Nokia in Line for 5G Contracts Worth up to $2.2B With Chinese Telcos

Iain Morris
11/11/2019

Nokia is in line to pick up a share of China's lucrative 5G contracts after signing preliminary agreements with the country's three operators, which plan to move ahead with a mass-market rollout of the new mobile technology next year.

The Finnish equipment vendor confirmed the development in an email to Light Reading after Chinese media last week reported that both Nokia and Swedish rival Ericsson had signed deals.

"The frame agreements in China are an important and normal part of the progressive steps in the discussions with all the Chinese operators for future development of telecom networks in China," said a Nokia spokesperson.

Nokia's agreements are valued at $2.2 billion and would cover 4G, 5G and end-to-end network rollout, as well as potential cooperation on serving enterprise clients, Light Reading has learned.

The frame agreements are not binding commercial contracts and essentially mean Nokia has qualified for the next stage in the awards process, when formal deals will be signed.

But they may alleviate some concern that Nordic vendors could miss out on 5G work in China because of the country's ongoing technology-related disputes with the US, which has long barred China's Huawei and ZTE from selling products to the biggest US operators.

In July, Nokia CFO Kristian Pullola said evidence of growing support for local vendors in China was forcing his company to assess its investment strategy there.

Any new Chinese restrictions on Ericsson and Nokia would come as a major blow to the firms given the size and importance of China's telecom market, which today accounts for about 60% of the global 4G infrastructure market, according to Ericsson CEO Börje Ekholm.

Under a system derided as unfair by Western critics, Huawei and ZTE together claim about 60% of the Chinese telecom infrastructure market, with the rest split between Ericsson, Nokia and Nokia Shanghai Bell, a joint venture between the Finnish company and a state-backed firm called China Huaxin, according to Light Reading's sources.

"You have to go to a test for your equipment that determines what price you get and your market share and the Chinese companies always perform much better," said John Strand, the CEO of Danish advisory firm Strand Consult, during a previous interview with Light Reading. "The market share that Ericsson and Nokia get in China is not related to free market conditions."

Ericsson's share is currently about 10%, said Ekholm during a recent phone call with analysts, but the Swedish vendor has indicated it will accept less profitable contracts as it tries to improve its position. A spokesperson for the company declined to comment on the latest reports about Chinese contracts.

Last year, China was Ericsson's second-largest geographical market after the US, accounting for 7% of total company sales, or 14.8 billion Swedish kronor ($1.5 billion). Nokia generated revenues of about €2.1 billion ($2.3 billion) in Greater China in 2018, according to financial statements.


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China Mobile, China Telecom and China Unicom launched initial 5G services this month using around 80,000 basestations they have already deployed. That number is expected to grow to about 130,000 by the end of this year.

That dwarfs 5G deployments elsewhere, with the US expected to have just 10,000 5G basestations by the end of this year, according to Bernstein Research.

But the Chinese figure still looks tiny alongside the country's overall basestation footprint. China Mobile was operating 2.71 million 4G basestations at the end of June, while Telecom had 1.52 million and Unicom another 1.35 million.

Telecom and Unicom recently announced plans to pool resources and build a joint 5G network in a move that could reduce the amount of work available to equipment vendors, although Ericsson has played down the impact.

"Sometimes one strong player is better than two weak ones," said Fredrik Jejdling, the head of Ericsson's networks business, during a recent interview. "You still have to dimension for peak rates, so in terms of capacity and coverage it is likely to be similar."

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— Iain Morris, International Editor, Light Reading

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christianfaandersen
christianfaandersen
11/18/2019 | 3:34:30 AM
5G alfa omega
5G is big business and is going to set the stage for the phone companies survival


Christian / løbeprogram  
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