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Ericsson Boosts 5G Network in Hong Kong With SmarTone Tie-Up

Zacks Equity Research

Ericsson ERIC recently announced its collaboration with Hong Kong’s leading communications service provider — SmarTone — for the deployment of 5G connectivity by leveraging Spectrum Sharing technology. Notably, the operator inked a five-year agreement with the Sweden-based telecom equipment maker as its sole 5G network supplier in March this year. Markedly, the latest move will enable Ericsson to capitalize on its best-in-class capabilities in wireless core services platform, thereby strengthening its position in Asian markets.

Ericsson’s Spectrum Sharing technology promotes cost-efficient and wide-area 5G coverage, which transforms end-user experience. This technology enables both 4G and 5G network to be deployed on the same radio through a software upgrade. Impressively, this dynamic solution is reckoned to be the most economically feasible way to deploy 5G on existing bands. The innovative technology re-uses hardware and spectrum, which allows operators to shift capex investments from new sites to new 5G stand alone use cases. Further, SmarTone will leverage Ericsson’s Dual-Mode 5G Core and Radio System as part of this 5G-backed collaboration.

Considered as the first operator in Hong Kong to deploy Ericsson’s Spectrum Sharing technology, SmarTone stated that it will combine high, mid and low spectrum bands to deploy a 3.5 GHz spectrum across the country. Addressing the burgeoning demands of high-bandwidth network, this 3.5 GHz spectrum will cover majority of outdoor and indoor locations with seamless 5G connectivity in its initial phase. The operator will deliver low-latency 5G network to nearly 70% of Hong Kong population with a goal of reaching citywide 5G coverage by mid-2021. With Spectrum Sharing technology, SmarTone will be able to efficiently allocate its spectrum assets according to traffic demands, using existing infrastructure. Also, customers and enterprises will be able to enjoy enhanced overall network experience, which will serve as one of the key enablers for Hong Kong’s smart city development.

Considering growth in the smartphone market and the subsequent usage of mobile broadband, user demand for coverage speed and quality has increased exponentially. Further, to maintain performance with increased traffic, network tuning and optimization is mandatory. Ericsson, being one of the premier telecom service providers, is in demand among operators for the expansion of network coverage and upgrade networks for higher speed and capacity. Notably, it is the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide. Within the next 12 months, it is estimated that more than 80% of Ericsson-powered commercial 5G networks will likely use the Spectrum Sharing solution to achieve broad 5G coverage.

Ericsson is on track with its 2020 and 2022 financial targets, while progressing toward building a stronger company in the long term. It has invested in R&D and supply chain capacity to increase market share. The company continues to focus on restructuring plan to cut costs and streamline focus areas as well as explore options for the media business. Its “cost and efficiency program” has been devised to generate higher cost savings. The company is focusing on structural changes that will help generate lasting efficiency gains and boost cost competitiveness. It intends to increase investment in certain core areas to develop a product portfolio.

To date, Ericsson has secured 91 commercial 5G agreements with unique communication service providers, of which 40 are live networks. The company is increasingly focusing on 5G system development to capitalize on the upcoming market opportunities. The company believes that standardization of 5G is the cornerstone for digitization of industries and broadband. Moreover, Ericsson foresees mainstream 4G offerings to give way to 5G technology in the future.

Ericsson currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 25.9%. The stock has lost 4.2% against the industry’s growth of 1.2% in the past year.

Some other top-ranked stocks in the broader industry are Ooma, Inc. OOMA, InterDigital, Inc. IDCC and Comtech Telecommunications Corp. CMTL. While Ooma sports a Zacks Rank #1 (Strong Buy), InterDigital and Comtech carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ooma’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 124.1%, on average.

InterDigital’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 99.5%, on average.

Comtech’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 85.9%, on average.

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