Ed Cholerton, who has taken over as head of sales for Nokia in North America, indicated that he is looking forward to seeing the results of the recent C-band auction. But the amount that U.S. operators bid for C-band spectrum will dictate to a certain extent how much capital they will be able to spend in 2021 on actual 5G deployments.
Just today, former Google CEO Eric Schmidt penned an Op-Ed in the Financial Times bemoaning the fact that American operators had to spend so much on spectrum. He said the huge capital outlays will set them back in the 5G race against China.
Cholerton, who was recently promoted to Nokia’s president for North American customer experience, said, “Countries that seek to pad the treasury with these license fees hold back deployments and put themselves at disadvantage to China and others who don’t go down this path.”
Cholerton is now overseeing Nokia's sales for both the United States and Canada. Previously, he served as senior VP of sales for Nokia’s AT&T business.
Asked if he had any estimates on U.S. operator capex spend on 5G in 2021, Cholerton said he expects 5G spending to tick up, but “a lot will depend on C-band deployments and who the winners are.”
The FCC has reported that bidding for the spectrum garnered $80.9 billion. The results of the C-band auction are expected in late February or early March.
Everyone’s excited to see the operators’ investments in C-band because it will be an indicator of their future plans to deploy 5G equipment. But ironically, they may have spent so much on spectrum that they will be cash-poor to actually deploy equipment quickly, as Schmidt pointed out.
The analysts at New Street Research have most recently estimated that AT&T would spend $24 billion on C-band, with Verizon estimated at $29 billion and T-Mobile at $13 billion. Meanwhile, analysts at Cowen have estimated AT&T’s C-band spend at $20 billion; Verizon’s at $35 billion; and T-Mobile at $10-15 billion.
AT&T recently filed an SEC Form 8-K, indicating that it has secured a $14.7 billion term loan credit with Bank of America, and that the purpose of the loan may include “financing acquisitions of additional spectrum.”
Cholerton said operators’ 5G deployments will be pressured “caused by the price of the license payments.” He said Canada’s telecom regulatory agency is having a similar mid-band spectrum auction this summer, and Canadian operators are hoping that auction “doesn’t go the same way as in the U.S. because if you’re an operator you start throwing money to the treasury and you can’t be as aggressive on the build itself.”
The three main wireless operators usually file their 10K annual reports in February, so we’ll soon be able to see their capex estimates for 2021. In 2020, AT&T spent around $20 billion on capex; Verizon spent about $18 billion; T-Mobile was confusing because it merged with Sprint; and Dish was just getting started with its wireless network build. So, 2021 should be much more telling.
“All the operators have been pretty flat for the last couple of years,” said Cholerton. “There was a big investment in LTE they were continuing to make, and now they’re transitioning to 5G. We expect the transition to take a couple of years.”
From Nokia’s perspective, it’s gearing up to meet C-band demand. “That’s our big focus right now and figuring out who we might be doing that with,” said Cholerton. “It’s not just a simple matter, get the same radio and deploy it everywhere. We have a lot of multi-band radios, depending on who are the winners of the auction and the timing, we have to sort of pivot to make sure we have the right radios.”
Nokia’s executive shuffle
Cholerton’s hiring comes as Nokia’s new CEO Pekka Lundmark is in the process of reorganizing the company’s top executive ranks. Cholerton, who will now oversee about 10,000 employees, took over from Ricky Corker, who was promoted to Nokia’s chief customer experience officer.
In the U.S. Nokia has telecom business with all three of the big wireless carriers. Although it recently lost $6.6 billion in business with Verizon, which chose Samsung instead.
“We hate to lose business, so it’s my job to find ways to win it back,” said Cholerton. “It’s true we have taken a little bit of pressure from Verizon, but they’re still a very important customer.” He noted that Verizon uses Nokia technology for “fixed, routing, optical software, on and on.”
According to a note from the analysts at Cowen led by Paul Silverstein last week: “Nokia is facing an adverse impact on both revenue and profitability from mobile RAN share loss and pricing pressure in North America, its single largest and most profitable market. To be clear, Nokia’s comments suggest meaningful incremental pricing pressure.”
Meanwhile, the company has garnered new business with Dish Network. In September 2020, Dish announced that it had chosen Nokia’s 5G standalone (SA) core software for its new U.S. 5G network.
“I’m going to have my first meeting with Dish on Thursday,” said Cholerton at the end of last week. “Obviously, they’re an emerging player. We hope we’d be able to grow our relationship with them.”
Nokia has an advantage with Dish in that Nokia’s former president of mobile networks Marc Rouanne is now Dish’s wireless chief network officer.