While apparently missing out on bigger radio access network (RAN) contracts for China’s three mobile operators, Nokia secured a deal to supply part of China Unicom’s 5G core.
Outgoing CEO Rajeev Suri indicated earlier that the Finnish vendor had won a deal for China Unicom’s core business, along with virtualized IMS, but Monday’s announcement was the first official release and disclosed the proportion as 10%.
Nokia said the deal supports China Unicom’s 5G standalone (SA) core network buildout, and also expands its existing relationship as a 4G supplier. The Finnish vendor has a 17% share in China Unicom’s VoLTE network, which uses Nokia’s cloud-based virtualized IMs platform.
For 5G, the move to standalone is seen as key for capabilities like network slicing, which can portion off parts of the network for specific needs and uses.
“Nokia is very proud to expand our working relationship with China Unicom beyond 4G,” said Markus Borchert, president of Nokia Greater China, in a statement. "We are looking forward to close collaboration with China Unicom on novel business models and 5G service innovation to enable an open 5G ecosystem.”
The 5G core deal includes products from Nokia’s Cloud and Cloud Packet Core portfolios, including Unified Data Management, Session Management and User Plane functions that are deployed on Nokia’s CloudBand.
Nokia called the Session Management Function a fundamental element of a 5G service-based architecture, interacting with the decoupled User Plane Function. The latter aspect increases bandwidth efficiencies and lowers costs by enabling packet processing and traffic aggregation to happen closer to the network edge, Nokia said.
China Unicom also will use the Nokia Cloud Mobile Gateway.
The value of the contract was not disclosed, but Nokia’s 5G presence in China still appears tiny compared to that of domestic vendors Huawei and ZTE, and to Swedish rival Ericsson.
Ericsson secured 5G deals for the more lucrative RAN portion with all three major operators China Telecom, China Unicom, and China Mobile. China Telecom and China Mobile also tapped Ericsson for 5G core components. China Unicom and China Telecom together plan to build 250,000 5G base stations in 2020.
Local media reports pegged Huawei and ZTE’s haul of China’s 5G contracts at 85%, with Ericsson at about 10%.
While expanding its presence in China, Ericsson has prepared for a short-term hit to its Segment Networks gross margin, attributed to high initial costs for new products for the 5G contracts in China. This month it warned of an approximately $108.6 million cost impact in Q2 from a planned write-down of assets.
Longer-term though, the deals are expected to pay off. Ericsson expects the 5G deals with China operators to “contribute positively to gross and operating income from the second half of 2020 and in line with the business plan to be profitable over time,” the vendor stated in its announcement.