Recently, American telecommunications equipment suppliers such as ADTRAN, CommScope, and MasTec have released financial reports and warned their network operators that customer spending has decreased more than expected.
They have joined a long list of suppliers facing the challenge of widespread reduction in online spending. Other companies that have issued similar warnings include Nokia, Ericsson, Corning, and Crown Castle. However, these device manufacturer executives continue to assure investors that sales will improve.
According to Seeking Alpha, Charles Treadway, the new CEO of CommScope, stated during the company’s recent quarterly conference call: “We are focused on what we can control. I think we are making good progress as we continue to drive improvements in our business positioning to achieve success. Recently, our focus has been on achieving cost returns in both the short and long term. Unfortunately, the market demand issues we are dealing with are more severe than we expected and difficult to overcome in the short term.”
Some analysts agree with Treadway’s view. There is still a glimmer of light at the end of the tunnel, “analysts at Wells Fargo wrote in a report to investors on Sunday”.
But it is currently unclear how the situation will develop. Officials from AT&T, Verizon, and other top network operators have hinted that they will cut expenses this year and next, but the scale of the cuts is not yet clear.
A new factor that may lead to a surge in demand is generative artificial intelligence technologies such as ChatGPT.
According to Seeking Alpha, DigitalBridge CEO Marc Ganzi stated during the company’s recent quarterly conference call, “This is one of the most active areas of interaction between us and our clients at the portfolio level, especially in the data center vertical”.
Latest Warning
Firstly, there is bad news. ADTRAN, CommScope, and MasTec have all indicated that their revenue has slowed down or lowered their revenue expectations this year. The slowdown in demand is quite significant and covers a wide range: ADTRAN sells fiber optic equipment; CommScope sells wireless and wired network devices; MasTec provides construction and deployment services for all types of network technologies.

CommScope reported a 29% decrease in its core connectivity business and a 41% decrease in sales of outdoor wireless network devices. ADTRAN has lowered its revenue growth forecast for 2023 and expects optical sales in the second half of this year to be 20% lower than the first half. In addition, due to sluggish demand from wireless network operators, MasTec lowered its revenue forecast for its communication business by approximately $150 million.
According to Seeking Alpha, MasTec CEO Jose Mas explained during the company’s quarterly conference call, “Our clients are adjusting their spending plans for 2023”.
Analysts at Wells Fargo Bank said that these data further indicate a slowdown in operator spending on wireless and wired infrastructure.
Hope
But executives believe there is reason to remain optimistic. For example, SBA Communications, a cellular tower company, stated that its carrier customers are only halfway through the deployment of C-band spectrum for 5G. CommScope’s Treadway agrees: “We believe that when customers talk to us about the medium to long term prospects, they have a positive attitude towards the prospects they see and believe that there will be growth in the future.”
Some executives point out that the US government’s $42.5 billion Broadband Equity Access and Deployment (BEAD) project promises to ultimately hand over taxpayer money to telecommunications companies for network construction in rural areas. Other executives point to generative artificial intelligence.
DigitalBridge is a company focused on data centers, cellular towers, Small Cells, and fiber optics. “Based on the feedback we have received from our CEOs and their conversations with customers regarding the growing capacity demand, we believe this opportunity will be at least as big as the public cloud market more than a decade ago.”
Ganzi believes that spending on generative artificial intelligence can help drive demand for faster and more powerful networks, as well as computing capabilities closer to users.
Dave Bolan, an analyst at Dell’Oro Group, agrees. He wrote: “Generative AI is a powerful tool, which may completely change several industries. Whether it is creating new content with AI/ML or analyzing data with AI/ML, it requires more computing power. If this computing power must meet some delay requirements, then AI/ML may promote the demand for more edge computing.”