Telco network infrastructure vendors booked a 5.1% year-over-year increase in revenue during the second quarter, reflecting a significant pullback from a 10% gain in the previous quarter, according to MTN Consulting.

Vendors collectively pulled in $110.4 billion in revenue during the first half of 2021, up 7.4% from the first half of 2020. Some of that growth can be attributed to a weak first half of 2020 when the initial spread of COVID-19 clobbered network infrastructure spending plans, Matt Walker, chief analyst at MTN Consulting, explained in a new report.

Total telco capex for the first half of 2021 jumped 9.8% year over year to $151.1 billion, he said, noting that the analyst firm added Airspan, Google Cloud, Amazon Web Services (AWS), and Microsoft Azure to its telco market coverage at the beginning of 2021. Telco capex grew 15% year over year in the second quarter of 2021 and opex climbed 14% during the same period. 

“Labor costs are a big part of telco opex (and rising), and automation is a key area of investment in 2021 for nearly all major telcos,” Walker wrote. “Numerous telcos are reporting that network operations are taking up a larger portion of the opex pie. This is important because vendors are increasingly selling into opex budgets within their telco customers, not just capex budgets. That’s especially true on the services and software sides.”

Huawei, Ericsson, Nokia, and ZTE maintained dominance in the market as the top providers of 5G infrastructure. MTN Consulting placed China Comservice in the No. 5 spot, followed by Cisco, Intel, Commscope, NEC, and Fiberhome rounding out the top 10. 

Drilling into network equipment providers, MTN Consulting pegged Huawei, Nokia, Ericsson, ZTE, Intel, NEC, Cisco, Fiberhome, Samsung, and Fujitsu in the top 10. The top four — Huawei, Nokia, Ericsson, and ZTE — accounted for 64% of revenues during Q2. 

Ericsson and Nokia reported the largest year-over-year jumps in telecom network infrastructure sales during the first half of 2021, up $1.46 billion and $1.01 billion respectively. Huawei meanwhile reported a $1.48 billion year-over-year decline in sales during the same period, according to MTN Consulting. 

The Chinese vendor still dominated the market during Q2 with $31.5 billion in annualized revenues. Nokia, Ericsson, and ZTE followed with $18.5 billion, $17 billion, and $10.2 billion in annualized revenues, respectively.

Hyperscalers are also increasingly crashing the telco party, Walker explained, adding that AWS, Azure, and Google all experienced “dramatic growth” in telecom-related revenues during the last few quarters. 

“This telco-webscale collaboration activity has picked up in the last 12-18 months. Webscale operators help telcos with service and application development, shifting of workloads, and developing, enabling, and marketing cloud-based services,” Walker wrote.  “Managing costs is a central purpose of telcos’ willingness to partner with webscale providers. Increasingly, the webscale operators who deliver cloud services are competing alongside traditional telco-facing vendors like Amdocs, Citrix, CSG, and Nokia.”

MTN Consulting estimates AWS, Azure, and Google had aggregate telecom sector revenues of $1.92 billion during the 12-month stretch that ended in June 2021. “These cloud providers will sometimes be valuable partners for telco-focused vendors, but in many cases they will be competitors and are important to track,” Walker added. 

The analyst firm projects industry wide network operation opex to jump about 5.3% in 2021 to $297 billion. “Telco outsourcing of netops tasks are widespread and growing,” Walker concluded. "Cloud providers are taking advantage of some of this growth, but a large number of traditional telco network infrastructure vendors sell into telco opex budgets.”