CEO’s review
After the exceptional years during the COVID-19 pandemic, we expected a return to a more normal operating environment in 2023. That was not to be the case. Much like the preceding years, 2023 turned out to be both unpredictable and difficult. On the whole, the beginning of the year went as expected, and we improved our net sales and profitability. After the summer, however, the market demand for our larger business unit took a notable negative turn, which meant that the company’s total net sales were lower than expected. Amidst the changes, we intensified our efforts to develop the strategic core of our business and our organisation.
The most significant reasons for the weak overall result in 2023 included the general global economic situation, higher costs and interest rates, and the volume of the Broadband Networks business being lower than expected. Due to cost reduction measures and investment cuts by network operators, our orders received did not reach our expectations. In addition, some of the deliveries originally scheduled for the latter part of the year were postponed due to delivery delays and problems with the availability of materials.
We expect the uncertain market situation to continue, with continued supply chain challenges particularly with regard to electronics components and semiconductors. In response to the circumstances, we initiated a number of measures in 2023 to increase the efficiency of our operations, cut costs and protect cash flow. We also continued our measures to pass the higher costs through to sales prices in both of our businesses. By prioritising our operations and adapting our cost structures, we create the foundation for improving profitability.
THE BROADBAND NETWORK MARKET SLOWED ON THE THRESHOLD OF A NEW TECHNOLOGY GENERATION
The demand for broadband services continues to grow, driven by remote work and the increasing consumption of digital services. This requires telecommunications operators to make investments in increasing network capacity and data transmission speeds. In cable-based infrastructure, this means a gradual transition to next-generation DOCSIS 4.0-compliant 1.8 GHz network updates that will provide subscribers with access to broadband connections with speeds of up to 10 gigabits.
Our DOCSIS 4.0-compliant network product development projects continued with high intensity in 2023. The next-generation smart amplifiers we are developing for the North American market entered the final acceptance testing phase with our main customer, and we expect the deliveries to begin in early 2024. At the same time, we are gradually preparing for high volume deliveries. In Europe, investments in new technologies will begin later than in North America, but the deliveries of our passive
1.8 GHz products are already under way.
DOCSIS 4.0 technology ensures the competitiveness of cable network connections
alongside optical fibre for years to come. This creates significant growth potential for the network products market, especially in North America, where we expect operators to make investments in the new technology from 2024 onwards. Predicting market development in Europe is more difficult, and it depends on the timing of the adoption of next-generation technologies.
STEADY DEVELOPMENT IN PUBLIC SAFETY AND MOBILITY MARKET
The market for video security and public transport information systems is growing steadily, driven by the development of urban environments, the increase of environmentally sustainable public transport services, and the increasing popularity of smart digital systems for a smoother life. The market is characterised by public sector investments aimed at ensuring the smooth operation and safety of services and infrastructure.
In public transport information systems, we delivered several projects in 2023 to major rolling stock manufacturers. We also made progress on a number of other customer projects in Europe and the Middle East. We purposefully sought to establish a stronger foothold among public transport operators and in the services business in particular. In addition, we continued the measures initiated in 2022 to improve the profitability of our projects and revise our organisation and processes.
Public transport information systems are continuously developing to be increasingly smart and real-time. Smart functionality is also increasing in video security and situational awareness solutions, and their scope is expanded by various mobile systems, for example. Next-generation solutions will include not only video but also increased management and analysis of various types of data streams. The rapid development of technology requires us to continuously make R&D investments in new intelligent solutions, and the share of software systems in these solutions will continue to grow.
STRATEGIC STEPS TOWARDS THE FUTURE
In 2023, we initiated measures to streamline Teleste’s legal group structure, which will involve carving-out our Broadband Networks and Public Safety and Mobility businesses into separate legal entities. The planned corporate structure will clarify the operational control of the businesses and increase the flexibility of the business units’ operations. At the same time, it will enable us to better take account of the special characteristics of both businesses.
We established an Advisory Board at the beginning of 2023 to support the North American networks business. The role of the Advisory Board is to steer our operations in the North American market. By strengthening cooperation and expertise, we expand our insight into the needs and expectations among operators in North America and ensure that we can take full advantage of the growth opportunities presented by the market.
Linda Kallas joined the company as the new Senior Vice President, Group Strategy, and member of the Management Group. Under her leadership, we will continue to advance our programme to sharpen our strategy. In June, we also sharpened our focus on the broadband networks technology business by divesting Teleste’s subsidiary Teleste Network Services SA to local management. The subsidiary was previously responsible for the Broadband Networks’ business unit’s engineering and services business in the Swiss market.
OUR SUCCESS IS BUILT ON OUR CULTURE
Teleste celebrates its 70th anniversary in 2024. This milestone is a great opportunity for our company to look back on the journey we have taken and think about what kind of company we will be in the future. We want to create value for our customers, investors, Telestians and the whole world. Now and in the future, our goal is to focus on creating the foundations for safe and good daily life for everyone.
Teleste’s history is a journey of change and renewal. While predicting the future is difficult, we believe that change continues to be vital in our operating environment today. We pursue success and growth, and we work together to achieve these goals. Our efforts will be supported by Teleste’s culture vision, which was published in 2023 and is built around our company’s key strengths: innovation, joy and respect. These qualities will continue to be the cornerstones
of our success in the years to come.
Esa Harju
CEO of Teleste
Source: Teleste’s Annual Report 2023