Nokia Corp. (NOK) recently announced a partnership with Canada-based Telus. The agreement mostly revolves around the 5G related offerings of the Finland-based telecommunications company.
The Finnish company will offer its subscriber data management and LTE indoor picocells, according to the terms of the agreement. Telus will also deploy Nokia’s policy controller and NetAct network management, as well as LTE indoor picocells.
Speaking on the deal, Chief Technology Officer at Telus, Ibrahim Gedeon said in a statement “with an exponential increase in capacity, bandwidth and speed, 5G will change the way we live and work by fostering Canadian innovation and growing several key verticals of our economy.”
Earlier this month, Nokia
Potential growth opportunities
Many European countries, such as the U.K. and Sweden, have ordered local telecom operators to phase out Huawei equipment from their 4G and 5G networks. So, those mobile operators are left with no choice but to turn to Ericsson and Nokia due to limited options.
Ericsson and Nokia
Experts believe if Huawei is forced to leave Europe, then it will not only create growth opportunities for established 5G players but also for the new ones stepping into the market.
There are four key players in the telecommunications equipment market including Nokia and Ericsson based in Europe, while Huawei and ZTE based in China. Designing innovative technology such as 5G is expensive and its deployment around the world requires a lot of expertise.
The telecommunication equipment industry has seen frequent consolidations over the years mainly encouraged by cost-saving and portfolio expansion goals. For instance, Nokia had inked merger deals with Alcatel-Lucent, Siemens, and Motorola in the past. The previous consolidations in the industry is one of the main reasons that we are seeing limited players in the 5G market right now.
If we rule out Huawei from the list, the European operators will be left with two options, i.e. Nokia and Ericsson. Moreover, new players cannot compete with these companies, as they lack the expertise and equipment required by the mobile operators for 5G upgrades.
Nokia vs Ericsson
On the other hand, Nokia
Restructuring plan under new leadership
Nokia’s new CEO Pekka Lundmark clearly said that the company will do whatever it takes to dominate the 5G market. He also plans to make significant changes in the internal structure of Nokia.
The Finnish company lost a key 5G RAN agreement with Verizon last month. While commenting on the lost contract, Lundmark said Nokia might experience margin pressure after losing the deal. He also added that the company needs to boost its R&D spending to become a leader in the 5G space.
Quarterly performance of Nokia
The company reported earnings of 203 million euros for the quarter, up more than two folds from the same quarter of 2019. On an adjusted basis, profit per share was 5 euro cents. Revenue came in at 5.29 billion euros, down 7 percent from the comparable period last year.
Moreover, it projected adjusted operating margins in the range of 7 to 10 percent, below analysts’ average estimate of about 11 percent.
Overall, 28 analysts have set a price target for Nokia