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Nokia to Support SoftBank in Commercial 5G Network Launch

Zacks Equity Research

Nokia Corporation NOK recently announced that it has been chosen by SoftBank Corp. — a leading Japanese telecommunications company — as a primary partner to drive its commercial 5G offering with Nokia AirScale solution. Presently, Nokia has 38 5G commercial contracts, including 20 with named customers.

The latest move strengthens the long-standing relationship between the two companies. The deployment of the Finnish telecom equipment supplier’s 5G AirScale will likely allow SoftBank to address the increasing demand for the future of connectivity. Markedly, the solution supports multiple frequencies in both distributed and centralized architectures, offering flexibility in network transformation.

Nokia’s 5G AirScale will be deployed across Japan, bringing 5G Radio Access Networks to enterprises and consumers. Its comprehensive 5G portfolio is expected to provide SoftBank’s customers with high bandwidth and low latency services, together with new applications in areas like virtual reality and artificial intelligence. Businesses are also likely to benefit from various IoT vertical use cases enabled by 5G as it will help enhance operational efficiency.

Additionally, Nokia’s deal-win rate is laudable with notable success in the key 5G markets of the United States and China. It is expanding business into targeted, high-growth and high-margin vertical markets to address opportunities beyond its traditional markets. Rollout of next-generation 5G networks are expected to improve market conditions considerably through 2019 and beyond.

Supported by 5G ramp up, Nokia has reiterated its guidance for 2019 and expects non-IFRS operating margin between 9% and 12%. Non-IFRS EPS is expected in the range of €0.25-€0.29. Nokia continues to execute its strategy with particularly good progress in Nokia Software and expansion to select enterprise vertical markets. It aims to accelerate strategy execution, sharpen customer focus and reduce long-term costs.

Shares of Nokia have incurred a loss of 12% against the industry’s rise of 14.1% in the year-to-date period due to increased competitive pressure. The company, though, is witnessing healthy underlying momentum in its focus areas of software and enterprise, which augurs well for its licensing business.

Nokia currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are T-Mobile US, Inc. TMUS, Ubiquiti Networks, Inc. UBNT and Juniper Networks, Inc. JNPR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

T-Mobile has long-term earnings growth expectation of 15.1%.

Ubiquiti has long-term earnings growth expectation of 19.8%.

Juniper has long-term earnings growth expectation of 6.2%.

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