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Nokia's (NOK) 5G Portfolio is Set to Modernize TST's Network

Zacks Equity Research

Nokia Corporation NOK has been recently selected as the sole technology provider by Taiwan Star Telecom (“TST”) — a Taiwan-based mobile network operator — for expansion of Long-Term Evolution (LTE). TST aims to augment the coverage and capacity of LTE network as well as drive subscriber growth on the back of the Finnish telecom equipment maker’s end-to-end solution.

Nokia’s state-of-the-art solution will facilitate the operator to offer narrowband Internet of Things services and shift to 5G services in the future. Furthermore, it will improve network quality and customer experience.

With Nokia’s 5G-ready portfolio, TST can now expand coverage in the 900MHz/2600Mhz band across Taiwan. The company will provide the AirScale eNodeB solution that presents the Nokia AirScale Remote Radio Head along with the 7750 Mobile Gateway and Cloud Mobility Manager for expansion of the packet core.

Markedly, the solutions comprise the 7750 Service Router for IP backbone expansion and the Smart Plan Suite that provides full policy and charging solution. It will also pave the way for 5G monetization.

Nokia is well positioned for the ongoing technology cycle, considering the strength of its end-to-end portfolio. The company’s deal win rate is encouraging with notable successes in the key 5G markets of the United States and China. Its 5G revenues are expected to grow sharply, particularly in the second half of 2019, on the back of commercial deal wins.

The company’s installed base of high-capacity AirScale product, which enables customers to quickly upgrade to 5G, is growing fast. The company is driving the transition of global enterprises into smart virtual networks by creating a single network for all services, converging mobile and fixed broadband, IP routing as well as optical networks with the software and services to manage them.

Leveraging on cutting-edge technology, Nokia is transforming the way people and things communicate and connect with each other. These include seamless transition to 5G technology, ultra broadband access, IP and Software Defined Networking, cloud applications as well as Internet of Things.

In addition, the company is expanding business into targeted, high-growth and high-margin vertical markets to address opportunities beyond its traditional markets. The ramp up of next-generation 5G networks is likely to improve market conditions considerably through 2019 and beyond.

However, shares of Nokia have declined 13% against the industry’s rise of 21.5% in the year-to-date period due to increased competitive pressure and delivery delays.

Nevertheless, the company is witnessing healthy underlying momentum in its focus areas of software and enterprise, which augurs well for its licensing business.

It is yet to be seen whether coveted solution offerings to industry frontrunners can help the company make a turnaround in the upcoming days.

Nokia currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Comtech Telecommunications Corp. CMTL, Ubiquiti Networks, Inc. UBNT and Ericsson ERIC. While Comtech and Ubiquiti sport a Zacks Rank #1 (Strong Buy), Ericsson carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech has long-term earnings growth expectation of 5%.

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

Ericsson is currently trading with a forward P/E of 24.6X.

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