Nokia Corporation NOK recently inked a strategic agreement with Altibox, one of the largest regional telecom service providers in Norway and Denmark, to offer its Gainspeed Unified Cable Access solution to increase the latter’s network capacity. The deal would also enable the carrier to eliminate legacy analog equipment, consolidate hubs and quickly extend all-IP-based services into residential and business customers.
The solution will facilitate Altibox and its partner Eidsiva Bredbånd to deliver greater space and power savings, along with superior architectural flexibility compared to traditional available variants in the market. This will likely help the firms to cater to the exponential growth of IP-based services, which is reportedly witnessing 20-30% rise annually. This software-driven, all-IP Distributed Access Architecture solution will further improve signal quality and cut operating costs by reducing the number of hub offices required by effectively virtualizing the headend and network functions.
Notably, Nokia has leapfrogged into the leading position in the race for commercial 5G deals across the globe, leaving behind the much-fancied Chinese telecom equipment manufacturer, Huawei Technologies. The company has also staved off competition from Swiss rival Ericsson ERIC to steer ahead in the three-way race.
To date, Nokia has received about 42 commercial 5G deals worldwide from diverse firms, at an average deal rate of one major contract each week since March end. Notably, media reports put the tally for Huawei’s and Ericsson’s current commercial 5G deals at 40 and 19, respectively.
Much of this healthy deal momentum of Nokia can be attributed to a solid foundation of mutual trust and confidence from the existing pool of customers that enabled a seamless transition from 4G to 5G deployment. In addition, growing resentment about alleged attempts of data siphoning by Huawei has tilted the scales in favor of Nokia, despite the former’s low price advantage.
In particular, Nokia has witnessed strong customer interests from Nordic countries as European firms largely stood by President Trump’s univocal calls to refrain from using Chinese telecom equipment on security concerns. About 22 of its 5G deals were secured from blue chip firms like AT&T Inc. T, Telia Company TLSNY and Softbank.
Nokia remains focused on its strategy that hinges on four strategic priorities. The first priority of the company is to lead in high-performance end-to-end networks with its communication service provider customers. The second priority is its relentless pursuit to expand network sales to select vertical markets, specifically energy, transportation, public sector, technical extra-large enterprises and webscale players such as Google and Amazon. Building a strong standalone software business remains the third strategic priority of the company. The fourth pillar aims to create new business and licensing opportunities in the consumer ecosystem.
In order to strengthen its leading position in the market, Nokia facilitates its customers to move away from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and flexible automation needed to support dynamic operations, reduce complexity and improve efficiency. The company seeks to expand its business into targeted, high-growth and high-margin vertical markets to address growth opportunities beyond its traditional primary markets. Rollouts of next-generation 5G networks are expected to improve market conditions significantly in 2019 and beyond.
Nokia’s shares have recorded an average decline of 8.6% in the past six months against the industry’s rally of 9.4%.
We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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