Ceragon Networks Ltd. (NASDAQ:CRNT) Q3 2019 Earnings Conference Call - Final Transcript

Nov 04, 2019 • 09:00 am ET


Ceragon Networks Ltd. (NASDAQ:CRNT) Q3 2019 Earnings Conference Call - Final Transcript


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Ira Palti

ahead with the 5G plans despite a more cautious environment and our leadership position is being recognized outside our existing customer base.

We expect quarterly revenue in most regions to improve in Q4 and also during 2020, allowing for typical seasonality in Q1. We see general strength or at least stability in most regions of the world outside of India. This is an important point, because it's not apparent from the results we just reported. We are also subject to the same macro issues that you have been hearing about from other companies in the telecom equipment industry and elsewhere. Nevertheless, we are targeting overall revenue growth next year. Driving this growth would be both ongoing programs and new 5G design wins, which will contribute mainly during the second half of next year. We acknowledge that our growth in 2020 will be from a lower level of revenue in 2019 than previously expected.

In the current global telecom environment, being able to see a path to profitable growth next year is a significant positive point, one which we owe to our leadership position and ongoing commitment to maintaining a global presence. So, we intend to grow and we intend to do it profitably. We have the resilience to deal with these developments without the need to make drastic changes.

With that overview in mind, I'd like to discuss development region by region beginning with India. On our Q2 call, we said the picture in India seem to indicate a deliberate slowdown in the pace of expanding and densifying India 4G networks with more focus on the 5G spectrum auction and on urging the government to lower minimum bid prices. In Q3, India fell slightly short of our lowered expectations. And after receiving in July half of the large batch of order delayed from earlier in the year, we were disappointed, but not overly surprised that we did not receive the second half of this batch of orders in Q3. We now believe they will come sometime during the first half of 2020, so the slowdown in India is definitely real and affecting us for more than just a quarter or two.

The lack of profitability and heavy debt burdens among most of the large operators in India, even after consolidation and restructuring, is becoming a more serious concern due to a recent decision by the Supreme Court in India. This decision, which settled a dispute between the operators and the Indian government over how certain fees should be calculated, is expected to result in additional $13 billion in fees owed to the government by the large operators. This decision represents the biggest development in the region since our last call. Meanwhile, the pace of investment will be curtailed, pending decisions from the government on the fees and the minimum bid prices of 5G spectrum.

The only solidly profitable operator in India, Reliance Jio, was not much affected by the court decision, but it had already announced its intentions to spend