NEC’s telecom business is stuck in a rut

Ray Le Maistre
By Ray Le Maistre

Jan 30, 2024

  • NEC has been trying to grow its global telecom business in recent years
  • But the market was tough in 2023 and, like others, the Japanese vendor struggled for growth
  • Its telecom division, which had expected to deliver double-digit growth, is on course for a slight decline in full financial year revenues

NEC, the giant Japanese technology vendor that has been trying (once again) to expand its telecom systems and software business globally and secure a position as a leading international partner to the world’s major network operators, has struggled to make headway, its latest financial update reveals. 

During the past few decades the company, which is a key vendor partner to Japan’s major telecom operators, such as NTT Docomo (which owns a small stake in NEC), KDDI and SoftBank, has been trying to spread its wings and become a larger and more strategic player in the global telecom sector. It took a bit of a run at the global market when it acquired telecom software specialist Netcracker Technologies in 2008 and, more recently, the emerging Open RAN sector acted as the bandwagon upon which NEC tried to hitch a ride into the global 5G tech sector. 

But last year the company implemented an executive shuffle and its international telecom ambitions appeared to be mothballed – and that is now reflected in the vendor’s latest financial report. 

For the nine months to the end of December 2023 (the first three-quarters of its current financial year), the vendor’s Telecom Services line of business – which comprises network infrastructure (including 5G radio access and core systems), submarine systems, OSS/BSS (the Netcracker Technologies unit) and the NEC Networks & System Integration Corp. (NESIC) – reported revenues of 560.6bn yen ($3.79bn), up just 0.8% compared with the same period a year earlier, while its adjusted operating profit dipped slightly (by 0.5%) to 14.1bn yen ($95m). 

For the full financial year that ends in March, the Telecom Services unit is expected to report a slight year-on-year dip in sales to 814bn yen ($5.5bn), which is about 20% lower than NEC had previously forecast for the business. 

But that telecom technology unit is just a small part of the NEC empire, which has been performing quite well, with total group revenues up by 5.5% to 2.39tn yen ($16.2bn) for the nine months to the end of 2023. The majority of those revenues, 72%, were generated in the company’s domestic market, which shows that it’s not just the telecom arm that hasn’t managed to branch out globally to any great extent. 

- Ray Le Maistre, Editorial Director, TelecomTV

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