Nokia’s struggles of late are well-known, but it’s still among the top three vendors—along with Huawei and Ericsson—reaping the benefits of surging 5G New Radio (NR) demand, which propelled the RAN market in the third quarter to a fifth consecutive quarter of year-over-year growth for the first time in over a decade, according to Dell'Oro Group.
"The positive momentum that has characterized this market since the upswing began in the second half of 2018 extended into 3Q 2019, underpinned by a 5G ramp that is accelerating at an extraordinary pace," said Dell'Oro Group analyst Stefan Pongratz in a statement. "While mid-band Massive MIMO continues to drive the lion share of the 5G capex, both low-band and millimeter wave (mmW) 5G NR deployments accelerated significantly in the quarter."
Nokia held an analyst event in Helsinki, Finland, last week, where Pongratz said the company started the event quoting Mike Tyson saying, “Everybody has a plan until they get punched in the mouth.” According to Pongratz, Nokia’s presentations were interesting with a tilt towards compelling. “But more importantly, management appeared relatively upbeat and optimistic they can deliver even after this punch,” he wrote this week in a note to clients. “It is now up to Nokia to decide if they will punch back or get hit again.”
Thanks #NokiaAR for an insightful event in Helsinki. Some quick notes: 1) Massive MIMO coming in faster than expected - Nokia working on cost optimization, 2) Price pressure is real, 3)Nokia is excited about private wireless & E2E benefits for enterprise channel @DellOroGroup pic.twitter.com/j07B0L9ROE— Stefan Pongratz (@StefanPongratz) November 20, 2019
Nokia’s share price is down roughly 40% year-to-date, and its 1Q19-3Q19 RAN revenue share declined six percentage points relative to pre-Alcatel-Lucent merger days, inching closer towards the mobile infrastructure revenue share threshold that is typically recommended to realize sufficient scale to deliver competitive RAN costs, features, and performance, said Pongratz, who is a FierceWireless contributor.
Nokia has said it wants to be a player in China, and during the event, Nokia confirmed that China remains an extremely important business for the company; it expects overall Nokia sales in China to remain around the 2 billion Euro level annually. “At the same time, Nokia also suggested it is not inconceivable that the mix between wireless and fixed/other will change, with wireless possibly comprising a smaller share,” Pongratz said. “More importantly, Nokia appeared confident they can absorb some potential RAN share losses in China without impacting its ability to deliver competitive cost, features, and performance outside of China.”
There are signs that the role of non-Chinese players in a 5G world will not be as significant in China as they were in the LTE era. Meanwhile, the shift towards Massive MIMO-configured systems is accelerating at a much faster pace than expected while the price premium between Massive MIMO and non-Massive MIMO configured systems is trending below expectations, propelling suppliers to accelerate their cost optimization efforts. Nokia spent a good portion of the analyst event addressing some of the cost, feature, and performance concerns with its wireless business, according to Pongratz.
He also noted that connectivity to support Industrial IoT/Industry 4.0 is the primary driver behind Nokia’s renewed enterprise enthusiasm, including robust momentum with 120+ enterprise wins and 240 new partners. In addition, more countries are exploring how to allocate spectrum for verticals, the ecosystem of industrial devices is proliferating rapidly, and Nokia is optimistic the E2E approach will resonate with enterprises.
“If one of the objectives with these events is to convince the analysts there are reasons to be optimistic—consider the mission accomplished. We are also excited about the private wireless opportunity,” he said, noting that more research is needed to understand how important E2E will be for verticals, as Ericsson is racking up private wireless wins as well, without the same E2E portfolio.