Ericsson laid out cautious 2023 plans predicated on slowing 5G radio access network (RAN) sales and a conservative approach to capital allocation.

The plans, which were part of the vendor’s recent Capital Markets Day, were highlighted by announced expectations of a flat RAN market in 2023. The vendor stated it’s “planning for a flat RAN market and is structuring its cost base and operations accordingly.” This is based on slower growth in what had been high-growth markets that will not quite be offset by growth in new markets.

“After record capex levels in North America in 2022, build out is expected to normalize in 2023, beginning in Q4 of this year,” the vendor stated in a release. “At the same time, revenues from share gains in other markets are expected to accelerate during Q4 and into 2023.”

Some of that acceleration should come from Ericsson’s recent 5G contract wins in India. Those have led to the vendor expanding its production capacity in that country.

Ericsson explained this broader shift will dilute margins, and that a normalizing of past supply chain constraints will be offset by operators looking to reduce their inventory levels.

Analyst firms have also stated RAN market concerns.

Dell’Oro Group reported that RAN market growth continued to slow during the third quarter of 2022, echoing a year-long trend. Nokia was the only vendor noted by Dell’Oro to have posted an increase in RAN revenue share for the quarter.

LightCounting also noted that the Q3 global wireless infrastructure market dipped 1% sequentially and was down 8% year over year. The 5G RAN space grew sequentially and was the only category that “sustained” the broader ecosystem.

“Overall, market dynamics continued to operate at equilibrium with the unabated execution of the 5G contracts awarded between [the second half of 2020] and [the first half of 2021],” LightCounting Chief Analyst Stéphane Téral noted in a statement. “However, this also means that we are reaching the end of this first 5G wave, which confirms our view that the global wireless infrastructure market is peaking this year.”

Ericsson is attempting to get ahead of this change, highlighted by broad corporate restructuring changes it instituted earlier this year, the fruits of which it noted during its most recent earnings release. Those changes included Ericsson forming two big operating pillars: its Business Area Enterprise Wireless Solutions division focused on the enterprise market and its Business Area Cloud Software operations focused on its 5G core and software business.

Ericsson is also looking to bolster its sagging cloud operations. CFO Carl Mellander had previously stated Ericsson has “underperformed in this area for a long time,” and “we’re not happy at this level.”

“We need to fix this. It should be a profitable business. With our market position and the technology we offer, this has all the potential to be profitable,” Mellander said during the vendor’s Q3 earnings call.

Ericsson said it plans to focus its cloud efforts in areas where it “has leading positions,” including its network managed services, business and operations support systems (OSS/BSS), and core networks. The vendor noted that last area “has gained significant market share but with negative development of profitability.”

Ericsson is looking to help turn around those financials by “limiting subscale software development, accelerating automation to lower deployment and maintenance efforts, and changing focus from market share gains to profitable business.” It’s looking for that focus to allow for a fiscal break-even for the full year leading toward “long-term sustainable profitability.”

That focus is also in play when it comes to potential acquisitions. Following a year where it closed on its controversial $6.2 billion purchase of Vonage Holdings, Ericsson touted a conservative M&A approach in 2023.

“M&A will be limited to bolt-on acquisitions with attractive returns and clear strategic fit,” the vendor noted.