Revenue attributed to network equipment and services is expected to improve following a five-year period of contraction, according to a new forecast from Dell’Oro Group. Growth in the sector won’t be robust, but it’s a welcome sign for vendors that are eager to grow revenues as 5G deployments get underway around the world. 

The research predicts the global telecom equipment and services market will grow at a 1% compound annual growth rate through 2023. Telecom equipment and services generated $121 billion in revenue during 2018 and the market is forecast to near $129 billion by 2023, according to Dell’Oro Group. 

“In order to cope with mobile data traffic that continues to grow at an unabated pace and flattish revenue trends, operators are balancing their investments carefully between the supply side related challenges and the opportunities from a demand perspective,” Dell’Oro Group analysts Jimmy Yu and Stefan Pongratz wrote in the report. 

“The need to reduce [total cost of ownership] has been a catalyst for the overall 4G to 5G migration acceleration, benefitting not only [radio access network] equipment but also the demand for core, transport, and services,” the analysts explained. 

The firm’s projections for 5G infrastructure, including RAN and 5G core, have also been revised upward to reflect a more optimistic view of the 5G core market. The global RAN market is projected to grow at a compound annual growth rate of 2% through 2023 and mobile backhaul will grow 3% on an annualized basis through the same period, according to Dell’Oro Group.

The global transport market, including microwave and optical equipment, is forecast to grow at a compound annual growth rate of 3% for the next five years. Increased adoption of 400 gigabit Ethernet should also strengthen the service provider router market and “offset flat growth expectations for broadband access,” the analysts wrote.

Overall, Dell’Oro Group concludes that improving market sentiment for telecom equipment will contribute to a low-single digit growth rate through 2023 for network equipment services, including managed service, network rollout service, and consulting.