Facing significant hurdles in the wake of Huawei's expulsion from Western markets, Nokia (HE:NOKIA) and Ericsson (BS:ERICAs), the remaining switchgear providers, are grappling with operators' reluctance to adopt 5G technology. The slow uptake is primarily attributed to difficulties in monetization and a lack of innovative applications that fully exploit the power of 5G. This has led to job cuts and profit warnings at both companies, with Nokia planning to cut 14,000 jobs and Ericsson issuing a profit warning.
Nokia's CEO, Pekka Lundmark, has pointed out that operators' hesitance and the absence of innovative applications leveraging 5G's potential are key factors causing these monetization issues. Historically, operators have used new cellular generations mainly for congestion reduction, often sidelining the introduction of novel applications. This longstanding practice, combined with current hesitance and monetization struggles, is predicted to trigger a 7% cut in telecoms capital expenditure from 2022-2025.
Despite years of technological disappointments and Huawei's ouster from Western markets, demand for bandwidth-heavy services like Augmented Reality/Virtual Reality (AR/VR) and the metaverse continues to be robust. However, the industry's focus on network congestion over innovation has contributed to the projected decrease in capital expenditure.
The telecom industry, led by Nokia and Ericsson, is confronting these headwinds due to operators' failure to incentivize users with innovative 5G applications. This situation has resulted in user disappointments and unfulfilled promises that have further slowed down 5G monetization.
To leverage the benefits of 5G's faster speeds, lower latency, increased capacity, both Nokia and Ericsson must shift their focus towards incentivizing users with innovative 5G applications that could revolutionize industries such as smart cities, autonomous vehicles, and immersive experiences. Delivering on promises made to users and enabling new possibilities is vital for successful 5G monetization. Despite the exclusion of Huawei from Western markets and a high demand for bandwidth-intensive services like AR/VR and the metaverse, the lack of innovative applications hampers their progress.
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