Nokia Reels In $3.5B 5G Deal With T-Mobile US

Iain Morris
7/30/2018
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Nokia has struck a $3.5 billion, multi-year agreement to build a "nationwide" 5G network for T-Mobile US in what represents its biggest 5G deal so far and one of the industry's largest 5G deals to date.

The Finnish equipment maker -- which champions its "end-to-end" capabilities over those of Swedish rival Ericsson AB (Nasdaq: ERIC) -- will provide a range of 5G products to the US operator, including radio platforms, core network technology and management systems.

Nokia Corp. (NYSE: NOK) is giving few other details away at this stage, including the exact duration of the contract and what percentage of the T-Mobile US Inc. network it covers, but said the financial impact would start to become apparent in its third-quarter results.

It will support the 600MHz frequencies that T-Mobile picked up in last year's auction as well as much higher 28GHz spectrum. The lower frequency bands are assumed to be much better for wide-area coverage and in-building services, while the 28GHz airwaves can handle much faster connections.

T-Mobile, which is trying to execute a merger with Sprint Corp. (NYSE: S), has previously talked up plans to build a "nationwide" 5G network by 2020 as it battles larger rivals AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) for mobile broadband leadership. It plans to spend between $4.9 billion and $5.3 billion in overall capital expenditure this year. (See 5G in the USA: Where We at With Mobile?, Is T-Mobile's 5G Plan Just a Pipe Dream? and T-Mobile & Sprint: Marriage Made in Hell.)

"We are all in on 5G," said Neville Ray, T-Mobile's chief technology officer, in a press release from Nokia. "Every dollar we spend is a 5G dollar, and our agreement with Nokia underscores the kind of investment we're making to bring customers a mobile, nationwide 5G network. And together with Sprint, we'll be able to do so much more."

The deal should help to address some investor concern about Nokia's 5G competitiveness after results for the second quarter showed a worrying decline in margins at the all-important networks business. (See Profits Crash at Nokia's Networks Biz.)

CEO Rajeev Suri, who has continued to present a bullish assessment of Nokia's 5G prospects in the second half of this year, blamed shrinkage in gross margins on customers funding 5G upgrades from older 4G budgets. Nokia spokespeople declined to comment when asked if the T-Mobile deal fell into this category.

However, Suri has brushed off suggestions Nokia is losing market share, hinting major deals were in the pipeline before today's deal with T-Mobile was announced.


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Nokia has seemed in recent months to fall behind Ericsson, whose efforts to slash jobs and pump money into research and development have led to profitability improvements in the first half of the year. (See Ericsson's R&D Workout Piles 5G Pressure Onto Rivals and Ericsson Back in Profit After Fierce Cuts & 5G Action.)

Notably, Ericsson had also managed to replace Nokia as a supplier of radio access network gear to Deutsche Telekom, T-Mobile's parent company, in Germany in late 2017. (See DT Ditches Nokia From Its German Radio Access Network.)

But Nokia has long insisted that its expertise in all areas of 5G -- and not just on the mobile networks side -- will give it a major advantage, and Ericsson has yet to announce a 5G deal worth as much as Nokia's contract with T-Mobile.

"This reflects the rationale of Nokia acquiring Alcatel-Lucent," said Phil Twist, Nokia's vice president of marketing and communications, referring to the €15.6 billion ($18.2 billion, at today's exchange rate) takeover in 2016 that gave Nokia capabilities it had previously lacked in fixed, core and IP network technology. "We wanted that for end-to-end deals and this reinforces its value. This means we can provide a network solution rather than network building blocks."

Analysts have also recognized that Nokia's software business is performing well as Ericsson continues to wrestle with a turnaround at its ailing digital services unit.

"Two percent revenue growth at constant currency for Nokia Software is encouraging," said James Crawshaw, a senior analyst with Heavy Reading, in a comment on Light Reading's website about Nokia's recent software performance. "That is a turnaround from a 3% organic decline in the first quarter (adjusting for the Comptel acquisition) and compares with a 12% decline for Ericsson Digital Services in the second quarter."

Nokia announced a €347 million ($405 million) cash takeover of Comptel, a communications sector software specialist with hundreds of OSS and BSS customers, in February last year.

US operators have generally been more aggressive than European service providers when it comes to 5G planning. AT&T, for instance, plans to make 5G services available in parts of 12 US cities by the end of this year.

Yet despite the hype surrounding virtual reality, connected cars and other new types of service, 5G will first be used in both Europe and North America merely to provide higher-speed broadband connections and relieve capacity on congested 4G networks. (See 5G Still More Like Rocket Fuel Than a Mission to Mars.)

— Iain Morris, International Editor, Light Reading

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DanJones
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DanJones,
User Rank: Blogger
8/1/2018 | 12:22:43 PM
Re: Vendor-based financing helps send thousands of wireless licenses overseas.
Ha! Verizon has a Swedish CEO and a Brit CFO! Sprint has a French CEO and an English CFO.
Clifton K Morris
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Clifton K Morris,
User Rank: Lightning
7/31/2018 | 4:36:47 PM
Vendor-based financing helps send thousands of wireless licenses overseas.
Dan is right. We should all congratulate T-Mobile, whom is over 60%-owned by the former European-government on winning the Vendor Financing award.

After all, if it wasn’t for Vendor Financing, T-Mobile wouldn’t be so successful at packaging up so many US spectrum licenses and sending them to their overseas-based owners. Deutsche Telekom is playing the US customers like a fiddle.

When 6G wireless service is developed, and Nokia finds a white-label manufacturer (like intel’s LTE base station development kit in this round) what industry do you think an English ex-pat like Neville Ray will want to place out-of-business next..? Neville has that certain je ne sais quoi; temperament and ego to successfully put companies out of business.

Whoever wasn’t in charge of approving the financing package had a difficult job because T-Mobile’s business model is one where it prefers to give everything it can away; and because of that, it can’t attract institutional investors or interest from US banking community.
TV Monitor
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TV Monitor,
User Rank: Light Sabre
7/30/2018 | 9:52:52 PM
Re: Vendor financing?
DanJones

T-Mobile has close to 190 Mhz of bandwidth available for 5G NR deployment between them and Sprint.(40 Mhz of 600 Mhz band + Sprint's 150 Mhz of 2.4 Ghz)

This puts T-Mobile in a unique situation where T-Mobile management concludes that they could defer the mmwave 5G NR deployment far into the future due to the available bandwidth below 6 Ghz.

In that case, going with Nokia would make sense for T-Mobile since 5G NR NSA standard requires that the 5G NR basestations be plugged into existing LTE core and T-Mobile's existing equipment vendor is Nokia and Ericsson.

The biggest problem of Samsung mmwave 5G is that the carrier must have an existing Samsung LTE network, or replace an existing LTE network with Samsung's in order to plug in Samsung's mmwave 5G basestations. The idea of replacing the existing LTE core network would be too cost prohibitive for T-Mobile, so T-Mobile is stuck with its existing vendors.
DanJones
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DanJones,
User Rank: Blogger
7/30/2018 | 5:02:50 PM
Re: Vendor financing?
That's about average download speed estimated so far, yeah, peak speeds (which mean very little) are 4.1-Gbit/s according to Legere. But I haven't even seen estimates of average mobile 5G speeds from AT&T or VZ yet, so there's that.
TV Monitor
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TV Monitor,
User Rank: Light Sabre
7/30/2018 | 4:58:05 PM
Re: Vendor financing?
Dan Jones

It is obvious that T-Mobile is focusing on expanding coverage at the least cost, does not care about throughput.

After all the bandwidth target goal of combined T-Mobile/Sprint is 533 mbits/s, which is less than LTE speed in some part of world. 
DanJones
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DanJones,
User Rank: Blogger
7/30/2018 | 3:04:03 PM
Re: Vendor financing?
Well they've signed with Nokia I guess!
TV Monitor
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TV Monitor,
User Rank: Light Sabre
7/30/2018 | 2:49:01 PM
Re: Vendor financing?
DnaJones

Nokia's mmwave 5G effort focuses on hotspot type access, not a broad coverage. 

By comparison, Samsung's mmwave 5G effort is positioned as a direct replacement of LTE and demands a much stronger commitment from carriers deploying them.

So by going with Nokia, mmwave access will be hotspot type. If you can find a mmwave 5G hotspot within 600 feet, fine. But for the most of the time you won't find an access point.

If a carrier is interested in deploying a citywide mmwave 5G access that supports vehicular mobility speed and handover capability, there is only one vendor currently able to support this capability.
DanJones
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DanJones,
User Rank: Blogger
7/30/2018 | 1:50:15 PM
Re: Vendor financing?
That's not what T-Mobile is saying, from their press release today:

"As part of the agreement, Nokia will help build T-Mobile's nationwide 5G network with 600 MHz and 28 GHz millimeter wave 5G capabilities compliant with 3GPP 5G New Radio (NR) standards."

 

 

 
TV Monitor
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TV Monitor,
User Rank: Light Sabre
7/30/2018 | 1:13:56 PM
Re: Vendor financing?
DanJones

Obviously, this is for 600 mhz 5G NR rollout and not for 28 Ghz mmwave 5G, since Nokia is not the go-to vendor for 28 Ghz 5G.
DanJones
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DanJones,
User Rank: Blogger
7/30/2018 | 11:59:29 AM
Re: Vendor financing?
I wonder if this means that T-Mobile has more insight into whether it will be allowed to bid on mmWave spectrum auctions in November? They definitely need more 28GHz etc.
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