of cloud service providers such as AWS, as well as on the Open RAN promise whilst deployment and integration challenges persist. It also highlights Huawei's difficulty to maintain its technical lead without access to advanced semiconductors.
Vendor status
Nokia
At MWC23, Nokia announced an updated company and technology strategy, along with a refreshed brand. The company plans to focus on B2B technology innovation to drive digitalization across every industry, expanding the share of enterprises within its customer base, and seizing opportunities from sectors beyond mobile devices. Nokia aims to lead the way in a future where networks meet cloud, realising the exponential potential of networks and meeting the needs of the metaverse.
Pekka Lundmark, President and CEO of Nokia, stated: “We are refreshing our brand to reflect who we are today – a B2B technology innovation leader. This is Nokia, but not as the world has seen us before.”
Nokia also launched new products and services. At MWC23, Nokia showcased anyRAN, the future-ready SmartNIC solution, its enhanced AirFrame Open Edge server, and the progress made in Cloud RAN with its best-in-class partners.
Ericsson
Nokia's recent rebranding at MWC23, with a focus on Enterprises, should not be seen in isolation as Ericsson is also in a similar situation following its recent re-organisation and acquisitions.
In May 2022, Ericsson formed a new division called Enterprise Wireless Solutions, which demonstrates the company's commitment to serving both enterprises and telecommunications companies.
In July September 2020, Ericsson purchased Cradlepoint, the US-based Wireless Edge WAN 4G and 5G Enterprise solutions provider.
In July 2022, Ericsson completed its acquisition of Vonage, the American cloud communications provider.
The company is still seeking more acquisitions, albeit smaller ones, in order to supplement its enterprise offerings. The aim is to consolidate the company's existing Enterprise portfolio and gradually expand into the next stage, in order to compensate for the lethargic demand for its telco offerings.
Ericsson displays at MWC23 included the demo of the Ericsson Radio System hardware wall and tower, as well as exhibits related to monetizing 5G, Time-Critical Communications, 5G standalone network slicing early deployments, energy-efficient solutions, and 6G-related technologies. Some of Ericsson’s recent announcements include the launch of the first 5G SA network in Spain by Orange, the partnership between Ericsson and Telkomsel for 5G FWA trial in Indonesia, and the completion of a 100km long-range 5G data call by Telstra and Ericsson in South Australia.
Samsung
At MWC23, Samsung showcased its latest developments in network connectivity in areas such as 5G RAN, virtualisation (vRAN), zero-touch networks (AI), secure end-to-end networks, eco-responsibility, and 6G roadmap and technology.
Samsung also showcased its latest flagship smartphone, the Galaxy S23 Ultra, which includes recycled materials in 12 of its components. In the foldable device market, Samsung, who until recently enjoyed an incontestable lead, now faces an increase in competition, as Chinese players such as Lenovo, OPPO, Honor, and Tecno Mobile exhibited their latest devices with folding or rollable displays. US tech companies are also set to enter this segment.
Finally, Samsung’s recent news include its:
Entry into 5G satellite connectivity, with its Exynos Modem 5300.
Plans to offer an NB-IoT Non-Terrestrial Networks (NTN) variation in the future.
Continued partnership with Dish Network Corp to expand 5G network zones in Open-RAN and vRAN, targeting the US market, and offering solutions such as virtualized distributed unit (vDU), virtualized central unit (vCU).
Huawei
Despite being banned in the US and receiving bad press, Huawei was determined to stay relevant, and had a strong presence at MWC23. Huawei's large exhibition booth showcased its latest products and solutions in 5G, ultra-broadband connectivity, digital and smart transformation, and green inclusion.
In addition, Huawei's Enterprise Division displayed over 50 new products and solutions for global customers. The company's consumer electronics division also exhibited the new Huawei Mate 50 series, Huawei Watch Buds, and Watch GT Cyber.
At MWC23, Huawei won 5 Global Mobile (GLOMO) Awards, the industry's most prestigious accolade, for its innovation in FDD beamforming, massive MIMO, rural connectivity solutions, private networks, and connected health.
Rakuten
Rakuten promotes a ‘Mobile as a Software’ mindset, which involves utilizing technology that fully embraces the separation of hardware, software, and network systems at all levels of the network. According to Rakuten, this approach enables mobile operators to maximize efficiency, reduce costs, and improve network agility, build-outs, and upgrades.
At MWC23, Rakuten showcased the benefits of this approach and presented the Cloud-native mobile network they have built with Rakuten Mobile in Japan.
Yet, Rakuten's mobile phone business accounted for a loss of ¥492.8 billion in 2022, which is primarily due to the significant costs involved in building base stations. Furthermore, the number of mobile subscribers decreased from 5.37 million in 2021 to 5.06 million in 2022, after Rakuten discontinued its zero-yen plan for users with low data usage.
Consequently, the future of Rakuten Group is in jeopardy, as it suffered a net loss of ¥372.8 billion in 2022, for the fourth consecutive year. Additionally, in December, S&P Global Ratings lowered Rakuten's rating from BB+ to BB, further lowering it to a speculative grade. As of MWC23, Rakuten’s share price was trading 55% below its March 2021 peak.
Mavenir
Mavenir, the US-based telecom software provider, aims to lead the 5G transformation by driving the digital transformation of mission-critical mobile networks. The company has been advocating for open interfaces to allow operators to choose network equipment from different vendors. It will put together a turnkey solution based on Open RAN that is suited to the way customers are accustomed to working with traditional vendors.
In October 2022, Mavenir, raised $155 million in capital, bringing the total strategic capital raised since July 2022 to $250 million. The funds will be used to invest in disruptive products and accelerate innovation in mobile networks. Mavenir’s private equity and strategic investors include Koch Strategic Platforms and Siris Capital Group.
However, when Mavenir raised $95 million through public debt in August 2022, the credit rating agency Moody's downgraded its opinion of the company's financial position due to its aggressive growth strategy, significant research and development spending, low profitability, negative free cash flows, and high leverage. Moody's also warned that Mavenir had high customer concentration, limited segmental diversity, and a small share of a sizable market with numerous and large competitors in the Open RAN market.
In addition, Mavenir recently had to lay off staff, primarily in marketing, because of challenges in the RCS market and economic uncertainties. These job cuts could be seen as a sign of market maturation as jobs shift from presales and marketing to aftersales, deployment, and support. Yet, the company has denied that these cuts reflect a loss of momentum for the Open RAN movement, and stated that it would continue to invest in its strategic growth portfolio areas that include OpenRAN/Radio, Converged Mobile Core/IMS and BSS.
At MWC23, Mavenir revealed that it has been selected to provide Open RAN services for a country in Deutsche Telekom's European network. Mavenir also announced the launch of the next generation OpenBeam massive MIMO (mMIMO) 32TRX Active Antenna Unit (AAU), which features the Qualcomm QRU100 5G RAN Platform.
Outlook
a) Telecom equipment providers have not delivered the 5G hype that they promised five years ago. Meanwhile, Cloud Service Providers such as Amazon Web Services (AWS) have created impressive platforms, delivered useful services and overhauled business models based on Cloud technology.
b) Nokia’s shift from consumers to enterprises feels forced and poses risks as the market is saturated with large IT providers competing for Cloud services and Enterprise business, such as AWS, Microsoft Azure, and Google Cloud on one hand, and Cisco, Oracle, IBM and HPE on the other hand.
c) It also remains to be seen whether Ericsson’s emphasis on Enterprises will be successful. One week before the Mobile World Congress, Ericsson announced its intention to reduce its workforce by 8,500 employees due to fierce competition in India, and slower growth in China, leading to declining profit margins. As of MWC23, Ericsson’s share price was still trading 52% below its April 2021 peak.
d) Samsung is quietly benefiting from geopolitical tensions that saw Chinese vendors banned in most Western countries. Samsung has increased its share of both the telecom equipment and smartphone markets.
e) Huawei has made a return with new products, but the question is whether they can maintain their technical lead without access to advanced semiconductors.
f) The disaggregation of mobile networks has opened up opportunities for new vendors globally, including from Taiwan, Japan, and China, to produce core and RAN solutions, which could put pressure on vendors based elsewhere. However, the promotion of open and virtualized radio access network solutions is yet to pay off in the sector, despite promises of deployments from major service providers.
g) In a market that can sustain a few vendors, the door is quickly closing on challengers with alternative approaches, such as Rakuten Symphony and Mavenir who lack the deep pockets to go head-to-head against the incumbent vendors.
Satellite and Terrestrial Networks Converging
This section explores the convergence of satellite and terrestrial networks. It discusses the various satellite phone technologies exhibited at MWC23, as well as the partnerships between mobile operators and LEO satellite service providers announced at MWC23. It highlights use cases for smartphones and industries such as agriculture, forestry, automotive, and logistics. This section also mentions the introduction of a new regulatory framework by the FCC, which aims to expand the coverage of terrestrial networks and increase the availability of emergency communications. Finally, this section provides an outlook on the LEO direct-to-handset industry.
Technologies displayed at MWC23
Murata’s cellular IoT solutions for direct connectivity over satellite
Murata and Skylo showcased their new generation of cellular and satellite services at MWC, combining Skylo's non-terrestrial network with Murata's Type 1SC low-power cellular IoT module to enable direct connectivity of devices such as wearables, sensors, and trackers over satellite without requiring new hardware or specialized equipment.
Collaboration between Bullitt Group and Motorola Solutions
Bullitt's solution earned a Best in Show Glomo award at MWC23. It utilizes a Motorola Defy device to connect a mobile phone to Echostar and Intelsat GEO satellites through an NB-IoT link. This service is both cost-effective and straightforward, which gives it the potential to surpass emerging low-bitrate messaging services that are based on LEO constellations. This development is expected to set a high-performance standard for constellations that intend to provide low-bitrate messaging services.
Apple’s Emergency SOS via Satellite
Apple's Emergency SoS via Satellite won the Disruptive Device Innovation award.
Qualcomm Snapdragon Satellite
Qualcomm announced at MWC23 that mobile phone makers such as Oppo, Vivo, and Xiaomi, will bring its satellite communication capabilities to their phones.
Qualcomm had unveiled its Snapdragon Satellite technology in partnership with satellite service provider Iridium at the Consumer Electronics Show (CES) in January 2023. This solution enables “two-way texting and other messaging applications using satellites” for premium smartphones.
“Unlike Apple’s current feature-set, the next-gen devices are expected to support recreational messaging for those in rural, remote, or off-shore settings, as well as an emergency measure for those who find themselves isolated and in need of help.”
“Snapdragon Satellite will be available across all upcoming 5G Modem-RF systems and Snapdragon Mobile Platform tiers (from 8- to 4- tier) as the ecosystem matures.”
MediaTek Satellite Connectivity Technology
MediaTek demonstrated its MT6825 chipset (based on the 3GPP NTN open standard) and its 5G New Radio technology. NTN technologies enable two-way satellite communications to smartphones.
Partnerships announced at MWC23
Veon and OneWeb partner to deliver seamless communication and digital services
At MWC23, Global digital operator VEON and low-earth orbit (LEO) satellite communications firm OneWeb announced that they are partnering to expand mobile internet connectivity and digital services in emerging markets.
VEON's focus on "4G for all" and "humanitarian connectivity" aligns with OneWeb's capabilities, which include high-speed, low-latency connectivity for governments, businesses, and communities.
OneWeb has launched 544 satellites into orbit, with 80% of its constellation complete, and its services integrate seamlessly with mobile communication infrastructure.
The partnership will focus on extending connectivity and digital services to underserved or unconnected communities, particularly those in remote areas or disaster-prone regions.
Orange offers OneWeb's LEO solution in regions that were previously difficult to access
Soon after MWC23, Orange signed a distribution agreement with OneWeb to enhance its connectivity in rural regions in Europe, Latin America, and Africa.
FCC introduces new space regulation
FCC announcement at MWC23
At MWC23 Barcelona, FCC chair Jessica Rosenworcel proposed a new regulatory framework to integrate satellite and terrestrial networks by expanding coverage to a terrestrial licensee’s subscribers, which would also increase the availability of emergency communications.
This Notice of Proposed Rulemaking (NPRM) also included mobile-satellite service allocation to a class of terrestrial flexible-use bands that have no primary, federal or non-federal satellite allocations, which would permit satellites to provide Supplemental Coverage from Space (SCS) to terrestrial networks. Rosenworcel stated the NPRM was designed to facilitate more collaboration between terrestrial mobile network operators and satellite service providers, and that she believed it was the “first effort of its kind anywhere in the world”.
Key aspects of the new FCC regulation
The FCC Supplementary Coverage from Space serves as the initial framework for regulating direct-to-handset satellite services. The SCS is solely a framework for cellular mobility and IoT, not for fixed wireless access.
It allows satellite operators to communicate with mobile devices through the use of MNO spectrum. Currently, the framework focuses on sub 3 GHz mobile spectrum and excludes millimeter wave spectrum.
To operate in a Geographically Independent area, the MNO must possess all co-channel licenses, of which there are six, with the continental US having the most prominence.
The size and location of service areas have an impact on the design and complexity of satellite antennas, as well as the financial viability of the venture, since DTH satellite constellations require a global revenue stream for commercial profitability.
The satellite operator must lease the spectrum from the MNO (under part 1 of FCC rules) and provide SCS service with authorization under part 25 of FCC rules.
Full lease arrangements and crucial concerns such as interference management and emergency calling are yet to be defined.
LEO Satellite Outlook
LEO satellite constellations can bring technological and business innovation for telecommunications, particularly in providing 5G connectivity in areas where ground stations are expensive to deploy. The market for Satellite-to-Handset (DTH) communications is set to experience significant growth as evidenced with the presence at MWC23 of various satellite companies offering devices and services that utilise satellite communications. LEO satellite constellations promise to provide global coverage and almost eliminate latency. Starlink has launched over 3,000 satellites, and OneWeb is planning to operate 648 satellites.
Yet, the direct-to-device (D2D) satellite market is in a state of flux, and it is unclear which companies will come out on top. It is likely that only a few companies will remain in the market, and one will have the edge.
The market's size is also uncertain, and the growth rate of satellite messaging remains modest. Several companies, including Samsung and EchoStar, are interested in creating new systems that offer more than simple messaging, but it is probable that the technology will complement (rather than replace) terrestrial systems in rural areas. For instance, IOH (Indosat Ooredoo Hutchison) is exploring LEO satellite services to provide backhaul to sites based on previously isolated islands of Indonesia.
Existing mobile network operators have already invested billions of dollars into their infrastructure and are not expected to be threatened by D2D services anytime soon. However, they should consider partnering with D2D players.
Credit: GSMA
SUSTAINABILITY
This chapter discusses the growing focus on sustainability in the mobile operator industry, including energy efficiency and device circularity. This is outlined in the recent GSMA's Global Mobile Trends and Mobile Net Zero reports, as well as expressed in the calls for action and the announcements made at MWC23. Yet, the GSMA could highlight this topic further and include it as part of the main themes of the Mobile World Congress in 2024.
GSMA reports
GSMA's Global Mobile Trends 2023 report
According to the GSMA's Global Mobile Trends 2023 report, telcos are placing a strong emphasis on environmental, social, and governance (ESG) issues, with energy efficiency and device circularity being key elements of their plans.
GSMA’s 2023 Mobile Net Zero report
The GSMA’s 2023 Mobile Net Zero report highlights the progress made by mobile operators in achieving net zero emissions: almost a quarter of the industry's electricity worldwide is now sourced from renewable sources, a noticeable improvement from 14% in 2020. The measures taken by operators to enhance energy efficiency throughout their operations include investing in 5G, which is more energy-efficient than previous technologies, decommissioning power-hungry legacy networks, and transitioning to electric vehicles.
MWC23 calls for action
At MWC23, ITU Secretary General called on the industry to adopt the UN Sustainable Development Goals. Panellists at the conference also noted the lack of urgency to sell more used phones, with only 17% of phones being recovered and 11% reused. Telcos could help accelerate the use of reused phones, but the business model needs to change in order to make it happen at scale.
Vodafone
Margherita Della Valle, CFO and Interim CEO at Vodafone Group, has urged European telco operators to collaborate and pool their energy resources to support larger renewable projects. She suggested that telcos act as anchor tenants with energy providers to enable this.
Della Valle also emphasised the need for European operators to invest in 5G to build decentralised smart grids for use cases like connecting car batteries to wind turbines. She noted that this would require new levels of investment and regulatory environment.
The war in Ukraine has increased pressure on mobile operators to be more energy-efficient. Despite a big increase in traffic, Vodafone's energy consumption has remained flat over the last few years due to increased efficiency, and the company is accelerating its energy projects in response to the crisis.
MWC23 announcements
Telia
Telia is exploring a program to feed back the energy it saves into the grid. When going through a significant change, you may come across small discoveries. The resilient leaders are the ones who seize these findings and expand them. Innovation aims not only to overcome crises but also to anticipate future ones.
Vattenfall
Anna Borg, the CEO of Vattenfall, which is one of the largest energy companies in Europe, stated that her company is aiming to achieve fossil-free living within a generation, and emphasised that it is their business strategy, not just their sustainability strategy.
Assessing energy efficiency solutions
The deployment of 5G technology poses a challenge for capital expenditure due to the fact that it almost doubles the power requirements at the cell site, which depends on the amount of spectrum and operating systems. This CapEx challenge is felt more consistently by service providers.
On the other hand, the impact of operating expenses related to energy varies depending on several factors, primarily the cost of energy. Therefore, the OpEx impact is regional and is experienced to different degrees by various service providers.
Addressing peak-power demand has the greatest impact in reducing both capital and operational expenses. These solutions typically involve hardware, such as semiconductor technologies, lithographic processes, amplifier linearization and compensation techniques, and radio architecture and design.
The use of software solutions, including AI technology, mainly affect the average energy consumption and OpEx, but have limited to no impact on CapEx. These solutions typically rely on traffic and involve powering-down resources to save energy through sleep modes, which can lead to a loss in capacity. Service providers in regions with high energy costs, such as Asia and Europe, are more likely to value these technologies as the threshold for a positive business case is lower.
Technology Themes at MWC23. Credit: GSMA
KEY TAKEAWAYS
North American and Asian operators are leading the way in technology adoption and introducing new services, whereas European operators are performing comparatively poorly and calling for regulatory reforms. As new revenue opportunities are slow to materialize, there is increasing pressure for M&As and asset spin-offs within the operator ecosystem.
Despite an abundance of technology, there is limited ability to monetize it, which adversely affects vendors of all sizes and makes the market ripe for M&As. Technology providers must carefully consider their strategies for developing new sources of revenue.
The convergence of satellite and terrestrial networks, telecom cloud platforms by Hyperscalers, and the framework for Open Gateway APIs were also noteworthy topics discussed at MWC23.
It is exciting to see Direct-to-Device technologies coming to market and partnerships being established between LEO constellations and mobile operators, and we will continue to monitor this ecosystem.
This year, the efforts of Hyperscalers to bring telco network functions into their clouds will be a topic to watch. Trade-offs between economics, resiliency, dependency, and manageability will have to be heavily assessed before taking critical strategic decisions.
It is worth watching the initiative of operators banding together to offer Open Gateway APIs to developers, but gaining adoption remains a key challenge.
In our next article, we will delve into the technology themes of MWC23:
Open Networks
5G Acceleration
Digital Everything
Reality+
Should you be interested in finding out more about the key topics of MWC23, follow this link to download the various insight notes from our Xona Partners colleagues.