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Ericsson Inks $3.5B Deal With T-Mobile for 5G Deployment

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Ericsson (ERIC - Free Report) recently announced that it has inked a $3.5 billion multi-year deal with T-Mobile US, Inc. (TMUS - Free Report) to support the latter’s nationwide 5G network deployment. Per the agreement, the Swedish high-end equipment manufacturer will provide the U.S. mobile carrier with the latest 5G New Radio (NR) hardware and software, compliant with 3rd Generation Partnership Project standards.

Notably, T-Mobile’s installed base of Ericsson Radio System radios will be able to run 5G NR technology with simple remote software installation. The agreement entails Ericsson's digital services solutions including dynamic orchestration, business support systems and Ericsson Cloud Core. As a result, this will help T-Mobile to bring innovative and groundbreaking 5G experiences to customers at a rapid pace.

T-Mobile is laying the foundation for 5G across the nation and together with Sprint Corporation (S - Free Report) it expects to amplify the 5G revolution. T-Mobile will leverage Ericsson’s market-leading 5G portfolio to expand existing LTE capacity needs. The latest move marks a key milestone for both companies. Ericsson has decided to increase investments in the United States to stay ahead of competition and better support its business customers with accelerated 5G deployments. 5G will boost the digital transformation in industries, enabling new use cases in areas such as Internet of Things, automation, transport and Big Data among others. The 5G networks hold promise to deliver high data speeds with reliability, low latency and extreme device densities.

Ericsson is focusing on 5G system development and has undertaken notable endeavors to position itself as a market leader in the technology. The company believes that standardization of 5G is the cornerstone for digitization of industries and broadband. It plans to accelerate planned cost cuts and efficiency measures, and focus on core business of selling networking equipment prior to the expected roll-out of 5G networks.

5G technology is set to play a major role in growing industry digitization. Per Ericsson’s 5G Business Potential report, industry digitization investments will generate an estimated $619 billion revenue opportunity for telecom operators by 2026. It will allow them to profit from an additional 36% revenue potential by 2026 from 5G-enabled market opportunities.

Over the past three months, shares of Ericsson have gained 10.9% compared with 10% growth for the industry.

Over the same period, shares of T-Mobile have gained 12.4% compared with 9.6% growth for the industry. Both the companies expect to ride higher on the back of such strategic deals.

Ericsson currently has a Zacks Rank #3 (Hold). A top-ranked stock in the industry is Ribbon Communications Inc. (RBBN - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ribbon Communications has a long-term earnings growth expectation of 12%. It beat earnings estimates in each of the trailing four quarters, the average surprise being 168.1%.   

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