MWC 2023 Day 0 – Party pooper

Ericsson – Blowing sentiment

• Mobile World Congress 2023 is about to start, but Ericsson has gotten things off to a bad start with a further 8,500 layoffs indicating that life remains tough in the world of mobile infrastructure.
• Ericsson is cutting around 8% of its workforce and is taking aim at service delivery, supply, real estate and IT in what looks like a case of moving to address inefficiency.
• Ericsson’s woes underline that the mobile industry is under pressure both from inflation which has reduced smartphone sales but also rising interest rates which have made financing equipment sales more expensive.
• Furthermore, a lot of infrastructure is priced in US$ which has been strong against emerging market currencies further increasing the cost of equipment.
• Coming from behind, Nokia looks nimble with a good quality management team which is doing a good job at taking market share from Huawei as well as steadily improving profitability.
• By contrast, Ericsson looks slow and lumbering and looks to me to be on the back foot.
• I expect a lot more positivity coming from Nokia’s end of hall 3 compared to Ericsson who may have already spoiled the party for everyone.
• I have held Nokia from €3.5 and remain happy to stay put till €6.

OpenRAN – All about performance

• I think that while macroeconomics will be a driving theme of this year’s show, the OpenRAN debate will attract more attention this year.
• This is partly as a result of a lack of other themes but also due to the emergence of small companies who claim to be able to fix the problems that have been preventing OpenRAN from getting real traction.
• OpenRAN is the idea that instead of buying all of one’s basetstation from one place, open and defined interfaces mean that one can pick and choose suppliers and build a base station like a jigsaw.
• This is threatening to the traditional business model where operators are locked into one manufacturer for each basetstation and where the real money for vendors is made on the basestation upgrades post installation.
• This is because one will be able to buy the upgrades from someone else creating pricing pressure and therefore lower margins.
• This sounds great but my early research into this topic indicates that the performance of systems that comply with the OpenRAN standard are far below that which the traditional vendors provide.
• This is why I suspect that there is so much scepticism surrounding OpenRAN and until the performance issues can be addressed, I think that this scepticism will persist and remain justified.
• This is why the claims of those that say that they can fix these problems are particularly interesting.
• Two of these are Aira Technologies which uses machine learning to optimize throughput over the radio interface and Xcom which has a solution to make very dense small cells work much better together by dealing with the interference.
• Both of these have chosen OpenRAN because it makes it easy for them to get their technology into the basestation without having to build the whole thing themselves and face off against Ericsson and Nokia.
• The big question is if these were integrated into a Nokia or Ericsson non-OpenRAN basestation, will they improve their performance and open the gap to OpenRAN once again?
• I suspect that the answer is yes but it is very unlikely that we will see these technologies implemented in non-OpenRAN systems unless they are acquired.
• This is why I remain pretty cautious about the proposition of OpenRAN as history is not on its side and I am not convinced it can close the performance gap.
• I suspect that this will be one of the biggest debates this week.