Mavenir risks default or restructuring after failure to crack 5GMavenir risks default or restructuring after failure to crack 5G

Among the various western challengers to the giant vendors of radio access network (RAN) products, Mavenir has perhaps been the noisiest and looked the most promising. A dedicated practitioner of open RAN, the Frankenstein-like stitching together of different vendor parts, it used to revel in denunciations of proprietary technologies and their owners, pushing hard to gain industry acceptance and land deals with major telcos. Operators bold enough to combine openness with virtualization could pocket gazillions in cost savings, the vendor previously claimed.

Unlike the much smaller Parallel Wireless, with which it used to be compared, Mavenir was able to count on a more successful business unit developing software for the "core," the brains of the telco network, while it hunted for RAN contracts. In 2018, as much as 95% of the company's $361.5 million in sales was generated in that core network market, it said in a filing with the US Securities and Exchange Commission (SEC). Meanwhile, investment flowed in from Siris Capital, a long-term backer, and Koch Industries, which injected $500 million into Mavenir in April 2021 after plans for an initial public offering were shelved.

But in recent months Mavenir seems to have vanished. It had no visible marketing presence or speaker role at this month's FYUZ exhibition and conference, organized by the Telecom Infra Project (TIP) and largely dedicated to the topic of open RAN, after it had made a big splash in previous years. A Mavenir executive is known to have attended the event and met there with Vodafone. But the company's general profile was lower than a Barry White bass.

"After a thoughtful review of our participation in open RAN policy and trade associations, we decided to reduce our presence at FYUZ in 2024 and withdraw from TIP/FYUZ in 2025. We will continue to deepen our relationships with the Open RAN Policy Coalition (ORPC) and O-RAN Alliance," said a Mavenir spokesperson by email, referring to other policy and trade associations in the sector.

This followed a report in September that said Mavenir had sought legal advice from Davis Polk and Sidley Austin after missing interest payments on debt. "We're in good standing with our lenders and do not comment on reports from others," Mavenir's spokesperson told Light Reading. But the news came about a year after a downgrade by Moody's, when the ratings agency warned of various business risks. "Weak liquidity was also a driver, with very limited cash, revolver capacity or alternate forms of committed capital," said Moody's in August 2023.

Circumstances appear to have worsened in the subsequent year. In October, S&P Global said it did not believe Mavenir had sufficient liquidity to repay the outstanding balance on a $133 million loan that matures in January, with just $17 million in cash on its balance sheet and access to a revolving credit facility of $32 million. The agency predicts a free operating cash flow deficit of $30 million over the next six months. Unless there is an extension of maturities or fresh injection of capital, it expects Mavenir to default or be forced into restructuring. Another $120 million is needed to cover debt obligations and spending for the next six months, said S&P.

Mavenir appears to have last raised funds in May, when it announced an injection of "up to" $75 million from an "existing investor." This brings the total it has raised in private equity financing since the start of 2021 to about $830 million, on top of the $95 million it secured in debt financing in August 2022. The question may be whether Koch and Siris, the two most prominent financiers, are prepared to continue funneling money into a business with such uncertain prospects.

Casualty of a downturn

To some extent, Mavenir has been a victim of market circumstances. This year and last have been among the worst for RAN product vendors this century, according to Stefan Pongratz, an analyst with Dell'Oro. Global revenues last year fell about 11%, to $40 billion, according to Omdia, another analyst firm (and Light Reading sister company). It now envisages another drop of between 10% and 15% in 2024, having guided for a decline of 7% to 9% earlier in the year.

Former stockpiling, gloom about 5G and telco cost cuts have all shared the blame for the poor condition of the market. Networks, moreover, appear to have absorbed the punches of data traffic growth without reeling. There is still ample capacity in much of the infrastructure already deployed.

But telcos have also leaned more heavily on the giants instead of awarding contracts to newer faces. Government-ordered replacements of China's Huawei have mainly benefited Ericsson and Nokia. The only real exception to that is Samsung, a South Korean electronics company with an annual group research-and-development (R&D) budget of more than $20 billion. Mavenir's single notable RAN deal with a major telco is a contract to provide software for Dish Network in the US. But Dish has also cut spending after financial and operational setbacks. It could now face bankruptcy.

Mavenir's small share of the RAN market was at its highest in 2022, when Dish was investing more, said Remy Pascal, a principal analyst with Omdia. While he does not break that out, his data shows the seven biggest RAN vendors collectively served 97.3% of the market last year, putting Mavenir in a pack of smaller companies divvying up the other 2.7%.

This implies Mavenir's RAN sales may have dipped since 2022, when CEO Pardeep Kohli put them at roughly $100 million in a LinkedIn post, up from just $7 million in 2020. Mavenir, however, insists "year-over-year revenue has steadily increased." After Kohli's update, efforts were clearly made to capture business in India's vast and emerging 5G market, where Mavenir claimed to have secured a contract with Bharti Airtel, the second-biggest operator, for up to 10,000 mobile sites in rural areas.

But there has not been a single reference to Mavenir in Airtel's various updates on commercial activity. The big jobs seem to have instead gone to Ericsson, Nokia and Samsung. An industry source close to the matter said Mavenir is not visible in the Airtel network. "Mavenir is actively involved with Indian operators as we continue to support India's end-to-end 5G transformation," said the company's spokesperson by email.

Elsewhere, Mavenir hopes to pick up a share of the RAN work that Vodafone has put out to tender. Originally, this was supposed to cover about 170,000 sites across Europe and Africa, with 30% earmarked for open RAN. While the number has dropped with Vodafone's divestment of European subsidiaries in Italy and Spain, Mavenir's meeting with the operator at FYUZ suggests it is still in contention.

Vodafone, moreover, did previously trial Mavenir's technology in the UK, and Yago Tenorio, the telco's former head of network strategy, was full of praise for its radio expertise in late 2023. A massive MIMO unit Mavenir had jointly developed with Qualcomm offered "dramatically better" energy efficiency than anything Tenorio had seen from the big incumbents, he told Light Reading at the time. Mavenir's partnership with Cohere Technologies – whose capacity-boosting software Vodafone clearly adores – is also a mark in its favor.

Separately, Mavenir appeared to win a potentially big contract with Deutsche Telekom in early 2023, covering the provision of massive MIMO units in European markets outside Germany. But there has been no update since then, and a deal between Deutsche Telekom and Nokia for 3,000 sites in Germany, announced at the same time, has subsequently gone nowhere, according to sources.

The German incumbent now seems more interested in doing what it can to retain Huawei, which is banned in other European countries. Under rules announced in the summer, Germany's government will allow it to remain in 5G networks as long as telcos replace a part of its management system. For other vendors that were poised to leap into the vacuum, the policy move came as a blow.

Burning cash

The betrayal of open RAN has inevitably hurt Mavenir, along with other challengers. The original concept was supposed to aid specialists by allowing them to slot in alongside other component suppliers. Without open interfaces, they needed either a full set of products or a close partnership with a vendor providing what they did not.

But most operators still prefer dealing with a small number of suppliers. Adding more often means spending more. Integration, even with new interfaces, remains difficult, especially in massive MIMO. Hence the oxymoronic phenomenon of "single vendor" open RAN, where a telco demands compliance with specs but takes nearly everything from the same supplier. Meanwhile, a US trade war with China cut Mavenir off from the low-cost radios it had hoped to unite with its software.

All this helped explain a decision by Mavenir to expand from the software domain into the design of radios and even system integration. But it has proven expensive, by the vendor's own admission. "That is why we raised almost $500 million to build our own radios – because there was nobody with a business case to build them," Kohli told Light Reading last year in reference to Koch's 2021 injection of funds.

Inevitably, this expansion of the product portfolio will have led to a sharp increase in R&D costs, just as RAN sales appear not to have meaningfully risen. It also makes Mavenir appear less like a specialist and more like a direct competitor to Ericsson and Nokia, which are collectively thought to invest about $5 billion in R&D for RAN technology each year. "Despite its cost-saving initiatives, Mavenir must maintain high R&D spending to avoid harming its competitive position," said S&P in its October note.

Previous filings with the SEC showed Mavenir's overall sales hit $427.4 million in the fiscal year to January 2020. That year, it recorded an $81 million net loss after sales, general and administrative expenses rose 15%, to $154.8 million. Revenues exceeded $500 million in each of the three subsequent fiscal years, according to Kohli. But the workforce of 4,116 employees in September 2022, according to a SEC filing, had soared to more than 6,000 by August 2022, according to a Mobile World Live report. It has burned through cash to attract and retain talent, according to an industry source.

"Mavenir is continuing to invest in R&D as we further our commitment to building the open and disaggregated networks of the future," said the company's spokesperson. "We are confident in our business and have the financing and investor support needed to continue driving our business strategy forward."

Problematically, radio development means substantial commitments must be maintained year after year, regardless of whether customers are biting. "Let's say you spent half a billion dollars on R&D to develop all these radios, but you don't sell anything, and the radios have been there for a year," said Earl Lum, the president of EJL Wireless Research. "Come next year, those designs are old, because nothing stays still. So now you've spent all this money for a product no one wants."

"I think the issue with Mavenir is they have some of the radios, but they don't have enough portfolio breadth," Lum continued. The trouble is that Mavenir's current financial difficulties could dissuade prospective customers from signing the contracts that would help it to expand. "Why do I want to even look at a guy that's maybe around for the next five to ten years but after that could be dead?" said Lum. For telcos attracted to Mavenir's products, it is perhaps the biggest question of all.

Update: The story has been changed since it was first published to incorporate comments supplied by Mavenir.