Tulipa keskustelua hyvin tukeva kirjoitus, joka valitettavasti puoltaa pessimististä skenaariota.
In 2022, return on capital employed (ROCE) for European operators fell below the weighted average cost of capital for the first time in years, according to data from the European Telecommunications Network Operators (ETNO) association, a lobby group for the industry. Commenting on that development in a report, Deloitte last year warned of a risk that “the gradual decline in the industry’s return on invested capital could soon go into free fall.” The core problem it saw was that "overcapacity makes connectivity a commodity," said Deloitte.
All this would seem to bode catastrophe for capacity suppliers such as Ericsson and Nokia. Each year, the Nordic vendors pump about $9.5 billion into research and development. Most of that goes into network technologies, mainly mobile. The payoff comes when telcos rip out old technologies and upgrade to the newest generation, a refresh cycle that has happened roughly once a decade, albeit only for a few generations. There are now multiple signs this upgrade cycle is broken midway through the rollout of 5G.
For vendors that make most of their money from expensive new radios, this was rather like the world’s biggest meat eaters telling chefs to serve just the salad garnish in the future. None other than Börje Ekholm, Ericsson’s CEO, now seems to realize 6G is in danger, and his company with it. "If we cannot generate the extra revenues from the features of the network, it’s very hard to justify the future investments in later generations as well," he said on his company’s recent earnings call for the second quarter.
Ericsson and other G stakeholders are desperately trying to monetize 5G by reaching out to software developers. The plan is to use industry-standard application programming interfaces (APIs) to expose 5G features to those developers. If all works out, new applications, impossible without 5G, could become available to any telco. Revenues would surely follow from developers accessing those APIs and 5G customers paying for a quality-of-service boost. Right?
Analysts are unconvinced. In 2022, Ericsson justified its $6 billion takeover of Vonage, a communications platform-as-a-service specialist, as a facilitator of this strategic expansion into network APIs. Since then, it has booked impairment charges against Vonage of nearly $4 billion, prompting one equity analyst to accuse it of “value destruction” on the second-quarter call. Since the Vonage deal was announced in late 2021, Ericsson’s share price has fallen 45%.
With the rollout of 5G on pause, while telcos question the reasons to invest, Europe’s big telcos show little appetite for 6G, promoted by parts of the industry as a 2030 standard. A paper from the Next Generation Mobile Networks (NGMN) alliance, another group of prominent telcos, said “6G must not inherently trigger a hardware refresh of 5G RAN [radio access network] infrastructure,” calling for it to be about “software-based feature upgrades of existing network elements.”
Analysys Mason, a consulting and analyst company, is seemingly among the skeptical. By the end of the decade, capital intensity (spending as a percentage of sales) will fall to between 12% and 14% for the world’s biggest operators from about 20% now, it said in a recent paper. Among its forecasts was the message that there will be “no cyclical uplift” with 6G.
Read the full report here 
