Nokia’s Commitment to the Telco Industry

The last couple of weeks have been very active in terms of announcements in the telco industry and perhaps setting the scene for even more announcements to come. Nokia, in particular, has made three different announcements:

1. The partnership with AT&T and Verizon in the United States to tackle the enterprise market
2. The launch of its new 5G Smart Node small cell portfolio adopting Qualcomm chipsets
3. The transition of its Information Technology (IT) infrastructure onto Google Cloud

These recent announcements show Nokia’s commitment to its customers and a potential change of strategy to keep and even strengthen its market position in the telco industry. Nokia faced a turbulent year, with shortcomings in delivering 5G System-on-Chip (SoC), named ReefShark. This situation caused the company to have a competitive disadvantage against its peers. However, Nokia has now rectified this issue and has returned to registering growth, winning several 5G contracts against its main competitors, Ericsson and Huawei. This result, coupled with the above changes, are expected to translate into a significant revenue uptick for the Finnish vendor as several leading operator Chief Technology Officers (CTOs) now claim that Nokia’s 5G New Radio (NR) product performance exceeds their expectations.

While Nokia is widening its chipset supplier base with the adoption of Qualcomm FSM100xx, the company is also supporting its customers by providing 5G indoor and outdoor coverage with reduced price points for Small and Medium Enterprises (SMEs). The agreement with Qualcomm enables Nokia to gain competitiveness to tackle the private cellular networks and suggests a transition of the company’s small cell product line toward Open Radio Access Networks (OpenRAN), particularly due the recent announcements of Qualcomm regarding the expansion of the 5G RAN platform. Qualcomm’s new solutions aim to support the telco industry in transitioning toward Virtual RAN (vRAN) and open networks. With an OpenRAN small cell solution, Nokia will be complementing and expanding the 5G AirScale Cloud RAN architecture, which is further discussed in ABI Insight “Nokia Strengthens Commitment to OpenRAN.”

In addition, with the migration of the on-premises IT infrastructure onto Google Cloud, both Nokia and Google have achieved a win-win strategic collaboration. Nokia will be able to generate operational savings due to a reduction of energy consumption and requirements for IT infrastructure, while Google is increasing its cloud computing market share, which still seems to be smaller compared to Amazon and Microsoft. This intelligent move may be a signal of potential strategic alliances being planned with the two companies in the upcoming years.

The collaboration between webscalers and cellular infrastructure vendors will continue to grow to support enterprise digitization, with vendors like Nokia providing the wireless connectivity and carrier-grade networking functionality that will benefit several verticals. Given that webscalers, mobile operators, and even infrastructure vendors are targeting the enterprise digitization of the very same verticals, it is possible that there will be more collaboration options and even new forms of commercial agreements between these types of companies. ABI Research expects Amazon, Google, and Microsoft to continue to enrich their product portfolios, even including telco functionality where necessary.

Nokia continues to grow and win more 5G contracts, but the financial community still expects the Finnish vendor to restart its dividend payment that was halted in 3Q 2019 to help get Nokia back to profitability. Since ReefShark and the 5G product line are back in growth mode, the most recent announcements could mean that Nokia is now ready for different types of collaborations with webscalers, and even new types of commercial agreements. The geopolitical environment could even hint that a U.S. company might be ready to acquire Nokia, but it remains to be seen whether this is a realistic scenario.