Ericsson (ERIC - Free Report) recently inked a definitive agreement with Liberty Latin America Ltd. (LILA - Free Report) to accelerate the telecom service provider’s network modernization drive across the Latin America region. The three-year deal is likely to foster the development of cloud-based and virtualized mobile core network solutions and facilitate the carrier to significantly scale up traditional wireless networks for superior customer service.
Per the deal, Ericsson will deploy Cloud Packet Core, Cloud Unified Data Management and Policy, Cloud Voice over LTE, Network Functions Virtualization Infrastructure (NVFI) and Network Manager solutions to augment voice quality and ensure high data speed with low latency. At the same time, the solutions will improve data security and increase network resiliency, enabling Liberty Latin America to better manage network user data in a cloud-native environment. The end-to-end cloud infrastructure will further help optimize performance and support a seamless transition to 5G technology across Puerto Rico, Panama and the Caribbean islands.
With products based on open-source software and open interfaces, NVFI helps carriers to reap the benefits of the cloud by virtualizing physical network functions through support for virtual machines, containers, edge computing and several third-party options at the hardware infrastructure level. This, in turn, boosts network architecture flexibility while optimizing traffic through a distributed network.
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 services 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.
Notably, Ericsson has secured more than 93 commercial 5G agreements with unique communication service providers, of which 40 are live networks. The company is increasingly focusing on 5G system development to capitalize on the upcoming market opportunities. The company believes that standardization of 5G is the cornerstone for the digitization of industries and broadband. Moreover, Ericsson foresees mainstream 4G offerings to give way to 5G technology in the future.
Meanwhile, the impending deployment of 5G networks is expected to boost the adoption of IoT devices, with technologies like network slicing gaining more prominence. Currently, Ericsson is investing in its competitive 5G-ready portfolio to enable customers to seamlessly migrate to 5G. AI and automation remain key enablers for its business development, while recurrent contracts ensure a steady revenue stream.
The stock has lost 2.8% in the past year compared with the industry’s decline of 3%.
We are impressed with the inherent growth potential of this Zacks Rank #1 (Strong Buy) stock. Some other favorably-ranked stocks in the industry are InterDigital, Inc. (IDCC - Free Report) and Juniper Networks, Inc. (JNPR - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
InterDigital has a long-term earnings growth expectation of 15%. It delivered a positive earnings surprise of 99.5%, on average, in the trailing four quarters.
Juniper has a long-term earnings growth expectation of 8%.
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