Mavenir boss regrets open RAN ‘bet’ in U-turn after financial rescue
Any lingering hopes that Mavenir could establish itself as a competitive US manufacturer of radio units for the world’s 5G networks have been quickly extinguished. In a dramatic but not totally unexpected move, the company is to quit hardware production after struggling to land contracts in a radio access network (RAN) market still dominated by Ericsson, Huawei and Nokia. “The only wrong thing we did was to bet on open RAN in a heavy way,” Mavenir CEO Pardeep Kohli said on a call with Light Reading.
The strategic pivot returns Mavenir to its software roots and accompanies a refinancing of the formerly debt-ridden vendor. Talks it recently held with Middle Eastern investors about an injection of funds ultimately proved fruitless. Mavenir, which previously had about $1.3 billion in debt, has instead carried out a debt-for-equity swap with current lenders in a transaction that dilutes the stakes of Siris, still its majority owner, and other shareholders such as Koch, Intel and Nvidia. New financing leaves it with a net debt position of $300 million, said Kohli.
Like others, Mavenir saw open RAN – which allows telcos to combine parts from different vendors more easily – as an opportunity to break into a market that generated product revenues of about $45 billion in 2022, according to data from Omdia, a Light Reading sister company. But Mavenir’s expansion into hardware was followed by a sharp downturn as telcos cut spending on RAN products by $5 billion in 2023 and another $5 billion last year, according to Omdia’s data. In that environment, telcos have largely stuck with existing suppliers and continued to buy all the products for any site from the same company.
Under its revised strategy, Mavenir will also continue to develop software for RAN compute or “baseband,” its original RAN focus before it entered the hardware sector. According to Omdia’s data, this part of the business was responsible for about 30% of total revenues in 2023, or $12 billion.
Yet Dell’Oro, another analyst firm, expects multivendor open RAN deployments – where an operator pairs one vendor’s RAN compute products with another supplier’s radios – to account for just 5% to 10% of total RAN revenues in 2028. Without sector growth between now and then, Mavenir could be looking at an addressable RAN compute market worth no more than $1.05 billion in sales.
The decision to exit RAN hardware will not have a massive impact on revenues at Mavenir, which generates 80% to 90% of its sales in the market for core network software. But it should make a big difference to margins, which have inevitably suffered with the push into the less profitable hardware sector.
Yet the RAN businesses of Ericsson and Nokia together spend about $5 billion each year on R&D. And matching them on inventory has been impossible for Mavenir, Kohli acknowledges. “Our main issue was the working capital inventory,” he said. “Ericsson and Nokia carry about $4 billion of inventory from month to month, and we don’t have predictable demand.”
Given forecasts about open RAN adoption, the retreat from RAN hardware means the biggest opportunity for Mavenir is likely to be the mobile core market, previously estimated by Dell’Oro to be worth about $8 billion in annual sales. Mavenir has clearly enjoyed more success in that software-only business area than it has in the RAN sector, and it says the just-announced transaction will aid future investment in mobile core product development.
Regardless, the latest news about Mavenir marks a further setback for open RAN. The original promise was all about supplier diversification. https://www.lightreading.com/open-ran/mavenir-boss-regrets-open-ran-bet-in-u-turn-after-financial-rescue
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