MTN Consulting

Corning Incorporated has a chance to get its market share in telecom moving in the right direction again. Yesterday the New York-based fiber giant announced a big multi-year broadband win at AT&T (https://lnkd.in/gnhgDeqH), adding to August's data center connectivity win at Lumen Technologies (https://lnkd.in/dwmjYV5X). Corning's carrier optical sales have been declining on a YoY basis steadily since 3Q22, so a reversal is overdue. The below chart illustrates how Corning's share of the Telco NI market has fallen in the last few years. Data source is MTN Consulting's 2Q24 review of vendor share in the telco network infrastructure (Telco NI) market (https://lnkd.in/gt_vQwDH) -Posted by Matt Walker #fiber #ftth #bead #dci

Telcos continue to gradually reduce their carbon footprints. One way to do this is simply use less energy per unit of revenue. I am a frequent critic of telcos' go-slow approach to sustainability, but many telcos are making improvements in this metric. Looking at energy consumed in MWh per $1M of revenue, the chart below highlights telcos with significant (>10%) reduction from 2019-23. The title of "most improved" would be awarded to MTN Group, if based purely on this metric. However, MTN Group also illustrates a couple of important things happening in the telecom industry. First, mobile operators continue to use a high percentage of dirty diesel fuel in their radio networks. MTN Group is among the worst, with roughly 65% of its 2023 energy consumption coming from diesel fuel. Second, operators continue to spin out more of their physical asset base, with towers a hotspot. In June 2022, for instance, MTN Group sold 5,701 towers in South Africa to IHS Towers, a carrier-neutral provider. This sort of sale plus leaseback transaction is done to raise cash and allow a telco to focus on higher value services, but it also may allow telcos to move emissions off of their direct accounts. Meaning, telcos (and other types of companies) who want to meet their climate goals sometimes have an incentive to simply outsource the problem. In theory the emissions from the entire value chain - including leased towers - would appear in "Scope 3" measurements. But, the industry lacks consensus about how to calculate scope 3's various categories and what to report, to who, when. Scope 3 is often ignored, and greenwashing is a real problem. -Posted by Matt Walker, Chief Analyst #esg #climatechange #greentelco #telcos #telecom #energy

The last few quarters have been humbling for telecom's biggest vendors. Telco capex overall has moderated slightly, while mobile RAN spending has fallen off a cliff. How does 3Q24 look? Much better, so far. Ericsson, Nokia and ZTE have all reported, and their network infra sales to telcos (i.e. "Telco NI") are still weak, but declines have moderated. As we've hinted before, the end of 2024 will see the turning of a corner. There is no big bump on the horizon, but the bleeding should slow down. The below chart shows Telco NI revenue growth rates for the three vendors since 2Q23, including the 3Q24 results recently posted. The aggregate of all vendors (134) is also shown, for all but the most recent quarter. MTN Consulting's latest full assessment of vendor market share in the telco sector can be found here: https://lnkd.in/gt_vQwDH #5G #fiber #capex #opex #cloud #telecom

On Nokia's earnings call yesterday, CEO noted that its "telco TAM" (telco total addressable market) will never be a significant growth market and the company needs to focus on "taking market share" in telco and expanding its ability to sell into data centers, especially webscale. Hopefully this is the not the first time Nokia noticed that telco was not growing. See the orange/top line in the chart below. Our research on this topic includes the following recent reports: Telecommunications Network Operators: 2Q24 Market Review https://lnkd.in/dCpJhtAU Webscale Network Operators: 2Q24 Market Review https://lnkd.in/gMfrbDYe Will the data center gold rush come to an end? https://lnkd.in/ggskKExx #capex #datacenters #telecom #genai

Every time MTN Consulting publishes a report, our subscribers receive email alerts. About 5-10% of our alerts result in out of office auto replies. Lots of them keep it simple and discrete, but a few mention the specific reason for being OOO. Usually it's to attend an event. Based on our latest email alert, it seems like popular recent events for our subscribers include GITEX in Dubai (an AI-focused event), the World Optical Fiber Congress in Shanghai, and TM Forum's Innovate Americas in Dallas. That's one nice thing about MTN Consulting's broad coverage: exposure to users with interests across a broad spectrum of topics. As for our own analysts, we do most work without needing to travel much, but this week we are participating in the India Mobile Congress event in New Delhi. Our subscribers will hear more about this next week, from Arun Menon.

Your sadly now regularly-required reminder that you should trust *absolutely nothing* that comes from an LLM or other Generative AI service as accurate. A lot of people are going to end up getting burned by this. Don't use it for financial analysis. Don't use it for data analysis. Don't use it for summarization. Just don't use it. When this bubble pops - and it will, sooner than you think - there are going to be people whose reputations will suffer because they bought into this and used these tools to conduct inaccurate analysis and produce outputs full of errors, and those who continue to enjoy good reputations with their customers and clients because they refused to buy in to these Chaos Engines and committed to Doing the Work in a thoughtful, ethical, disciplined, and Human fashion. Which side of that line do you want to be on when the dust settles? #GenerativeAI #Data #AI #Hype

Huawei is back. MTN Consulting's latest telco NI market share report is out. The 2Q24 vendor market sank 3.4% YoY, a big improvement from the previous 6 quarters. What happened to share at the company level? The chart below shows the biggest gains and declines in annualized market share, comparing 2Q24 with 2Q23. The two Chinese vendors, led by Huawei, saw the most significant market share growth. After several challenging quarters, Huawei experienced positive momentum in 4Q23 and continued this upward trajectory into 1Q24 and 2Q24. Other top five vendors include cloud and IT service providers like Microsoft, Broadcom, and Amazon, driven by telcos adopting their cloud collaboration and IT services. Broadcom’s rise was further supported by its acquisition of VMware. Dycom holds the fifth position and is capitalizing on a surge in fiber construction projects. Amdocs holds the sixth position, bolstered by a multi-year managed services agreement with Telus and a partnership with AT&T for its connectX platform. A strong climate for cloud and IT services spending by telcos helped Alphabet, Oracle, and IBM make strides. Cisco, CommScope, and Nokia are reeling at the bottom; Cisco cites lumpiness in its customers' spending patterns, but that is not enough to explain the disappointments. Several of the other share declines can be attributed in part to a weaker currency (Furukawa Electric) and spending scale back, which is expected to improve in 2H24. Full report: https://lnkd.in/gt_vQwDH Posted by Matt Walker, Chief Analyst (matt@mtn-c.com). * [To sign up for MTN Consulting's research list: https://lnkd.in/gm_q_8S8] #telecom #telcos #networks #5G #marketshare #vendorshare #huawei #onebeltoneroad #digitalsilkroad #cloud #genai #capex Janson JIAN Betty Zou Konesh Kochhal Shadow Chen Amy Xiang Kevin Wu Sergio Coelho Micaela Giuhat Nischay Mundas Susan Prakasam Clare Flanagan

Last week a fund was announced to raise and manage up to $100 billion (B) in funding for AI data centers and related energy investments. The new fund, Global AI Infrastructure Investment Partnership (GAIIP), is a partnership between Microsoft and three financial institutions betting big on AI infrastructure: BlackRock, Global Infrastructure Partners (GIP), and Abu Dhabi-based MGX. The new partnership adds to a long list of private equity-driven investments in data centers announced over the last few years. These investments have spiked since late 2022, when ChatGPT was released. Even prior to GenAI rolling out in late 2022/early 2023, new investment vehicles were emerging to raise capital and manage investments in digital infrastructure. With GenAI gaining steam in 2024, that has accelerated. It’s not news that data center spending is surging thanks to widespread enthusiasm for GenAI. The announcements keep on coming: new data centers, bigger and better, consuming more power. New financial vehicles arising to fund all this new infrastructure. With this, a more widespread appreciation of how power-hungry computers actually are – especially the massive clusters of computers prevailing in webscale data centers, now dominated by GPU servers. Energy consumption has doubled in the webscale sector since 2019, growing 15% per year in each of the last two years. More important, since COVID, the webscale sector has become more energy intensive, not less; in 2021, 59 MWh of energy was consumed per US$1M in revenues. That figure grew to 65 in 2022 and 70 in 2023. This is notable, as webscalers are supposed to be able to exploit their size in order to get efficiencies from scale; it’s going the opposite direction with data center power consumption. And energy intensity is likely to keep rising with big commitments to GenAI. Inadequate access to affordable, renewable power is one of many challenges faced by the GenAI market. Despite these challenges, data center spend is likely to remain elevated for a few quarters, driven by the webscale market. There is a race underway to train and evolve these new AI models. There is a feeling that the early winners will be able to preserve their advantage for many years. Hence there is a land grab underway: for skilled developers, for tools, for energy capacity, and for land. This short brief is focused on data center demand and the role of generative AI in spurring an uptick in investments, particularly in the webscale sector. Posted by Matt Walker, Chief Analyst (matt@mtn-c.com). * [To sign up for MTN Consulting's research list: https://lnkd.in/gm_q_8S8] #datacenters #datacentres #cloud #genai #llm #webscale #hyperscale #nvidia #GPUs #networking #capex #chips https://lnkd.in/ggskKExx

In June 2024, MTN Consulting posted a brief note to its LinkedIn page, addressing the use of AI/GenAI in research: “MTN Consulting does not use AI or GenAI or similar tools for its analysis, and plans to stay that way. GenAI has some appealing use cases - many in telecom! - but it is also by its nature derivative - not adding to knowledge but skimming off the top of what humans have already created. The more society relies on GenAI, the less true innovation will be seen in the world.” Since then, I have received several notes of support privately. These notes have come from customers, and industry friends with experience in the analyst business. We appreciate this support. And we remain skeptical of GenAI. However, we don’t have our heads buried in the sand. We occasionally play with the tools to understand them, or use them to create visuals for fun. We also have kids in high school and college, and we quiz them about classroom use, and ask what our kids think of them. We encourage our kids to do the same as we do ourselves: learn about the different models, and play with them, with a goal to finding out how they work, what they can do, and what they do poorly. After all, advising them to ignore GenAI would be like telling a student in the late 1990s to ignore Google, and just continue to stumble around the Internet in search of random information. However, these tools are rapidly developing and new ones are emerging often, and there are only so many hours in the day. So, the focus should be on using your own brain to create content, not on tricking a machine into doing your thinking and research for you, and hoping for the best. I mean, if you're BT and can afford to build a "GenAI Gateway" with Amazon's help, that's great - but for individuals, it's still the wild wild west. Yes, LLMs continue to generate nonsensical results, and have a habit of hallucinating. I recently came across a good example of what is, I think, GenAI making stuff up. In DigitalBridge’s recently published sustainability report, the below figure was published in the report’s “Risks and Opportunities” section. It’s a nice chart: it seems to show that so-called “AI Compute” data center power is likely to grow at a 25% average annual rate going forward, versus just 8% for other types of data center power. It suggests that total data center power consumption in 2026 will be about 700 Terawatt hours. Both may be true, but there is no data to support it in this report. If you check the endnote behind this chart, you get a link to an article in Dataversity from September 2023. The article doesn’t say anything about AI Compute or energy consumption, nor do any of the links in the article. So, where did the chart come from? It could be a case of sloppy research by the ESG Report author. Or it could be a case of using GenAI tools incorrectly, without verification of results. Both are caused by human error. You can’t blame the AI tool for your bad work product.

Telcos continue to shrink their workforce. AT&T and Verizon alone cut nearly 3K staff in 2Q24. That follows a longer-term trend of declining headcount. The industry has lost over half a million people in the last five years, per MTN Consulting data. Telcos are using layoffs, voluntary retirement schemes, attrition, asset sales, and other means to reduce headcount. The industry as a whole ended 1Q24 with 4.495 million employees, down about 1.4% YoY. Over the last three years (1Q21-1Q24), an average quarter saw headcount fall by over 22,000. These reductions don't always translate to less money spent on employees, as per-employee costs are rising. The annual average has increased from around $48K per employee in 2017 to $58.5K in 1Q24. The chart below illustrates how COVID accelerated trends already underway. Telcos had been aspiring to lower their staff count for years - seeking out benefits from scale or scope, and spending big on automation and AI. When COVID hit, employee reductions were easier to justify, and done so quickly.  Looking forward, we expect telcos to continue to lean heavily on tech solutions to squeeze more labor costs out of the business. Customer satisfaction and network performance will almost definitely suffer. But the optimism about all things AI right now is enticing telcos to implement things quickly which they may regret later on. -Posted by Matt Walker, Chief Analyst (matt@mtn-c.com) * [To sign up for MTN Consulting's research list: https://lnkd.in/gm_q_8S8] To access our latest rundown of telco finances, see https://lnkd.in/gVyHTYkC. #layoffs #telco #automation