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

at a less aggressive pace. Now, we better understand the reasoning. With all the major operators scaling back spending, either because they must or because they can afford to, strategically, our assumption about annual run rate for India this year and next year is less than half the average run rate of 2014 through 2018, more like $50 million per year in 2019 and 2020 versus over $100 million a year in revenue on average for the past several years.

We strongly believe we are retaining our market share in India and we have some positive indications about strengthening our position in the region. Specifically, we believe we will be selling to Vodafone Idea next year in addition to continuing with Bharti and Reliance Jio. We have been working very hard to find a way to sell to Vodafone in India with an acceptable level of risk. And we believe we are closer to finding such a mechanism. This feeds into the reason, we now expect business in India to stabilize at around the 2019 level. During the transition period, the operators are going between the 4G build out and the evolution to 5G. Regardless of the financial woes, these operators need to support more coverage in the rural market, which requires compact low cost solution of the type we already deliver.

Meanwhile, Indian operators will also have to address growing data demand in the urban markets using high-capacity links, which is also an area where we excel by providing compact all outdoor solutions. So within the context of the typical lumpiness and timing issues in India, we see some potential upside in demand next year, but we prefer to remain cautious and look for a flat year in 2020 given the operator's financial situation, recent developments and our recent experiences in the region.

Moving on to Africa, we've also seen more cautious from customers recently with the decision cycle taking a bit longer. We expect some improvement in Q4 as we begin to ship to the new African customer we mentioned on the last call. But looking into next year, we are a little more cautious about the near-term potential of this region, because of the ongoing issues the operators are having with obtaining foreign currency, plus their tendency to pay slowly. We are addressing this risk by negotiating additional upfront payments and other measures.

Latin America continues to be strong overall due to the continued expansion of 4G networks. We had a hiccup in Q3 because a project for Orocom aimed at bridging Peru's digital divide was delayed due to the after effect of the election in Peru and elongated financial arrangements. However, we believe it was a delay of only one quarter. We have a nice backlog in Latin America and expect to see further growth in this region next year as well.

APAC was particularly strong in Q3 as we recognized significant revenue from the large scale network expansion we are supporting in Southeast Asia. You