Telefónica, S.A. (TEF - Free Report) is aiming to take a giant leap forward by deploying 5G services to 75% of Spain’s population by the end of the year. Accordingly, the company has inked agreements with Nordic firms – Nokia Corporation (NOK - Free Report) and Ericsson (ERIC - Free Report) – to provide essential telecommunications equipment for the nationwide deployment. The move underscores Telefonica’s concerted efforts to emerge as a forerunner in the European telecommunications market.
Nokia has been Telefonica’s preferred vendor since 2018 and has supported its 5G strategy with trials in the historical city of Segovia in central Spain. The telecommunications equipment provider undertook several initiatives to ascertain the capabilities of the carrier and enable local citizens and businesses to realize the potential benefits of high speed 5G data services. This groundwork seemed to have borne fruit and the company is apparently ready to deploy 5G services across the country. To its credit, Nokia is reportedly the only vendor to supply 5G radio technology to all of Telefonica’s 5G operations across Europe.
In particular, Nokia will offer AirScale Radio Access products in Spain to deliver low-latency, high-capacity broadband connectivity. This industry-first commercial end-to-end 5G solution will enable Telefonica to meet higher demand for data and optimize operations with low costs of ownership. Nokia’s 5G portfolio will provide a solid foundation to scale up Telefonica’s legacy network infrastructure within dynamic cloud environments, with a sharp focus on scalability, automation and performance. This, in turn, will enable the carrier to deliver 5G services with Unified Data Management, Signaling and improved network functions.
Telefonica has also roped in Ericsson for the rollout of 5G services. Ericsson will offer the carrier new 3.5Ghz radio equipment and software upgrades, with its engineers working round the clock to ensure that adequate 5G base stations are fully operational for the nationwide deployment. The Ericsson Radio System comprises hardware, software and services for radio, RAN Compute, antenna system, transport, power and site solutions. It enables smooth and cost-effective migration from 4G to 5G, supporting communications service providers to launch the avant-garde technology and grow 5G coverage faster. The company’s 5G radio access technologies provide the infrastructure required to meet the growing demand for high-bandwidth connections and support the real-time, low-latency, high-reliability communication requirements of mission-critical applications.
Notably, Ericsson has achieved a significant milestone with the commercial availability of its Standalone 5G NR software for service providers in the 5G mid and low bands. With this, the company has also taken a big step in the evolution of the 5G ecosystem to make it more pervasive across the globe. Ericsson currently has 108 commercial 5G agreements with operators (of which 58 are publicly stated) and includes 60 live 5G networks on four continents.
Owing to the wide proliferation of the smartphone market and subsequent usage of mobile broadband, user demand for coverage speed and quality has increased. Further, to maintain a superior performance with traffic increases, there is a continuous need for network tuning and optimization. Ericsson, being one of the premier telecom service providers, is much in demand among operators to expand network coverage and upgrade networks for higher speed and capacity. The Sweden-based telecommunications equipment provider is arguably the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide.
Riding on the individual core competencies of Nokia and Ericsson, Telefonica remains well poised to achieve its set target of 5G deployment in Spain. The 5G network is likely to enable vertical industries to introduce new businesses and promote direct and indirect cross-cutting benefits to primary sectors such as healthcare, tourism and automotive. It will also promote digitization of small and mid-size enterprises.
Telefonica currently has a Zacks Rank #3 (Hold). A better-ranked stock in the industry is Deutsche Telekom AG (DTEGY - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deutsche Telekom has a long-term earnings growth expectation of 10%.
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