Telecom network infrastructure vendors generated $55.6 billion in revenue during the third quarter of 2020, according to a new report from MTN Consulting. The quarter marked a return to growth for the sector, following three consecutive quarters of decline and widespread economic malaise during the first global surge of COVID-19 infections.

However, MTN Consulting notes that the 4.7% year-over-year revenue growth in Q3 was largely driven by Huawei and ZTE. When the pair of Chinese vendors are removed from that equation, telecom network infrastructure revenues declined 1.4% from the year-ago period.

Those findings also line up with Dell’Oro Group’s assessment of infrastructure vendors’ performance during the quarter, which ended with Huawei and ZTE capturing 41% of the total market. 

“We now have enough evidence from early adopters to suggest that 5G is going to be a long slog, even after the COVID-19 pandemic is resolved,” Matt Walker, chief analyst and CEO at MTN Consulting, wrote in the report.

“Aggressive marketing and device subsidies may encourage rapid 5G adoption but doesn’t create profitability. As with many technology upgrades, committing rapidly to the new one puts at risk the safer, relatively high margins of the last generation,” he explained. 

MTN Consulting also ranked the top 10 network infrastructure vendors in Q3 2020 based on revenue. Huawei, once again, dominated the market with $46.2 billion in related revenues, a figure that exceeds the sum of the second- and third-ranked vendors Ericsson and Nokia, respectively. 

ZTE landed at No. 4 in the quarter, followed by China Comservice and Cisco, which dropped to the sixth position after a fifth-place ranking in the second quarter of 2020, and the fourth-largest vendor in the segment two years ago, according to MTN Consulting.

“Cisco remains dominant in the router market but a steady decline in telco sales have eroded its overall position,” Walker wrote. CommScope nabbed the No. 7 spot, followed by NEC, Intel, and Amdocs, respectively, according to the research firm.

Walker identified CommScope, Capgemini, IBM, Casa Systems, Amdocs, and Ribbon Communications as vendors that experienced noticeable gains in market share during the quarter, but noted that growth was fueled by merger and acquisition activities. “Ericsson’s share gain is also due in part to an acquisition (Kathrein), but more significant is its aggressive bid for 5G business in China,” he explained.

MTN Consulting also recognized Intel for having “recorded the most significant share increase in Q3,” which was up 0.6% on an annualized basis. “Despite Intel’s recent hiccups in its chip development pipeline, its bid for telco business has resulted in steady revenue growth in that segment,” Walker wrote, adding that “there are clear signs that Intel is not planning to let up on its telco market push.”

Looking ahead to 2021, the analysts expect telco capex to grow 4% from 2020, and it forecasts the software component of that spend to rise nearly 20%. Mobile network operators will turn to vendors for more help on services and systems integration as they pursue open radio access network (RAN) architectures and expansive cloud collaborations with hyperscalers, according to MTN Consulting.

“Network operations opex budgets will be a more compelling opportunity for vendors as telcos lay off more of their own staff and look for efficiencies,” Walker wrote. “In 2020, COVID-19 and a slowdown in 5G deployment have been disappointing to vendors, but far from catastrophic. There is hope in 2021.”