Nokia Private Cellular Networks Results Point to Market Challenges

Kathryn Weldon – Research Director, Business Network and IT Services – Americas

Summary Bullets:

• Nokia’s Q2 2022 disclosures about its private cellular network market performance provide insights on the overall market, which is seen as a significant growth opportunity by a diverse cast of characters.

• Nokia experienced a slower new-customer growth rate over the last two quarters than in 2021. The company notes regional, seasonal, and go-to-market disparities with some verticals slower to adopt than others.

Nokia transparently discloses details of its private cellular wireless market performance to analysts each quarter, which not only provides insights on the vendor’s momentum, but also enlightens us with information on enablers and challenges that likely apply to most providers. As so many vendors and service providers see private cellular as a major growth opportunity, Nokia’s insights may help explain why the market is still at an early stage of enterprise adoption and why some provider segments appear to be doing better than others in gaining large numbers of new customers and associated revenues.

In Q2 2022, Nokia had noted that it has over 515 private wireless network customers, with new public logos in the quarter that include the NHS Foundation Trust (Bethlehem Royal Hospital in the UK), Antamina (mining company in Peru), Mext (university technology center in Turkey), Flex (manufacturer in Brazil), APM Terminals (Mexican maritime terminals), and the Public Transport Authority (Australia). The key verticals within its customer base includes:

  • 91 Transportation companies
  • 126 Energy companies (including energy, utilities, and mining)
  • 132 Public Sector organizations/smart cities
  • 93 Manufacturing/logistics companies
  • 73 Other companies and organizations (hospitality, healthcare, agriculture, device testing, etc.)

Nokia notes that it is seeing the most growth in manufacturing and energy customers. While manufacturing is growing, progress in this vertical is complicated because it includes so many diverse kinds of companies with different requirements. Nokia is beginning to split manufacturing customers into 25 subsets to understand and serve them better. In addition, manufacturing deployments tend to be quite complex and are often the engagements in which Nokia partners with global systems integrators. They also differ in terms of the urgency with which they need to deploy private wireless and for what reasons. For example, worker safety has become a critical imperative in many factory environments as it is in many of the process manufacturing segments.

Regionally, 23% of Nokia private wireless customers are in North America, 10% in Latin America, 41% in Europe, 21% in Asia-Pacific, and 5% in the Middle East and Africa. The cellular technology split is 80% 4.9G/LTE or GSM-R; 5% 4.9G and 5G; and 15% 5G only. Nokia notes that neither the regional split nor the technology split has changed much in recent quarters. Nokia also discloses that the ratio of its direct to indirect sales is now 39% direct to 61% indirect, a direction in which the vendor has purposely been heading over the last several quarters. While Nokia does partner with CSPs (for example, its NHS deal is with Virgin Media O2, and the Antamina deployment is with Telefónica), it is increasingly working with large global systems integrators and VARs. In many cases, the customer is already working with one of these partners and asks Nokia to include them in the deployment.

Nokia’s YoY customer (new logo) growth rate in Q2 2022 (as well as Q1 2022) was more than 30, which, while healthy, is lower than the vendor has seen in prior years; although, there appears to be some seasonality in the rate, which generally strengthens in Q3 and Q4. The growth rate includes existing customers adding new sites, as well as new customers. While the regional split has not changed, there are differences between the regions. For example, Nokia notes that sales in LATAM, the Middle East, and Africa are dominated by operators. Nokia has dedicated teams in top countries to sell private wireless; in other countries, the enterprise sales team promotes private wireless as well as other enterprise products such as IP and optical networking.

Another one of the above statistics that stands out is the split between 5G and 4G (or what Nokia calls 4.9G). The fact that the split hasn’t changed much and still shows 4.9G as the technology used in 80% of deployments should be highly instructive to service providers and shows that the kinds of complex, real-time, low-latency, and high-bandwidth use cases being touted by 5G service providers and vendors alike are still not common requirements. 5G may be a significant enabler of private network use cases in the future, but it will take a while before it drives significant revenues, linked to the widescale availability of a 5G-capable industrial ecosystem.

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