Is the Telecom industry experiencing a slow down?

A recent report by Dell’Oro suggested that spending in the telecoms industry is set to slow down in the forthcoming years. The report showed that capital expenditure would be 2% lower in 2026 than in 2025 and that from 2027-2030, the compound annual growth rate would recover slightly to a very modest 1% on average. This forecast is enough to send shivers down the spines of CEOs across the industry but there are strategies to mitigate such an opportunity adverse environment.

What’s the basis for this forecast?

To better understand the forecast, it’s best to explain the current state of the industry. If you’re a multi-national operator or vendor, telecommunications is a capital-intensive, debt-heavy industry and as a result, is reliant on stability within the global interest rate markets. With recent geopolitical events affecting these rates, the financial pressure to produce a positive return on their investments is the only avenue through which larger operators can help offset those external pressures. Unfortunately, these external constraints are happening at the same time the telecoms industry is undergoing internal turmoil.

The 5G rollout cycle is entering a slower, more mature growth phase as the more lucrative markets are reaching their saturation point. To compound the situation, the heavy investment in 5G technology has yet to bear the financial fruit which was expected. Despite 5G connections reaching the three billion mark and growing 34% year-on-year, it pales in comparison to 4G’s eight billion connections and monetising 5G effectively has vexed operators.

Less investment means?

From the Operator perspective:

The knock-on effect of slower revenue growth means fewer new network rollouts and fewer upgrades. Operators will begin to focus on sweating existing assets and increasing cost efficiencies instead of expansions. With pressure being exerted on their margins, we will also see operators push harder on pricing.

From the Vendor perspective:

With the possibility of a lower order intake, this will potentially cause vendors to pivot to offering optimisation, automation, and cost-saving solutions. The financial pressures from longer sales cycles where vendor offerings are under more intense financial vetting could also lead to lower margins and a reliance on incremental upgrades and support renewals.

How could this play out for operators?

The reduced need for large-scale physical infrastructure is seeing a shift toward efficiency over expansion. Operators are now focusing on automation, AI and virtualisation. Until 5G is profitable, 6G will remain a pipedream and the spending will be on essentials for efficiency and necessary upgrades.

In what ways can vendors adapt?

Embrace being niche

Instead of providing a whole suite of products, be the go-to company for a relatively small selection of products. This hyper-specialised focus can give you a unique selling point as vendor who excels at solving specific problems, this as a result makes your solution a sought-after resource.
Use your size to your financial advantage

If you’re a smaller vendor, the prices for your products and services will probably be lower and more attractive to price conscious operator than your larger competitors.
Pivot to opex-driven models

Instead of relying on upfront capex-heavy sales, offering subscription pricing, managed services or ‘as-a-service’ platforms. This kind of service offers both vendor and operator better cash flow and clears many of the financial approval barriers from an operational perspective.
Sell cost reduction, not just capability

By adding this extra component to the arsenal of sales messages, efficiency and resource reduction are more likely to make products more preferable.
Target essential-spending areas

There are always going to be areas for which a percentage of an operator’s budget has been allotted for essential expenditure. These include budgets for security, fraud prevention, regulatory compliance and service assurance.

Focus on Software and Virtualisation

Hardware is expensive both to buy and maintain so, cloud-native and hybrid solutions can potentially offer easier scaling, faster deployments, and lower upfront costs in some circumstances.
Look to underserved and growing markets

There are still geographical areas that still have 3G networks or areas where they are earlier in their 5G or fibre rollouts. Often the budgets for telecoms companies are lower in developing nations which gives smaller vendors a competitive advantage.
Reduce barriers to approvals

This can come in the form of running pilot projects, structuring deals with clear ROI milestones, or offering smaller initial contract lengths.
Focus existing customers

Cultivating relationships with existing customers and knowing their existing core network configurations is essential in offering upgrades and alternative solutions when externally sourced solutions in their network are due for renewal.

Summary

There is still a place for niche, value-driven vendors despite the all-encompassing capacity of huge private and state-backed enterprises. Many smaller core network vendors offer more cost-effective solutions and their relative size compared to a much larger organisations gives them the ability to deploy solutions quicker and meet customer needs more efficiently. Also, with smaller vendors, their customer focus isn’t just on the latest technologies but on legacy networks which gives them an advantage when dealing with installations in developing nations.

To find out more about Squire Technologies click here

Gareth Thomas, Digital Marketing Executive at Squire Technologies

Diameter Routing Agent

The SVI-DRA or Diameter Routing Agent sits at the centre of a Diameter signalling network. It manages high-volume traffic through dynamic load balancing and configurable throttling whilst multi-vendor support is provided by onboard mediation.

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