Managed service market expands 11%
As Nokia (NOK) has continued its push in the managed service market with a multiyear contract with Australian telecom operator Optus, it’s a good to time examine the company’s revenue opportunities in this market to determine how its efforts could transform its fortunes.
According to MarketsandMarkets, the global managed service market will expand at an average annual rate of more than 11% between 2017 and 2022, becoming a $257.8 billion revenue opportunity by 2022.
Nokia’s and Ericsson’s revenue falls in 2017
The global managed service market was valued at $138.3 billion in 2016, as illustrated in the chart above. In fiscal 2017, Nokia generated revenue of 23.1 billion euros ($28.5 billion), and Ericsson (ERIC) generated revenue of 201.3 billion Swedish krona ($25 billion). Both Nokia and Ericsson saw their revenue fall in 2017 amid hard times for their core network businesses as infrastructure upgrades by telecom operators slowed down. While US telecom operators AT&T (T), Verizon (VZ), and T-Mobile (TMUS) have begun preparations for 5G (fifth-generation) networks and are working with Nokia and Ericsson on trials, commercial 5G deployment is still years away.
Diversifying revenue streams
In the meantime, Nokia and Ericsson are looking to the managed service market to drive growth. With ~$260 billion up for grabs, deeper penetration of the market could transform Nokia’s fortunes for the better. Not only do managed services present a massive revenue opportunity, they also present an opportunity for Nokia to diversify its network revenue sources. Telecom equipment sales currently contribute a huge share of Nokia’s network revenue.