Vendors have been struggling for years amid a pullback in telecom network operator spending. Now, though, it appears operators are beginning to resume more normal spending patterns.
As 5G vendors ring in the new year, they may finally have something concrete to celebrate.
There are growing indications that telecom operators in the US will resume network spending after roughly two years of stagnation. That spending could buoy vendors all across the telecom landscape, from optical systems suppliers to cell tower operators to 5G gear vendors.
"A lingering domestic wireless carrier deployment lull ... severely impacted 2024 stock performance," wrote the financial analysts at BofA Global Research in a recent note to investors regarding big US cell tower operators like Crown Castle and American Tower. "Tower management conversations with carriers heading into 2025 are trending 'positive' and based on this, could be a harbinger for a 2H25 rebound in domestic carrier macro cell site deployments."
Other analysts and telecom industry execs are seeing similar trend lines.
"In Q4, for the first time in two years, we saw our service provider orders in North America be greater than revenue. ... You've got that supply-demand piece coming back into balance," Ciena CEO Gary Smith told Light Reading recently. Ciena sells optical networking equipment for the fiber networks that underpin 5G.
The head of network testing equipment vendor Viavi expressed optimism as well. "There are signs of stabilization and improved momentum, leading to demand recovery starting in the December quarter and continuing into the second half of fiscal '25," Viavi CEO Oleg Khaykin said in November.
And Ericsson officials said in October that they're seeing improved sales in North America and some other regions. Ericsson is the biggest 5G equipment vendor in the US.
Much of that upswing is due to a rise in equipment spending among US telecom network operators, including those managing wireless networks.
"We think that among T-Mobile's capex bottoming, Dish receiving an FCC extension on 5G build-out targets and pursuing the separation of its satellite business while securing new financing, AT&T's ORAN deployment accelerating, and Verizon likely accelerating C-band to pursue higher FWA [fixed wireless access] targets, there are catalysts forming and reasons to believe capex/leasing expectations are at their trough," summarized the financial analysts at KeyBanc Capital Markets in a note to investors in October.
A reversal
The tone at the end of 2024 is miles apart from what it was a year ago.
For example, in the summer of last year Crown Castle said AT&T, Verizon, T-Mobile and Dish Network generally spent 50% less on their 5G networks than it expected. That forced the tower company to lower its guidance and eventually to cut jobs.
The situation sparked real concern among some analysts. "From our perspective, this new guidance is as close to a disaster as it gets," wrote the financial analysts at KeyBanc Capital Markets following Crown Castle's warning in 2023.
Crown Castle wasn't the only company warning of that spending slowdown. Vendors all across the sector made similar comments. Some weathered the situation relatively well. Others – like bankrupt Casa Systems – did not.
There were a few high-profile trends driving telecom's winter of spending. First, in 5G, wireless network operators never saw a revenue bounce from early deployments of the technology. That caused many to pull back from their 5G efforts.
More broadly, network operators spent heavily on all kinds of telecom equipment to address pandemic-era data traffic spikes. When Covid ebbed, they didn't need to purchase any more new equipment as they slowly worked through their inventory stores.
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