Mavenir seems to have badly misjudged the market. Four weeks ago, the US developer of network software was making plans for an initial public offering (IPO) amid excitement about open RAN, an overhyped technology it sells to operators. On October 26, its share offering was cut 8%, to some 12.5 million shares priced at $20 to $24 each. At the midpoint, that would raise $275 million. But days later, the IPO plans were scrapped altogether. In a statement, Mavenir blamed "market volatility."

Renewed concern about COVID-19, well into a dreaded "second wave" in some countries, has made a rollercoaster of some indices. The imminent presidential election in the US might also have caused a few jitters. Yet an end to the pandemic was not in sight on October 6, when Mavenir first announced its IPO. It is not as if election plans have been sprung on unsuspecting US citizens and businesses, either. Despite all the current turmoil, the S&P 500 was trading just 1.5% lower at the time of writing than on October 6.

The telecom sector also remains fairly resilient. Driven into their homes by the pandemic, consumers and workers are relying on communications services and Internet connectivity more than ever. The share price of Ericsson, a Swedish equipment supplier that Mavenir hopes to challenge, has gained a fifth so far this year.

Mavenir's original filing with the US Securities and Exchange Commission may have disappointed a few investors. It revealed a net loss in the previous fiscal year of more than $81 million, despite sales of about $427 million and a gross profit margin of 57%. It also showed the open RAN market is a tiddler, worth just $200 million annually, according to analyst firm Dell'Oro. Operators currently spend around $30 billion a year on traditional radio access networks.

The US firm apparently puts more trust in Dell'Oro's numbers than it does in more optimistic forecasts that have recently appeared. In 2026, ABI Research thinks operators will spend $40.7 billion on open RAN technologies for public outdoor systems. Rethink Research is predicting overall open RAN expenditure of $32.3 billion that year. Dell'Oro's forecast is considerably more cautious, anticipating revenues of more than $3 billion in 2024. Omdia, a sister company to Light Reading, has been similarly restrained. In July, before much of the recent coverage, it said revenues would grow from about $200 million this year to more than $2.1 billion in 2024.

Figure 1:

Mavenir's still on the outside, looking in. "NYSE" by Brian Glanz is licensed under CC BY 2.0

Open RAN doubts

Mavenir does more than just open RAN. Most of its revenues come from other products, including software for core network and voice systems. But Dell'Oro expects even lower rates of growth in these areas. Revenues from virtualized packet core, voice and IMS products will grow from about $4.2 billion this year to around $8.7 billion in 2024, it says.

In other words, even in Dell'Oro's more bearish view, the biggest growth opportunity for Mavenir over the next few years is open RAN. A major concern in this market is that Mavenir could face competition from a small army of rivals cosseted by the protectionist instincts of governments, some of which look determined to build networks using homegrown vendors.

Another issue is that open RAN simply does not measure up to mainstream technologies, according to many experts. It will do for rural communities with more basic needs but looks a poor substitute in more densely populated and demanding areas. Even Comba Telecom, an open RAN vendor based in Hong Kong, admits the technology is "not as advanced."

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So far, the only operators building open RAN networks in advanced markets are Japan's Rakuten and America's Dish. Both are starting from scratch and do not have to worry about a swap-out of systems they have already installed. The only other major commitment outside emerging markets came today from Vodafone UK, which has promised to substitute about 2,600 sites currently supplied by Huawei with open RAN technology.

But the head of the UK taskforce set up to explore alternatives to the traditional kit vendors has downplayed open RAN expectations. "As you move to a diversity of suppliers, you don't have a single entity doing systems integration and it becomes more difficult," said Ian Livingston, a former CEO with BT, during a parliamentary briefing last week. "There are challenges beyond the obvious ones."

None of this renders Mavenir a dud. Its revenues grew 9% last year, and those from products were up 15%. Its net loss is narrowing. And it is one of a handful of names that turn up when US and European service providers are conducting open RAN trials. All that said, the postponement of the IPO does not look good.

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— Iain Morris, International Editor, Light Reading