Comment (5)The world's biggest mobile network vendors would rather forget about 2017. Major customers had already built their 4G networks and were still waiting for the first 5G standard to arrive. Spending dried up and sales suffered. Ailing Ericsson braked the hardest. Even China's Huawei changed down a gear, despite continuing to outperform its Western rivals. (See Ericsson Sees Networks Progress Despite Mounting Losses and Huawei Hits $92B in 2017 Sales.)
But last year's progress on standardizing the initial 5G new radio (NR) specification already seems to have put some fuel in the tank for 2018. Even before the 3GPP froze the NR spec on December 20, Ericsson AB (Nasdaq: ERIC) was touting a deal to provide "5G-ready" equipment to Deutsche Telekom AG (NYSE: DT) in Germany. Nordic rival Nokia Corp. (NYSE: NOK) today landed a similar contract with Japan's NTT DoCoMo Inc. (NYSE: DCM). That came after it heralded a 5G-related core network deal with Nordic operator Telia Company earlier in the week. (See Nokia Lands 5G Deal at NTT DoCoMo , Ericsson Replaces Major Rival as DT Supplier in 5G Deal and 5G Is Official: First 3GPP Specs Approved.)
Ericsson and Nokia can also expect to mop up much of the business in the US market, where operators are in a race to build 5G networks. Deemed a security threat because of their alleged ties to the Chinese government, Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) have been frozen out of network deals with major US operators since 2012, when they were blacklisted in a US government report. Recent legislative moves could make conditions even worse for them in the future. (See AT&T Warned to Cut Ties With Huawei – Report and Huawei Still Knocking on US Door – but AT&T Deal Thwarted.)
Pump up the baseband
The deals in Germany and Japan are especially noteworthy because they cover the radio access network (RAN), which will gobble up between 50% and 70% of 5G spending, according to Bruno Jacobfeuerborn, formerly chief technology officer of Deutsche Telekom and now head of its towers subsidiary. Major RAN deals are where most of the money lies, agrees Nokia (while declining to put a valuation on the contract with NTT DoCoMo). (See The Growing Pains of 5G.)
In both cases, Ericsson and Nokia are providing operators with the baseband equipment that processes radio signals. This gear is typically installed at radio sites, although moving it into central data facilities could improve the economics of 5G rollout. NTT DoCoMo plans to support 5G services with such a "cloud" RAN. Either way, both vendors claim their hardware is "software-upgradeable" to 5G: Operators can move it from 4G to 5G without deploying new equipment. (See Facebook's TIP Seizes vRAN Initiative From 3GPP.)
Some one-upmanship is at play as operators jostle for 5G market leadership. NTT DoCoMo has had a long-standing RAN relationship with Nokia. But the Finnish vendor will be delighted to have snatched a core network deal from under the nose of Ericsson in Sweden, where Telia is also based. Ericsson, meanwhile, has replaced either Nokia or Huawei as one of the two RAN suppliers that Deutsche Telekom uses in Germany.
Next page: Hold your 5G horses
