The next several years are set to be very competitive for telecommunication equipment providers like Ericsson, Nokia, Huawei and Samsung as they look to grow U.S. market share at the same time that operators like Verizon, AT&T and T-Mobile US are looking to trim their overall spending.

Each of those operators has expressed plans to cut their overall capex, which is coming off all-time highs tied to their initial 5G deployments.

Verizon spent $23.1 billion on capex in 2022, which was substantially higher than the $20.3 billion it spent in 2021. Much of that increase was tied to expediting the build out of its C-band spectrum holdings, which the carrier paid $45 billion to acquire. Nearly all of that C-band spectrum is supporting the carrier’s 5G network.

However, the carrier is forecasting capex of between $18.25 billion and $19.25 billion for 2023. That will include the final $1.75 billion of guided spend on the C-band deployment, with Verizon CFO Matt Ellis stating the year-over-year drop in total capex will “drive higher free cash flow in 2023 despite increases in cash interest and cash taxes.”

Verizon CEO Hans Vestberg further tempted investors by stating the carrier was currently planning around $17 billion in capex for 2024, “which we expect to represent the lowest capital intensity in over a decade and among the lowest in the industry. We expect we will deliver a best-in-class network experience while reducing our 2022 capex leveraged by more than $5 billion over the next couple of years.”

AT&T is in a similar cost-cutting boat. The carrier plans to slash capex from a high of around $24 billion this year to around $20 billion starting in 2024.

“We’ve got to make our capital dollars stretch a bit further, operationally, with our wireless build, which we are seeing in better than expected C-band coverage performance and our wireless investment last year,” AT&T COO Jeff McElfresh said during a recent investor conference. “All of this goes into our ability to get better return on a lower capital number next year.”

Despite those heavy initial investments, operators have so far failed to see a return on that capital. MTN Consulting noted that telecom operator service revenues declined for most of 2022.

“It’s more important to focus on service revenues in assessing the health of the telco sector. That’s particularly important now, as telcos have spent heavily on their networks to deploy 5G,” the firm noted in a recent report, citing the strong surge in 2022 capex. “Telcos, and their investors, expect new revenue streams to result from these buildout costs. So far, 5G has not delivered.”

Nokia CEO Pekka Lundmark acknowledged this challenge at the recent MWC Barcelona 2023 event where he touted the vendor’s push to grow its communication service providers (CSP) business at a faster rate than the market. Lundmark noted that the market itself is forecast to grow at a 1% compound annual growth rate (CAGR) through 2026, which “puts the onus on Nokia to take share from our competitors,” he stated.

Ericsson is also in a precarious boat as it’s battling resurgent rivals in the U.S. market and its own internal upheaval.

“We expect 2023 to be rather choppy with near-term uncertainties and macroeconomic headwinds that will likely impact operator capex,” Ericsson President and CEO Börje Ekholm said during the vendor’s fourth quarter of 2022 earnings call.

This is not just a U.S. challenge.

Dell’Oro Group predicts worldwide telecom capex increased at a low-single digit rate year-over-year in 2022, down from the high-single digit growth in 2021. The firm expects global telecom capex to drop at a 2% to 3% compound annual growth rate (CAGR) over the next three years “as positive growth in India will not be enough to offset sharp capex cuts in North America.”

Stefan Pongratz, VP and analyst at Dell’Oro Group, noted in a recent report that the disconnect is “partly because the equipment makes up roughly one-third of the capex.”

“With the equipment market expected to grow 1% in 2023, and telco capex projected to decline, it can be inferred that the Dell’Oro analyst team is modeling some minor decoupling over the short-term,” Pongratz explained.

Huawei, which remains the world’s largest telecom equipment vendor despite limited access to a number of Western markets, reported sales last year increased less than 1%.

“The company has gone through some challenging times, and I think the perception is right now that our business has stabilized and we’re moving steadily forward,” Andy Purdy, chief security officer for Huawei, told SDxCentral in an interview.

Purdy’s comments echoed that of Huawei’s top leadership, which has focused on the vendor’s ability to pivot operations to deal with its new reality.

“A challenging external environment and non-market factors continue to take a toll on Huawei’s operations,” Huawei’s Rotating Chairman Eric Xu noted in a statement tied to the vendor’s latest results. “In the midst of this storm, we have kept racing ahead, doing everything in our power to maintain business continuity and serve our customers.”

Two areas vendors could witness growth are from the enterprise space and from operators beginning to invest in next-generation wireless technology.

The former is likely to come in the form of private network investments. ABI Research predicts the market for private cellular services will grow from $7 billion in 2023, to more than $96 billion in 2030.

Nokia’s Lundmark said he expects the enterprise market to grow at an overall 8% CAGR through 2027, with a more significant 27% growth CAGR tied to the private wireless space.

The Nokia exec said the vendor wants to increase its enterprise-derived revenues from around $2 billion last year, or just 8% of Nokia’s total revenue haul, to “double-digits as quickly as possible. And that double-digits I see as a floor rather than a ceiling,” Lundmark clarified.

The other area is planned investments in the next 5G iteration, currently referred to as 5G-Advanced. That update is attached to the 3GPP Release 18 specification, which is scheduled to have a final code freeze in early 2024.

ABI Research predicts 5G-Advanced radios will start gaining traction in the market between 2024 and 2026. The firm expects the consumer infrastructure market will lead the space, with 75% of 5G base stations serving the market being upgraded to the 5G-Advanced specification by 2030. The enterprise infrastructure market will lag, hitting about half of that upgrade ratio.

That timing leaves 2023 lined up as a fallow year for capex spend and provides an interesting talking point for upcoming earnings calls.