SEOUL (Reuters) – Samsung Electronics said on Monday it had won a $6.64 billion order to provide wireless communication solutions to Verizon in the United States, a major win for the South Korean firm in the next-generation 5G network market.
Samsung’s global prospects for its network business have improved following US sanctions on its bigger rival Huawei, analysts said.
Verizon CEO Hans Vestberg told CNBC in July last year that Verizon does not use any Huawei equipment. Verizon had already been a Samsung customer before the order.
Verizon is believed to be Nokia’s biggest customer, JP Morgan research said in a July note.
“Samsung winning the order from Verizon would help the company expand its telecom equipment business abroad, potentially giving leverage to negotiate with other countries,” said Park Sung-soon, an analyst at Cape Investment and Securities.
The order is for network equipment, a Samsung spokesman said. The company declined to comment on detailed terms the contract such as the portion of 5G-capable equipment included.
“With this latest long-term strategic contract, we will continue to push the boundaries of 5G innovation to enhance mobile experiences for Verizon’s customers,” Samsung said in a statement.
Samsung said in a regulatory filing the period of the contract, which Samsung’s US unit signed with Verizon Sourcing LLC, is from June 30, 2020 to Dec. 31, 2025.
Samsung had a 3% market share of the global total telecom equipment market in 2019, behind No. 1 Huawei with 28%, Nokia’s 16%, Ericsson’s 14%, ZTE’s 10% and Cisco’s 7%, according to market research firm Dell’Oro Group.
The Trump administration last month unveiled plans to auction off spectrum previously dedicated to military purposes for commercial use starting in mid-2022, to ramp up fifth-generation network coverage in the United States.
The next-generation 5G wireless network is expected eventually to connect and enable high-speed video transmissions and self-driving cars, among other uses.
Britain in July ordered Huawei equipment to be purged completely from its 5G network by the end of 2027, adding it needs to bring in new suppliers like Samsung Electronics and Japan’s NEC.
Samsung Electronics shares rose 2% compared to the wider KOSPI’s 0.5% climb.
However, Finnish telecom firm Nokia suffered a setback. The loss for Nokia comes after its new Chief Executive Pekka Lundmark took the top job in August, but a source said negotiations were going on before he took charge.
A Nokia spokeswoman declined to comment on the loss.
“We play a critical role in enabling Verizon’s 3G and 4G networks and continue to work with them to accelerate innovation in 5G,” she said. “They remain a top-three global customer.”
Liberum analyst Janardan Menon said the contract loss could impact Nokia’s ability to invest in technology at the same rate at its competition, and rival Ericsson might have even increased its share at Verizon. Liberum has a “hold” rating on Nokia shares.
Nokia shares were down 1% in morning trade.
The shares had fallen in July when brokerage JPMorgan said there was a real risk Verizon would reduce its dependence on Nokia as its primary RAN (radio access network) supplier going forward and shift towards Samsung.
(Reporting by Joyce Lee, Heekyong Yang, Supantha Mukherjee in Stockholm and Anne Kauraren in Helsinki; Additional reporting by Hyunjoo Jin; Editing by Muralikumar Anantharaman, Keith Weir and Stephen Coates)
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