Nordic Firms Score Big on Commercial 5G Deals, Huawei Falters

The fifth generation of cellular technology (5G) has accelerated the widespread adoption of video and other bandwidth-intensive applications with a data transfer rate that is about 10 to 100 times faster than the existing 4G networks. 5G is considered the technology of the future with faster download speeds and low latency and is considered the main catalyst for next-generation IoT services. These include connected cars coupled with augmented reality and virtual reality platforms, smart cities, and connected devices that are likely to revolutionize key sectors of the industry.

As the 5G ecosystem continues to evolve as it spreads around the world, it is likely to offer a multitude of opportunities for different industries. The coronavirus outbreak has further underscored the need for high-speed, high-bandwidth, and low-latency connections - hallmarks of the 5G network - for digital sustainability against the backdrop of social distancing and the work-from-home trend.

With this in mind, Nordic telecom device makers like Ericsson and Nokia are gaining traction at the expense of Huawei Technologies as more and more countries remove the China-based company from their list of 5G providers because of perceived security risks.

Ericsson ERIC: Backed by a relentless drive to develop autonomous 5G-enabled vehicles around the world, Ericsson has signed 111 commercial 5G contracts with unique communications service providers, 65 of which are live networks. The company is increasingly focused on developing 5G systems to take advantage of the upcoming market opportunities. The company believes that standardizing 5G is the cornerstone of digitizing industry and broadband. In addition, Ericsson expects that the common 4G offers will give way to 5G technology in the future.

As the Trump administration wants to prevent Huawei and ZTE from offering 5G transmissions worldwide, the Swedish company has created new business opportunities. It is expected that the increasing adoption of IoT devices will bring technologies such as network slicing more to the fore, thus benefiting Ericsson. The company has deployed 5G in high, mid, and low bands in various urban, suburban, and rural areas. The 5G radio access technologies provide the infrastructure necessary to meet the growing demand for high bandwidth connections and support the real-time communication requirements for mission-critical applications with high reliability.

With a VGM rating of A, the stock expects long-term earnings growth of 26.3%. In particular, earnings estimates for this stock from Zacks Rank # 3 (Hold) are up 9.8% over the past 90 days. The full list of today's Zacks # 1 Rank (Strong Buy) stocks can be found here.

Nokia Corporation NOK: The Finland-based telecommunications equipment manufacturer has closed 100 commercial 5G deals from various companies around the world. Much of this good business momentum is due to the company's solid foundation of mutual trust from its existing pool of customers that enabled a seamless transition from 4G to 5G deployment. In addition, the growing reluctance to believe Huawei's alleged attempts to suck up data has shifted the scales in favor of Nokia, despite Nokia's low price advantage. This Zacks Rank 3 stock, in particular, has seen strong customer interest from the Nordic countries as European companies have largely stood by President Trump's clear calls to ban Huawei for security reasons.

Nokia is well positioned for the current technology cycle due to the strength of its end-to-end portfolio. The installed base of a high capacity AirScale product that customers can use to quickly upgrade to 5G is growing rapidly. The company is driving the transition of global businesses to intelligent virtual networks by creating a single network for all services and bringing together mobile and fixed broadband, IP routing and optical networks with the software and services to manage them. Taking advantage of cutting edge technology, Nokia is changing the way people and things communicate and connect with each other. This includes the seamless transition to 5G technology, ultra-broadband access, IP and software defined networking, cloud applications and IoT.

With a VGM rating of A, the stock expects long-term earnings growth of 15.6%. In particular, earnings estimates for this stock from Zacks, ranked 3rd, are up 12% over the past 90 days.
Go forward
Both Ericsson and Nokia were the main beneficiaries of Huawei's global blacklist, gradually taking market share from the Chinese firm. From leading Canadian carriers like BCE Bell Canada from BCE Inc. and TELUS Corporation TU to BT Group in the UK, Proximus in Belgium and Optus in Australia, the list of network providers that have chosen key 5G devices from Nordic companies is as follows endless. It remains to be seen whether these two leading telecom equipment providers will be able to continue their 5G winning streak.
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