Nokia as an investment (Part 3)

Stocks
, , , ,
4284

what is the significance of this agreement?

Press Release

Nokia and Deutsche Telekom begin deployment of multi-vendor Open RAN network in Germany

  • New deal will see companies partner to deploy a commercial Open RAN network in Germany; realization of MoU signed at MWC 2023
  • Deal marks a significant return for Nokia into Deutsche Telekom’s network
  • Nokia to provide high-performance Open RAN compliant AirScale solution; Fujitsu will partner with Nokia in the deal with open-fronthaul compliant Radio Units.

  • Deal highlights the maturity and performance of Nokia’s O-RAN CU/DU; Confirms Nokia’s industry leadership through its anyRAN approach which offers mobile operators more choice in building 5G networks

12 December 2023

Espoo, Finland – Nokia and Deutsche Telekom AG (DT) today announced that they have begun to deploy a multi-vendor Open RAN network with Fujitsu in Germany. The technology is fully integrated into DT’s live commercial network and the initial cluster will provide 2G, 4G, and 5G commercial services to customers in the Neubrandenburg area of Northern Germany. The deal marks a significant return for Nokia into DT’s commercial network and is the realization of the Memorandum of Understanding signed by both companies at MWC 2023. Nokia will replace the incumbent vendor in the deal. The project is already underway and will be extended from Q1 2024 onwards.

Nokia will deploy its commercial Open RAN compliant, high-performance, energy efficient 5G AirScale baseband solution in DT’s commercial network including Fujitsu Radio Units. Nokia’s O-RAN solution will ensure DT has full feature, service, and performance parity with classic purpose-built RAN. Both companies have also agreed to explore O-RAN technology around Cloud RAN, 3rd party CaaS, RIC, SMO, and energy efficiency.

This is another example of Nokia’s anyRAN approach, which aims to build future-ready radio access networks together with an ecosystem of industry partners to unlock collaborative advantage. Nokia anyRAN is designed to give mobile operators and enterprises more flexibility in building their networks. For Open RAN, Nokia develops the required Open Fronthaul features on top of its high-performance RAN software, ensuring co-existence and feature performance parity with purpose-built RAN. Nokia baseband solutions can be combined with both Nokia and third-party radios. For operators, this ensures a smooth evolution path towards hybrid, Cloud RAN, and O-RAN deployments.

Claudia Nemat, Board Member of Deutsche Telekom AG for Technology and Innovation commented: “Open RAN is crucial to Deutsche Telekom’s strategy to promote greater supplier diversity and accelerate customer-oriented innovation in the radio access network. Our commercial deployment with Nokia and Fujitsu is an important step to prepare multi-vendor Open RAN as the technology of choice for future networks.”

Tommi Uitto, President of Mobile Networks at Nokia, said: “We are proud to partner with Deutsche Telekom, the largest mobile network operator in Europe, to start deploying a commercial multi-vendor Open RAN network in Germany with Fujitsu. Together, we are making Open RAN a commercial reality. Nokia’s industry-leading radio access portfolio and baseband software ensures that multi-supplier O-RAN systems can be deployed without any compromises in terms of performance, energy efficiency, or security. Together with our ecosystem of partners, we are providing more choice and a higher performance in Open RAN solutions to our customers than they will see from other RAN suppliers. This is another step highlighting Nokia’s commitment to Open RAN.”

Resources

Webpage: Nokia AirScale Cloud RAN

Webpage: Nokia anyRAN

Webpage: Nokia AirScale Baseband

Whitepaper: Cloud RAN: A Guide to Acceleration Options

12 Likes
4285

What should have been in there? Hardly anyone seemed to believe the previous 2026 targets anyway. In my opinion, a 13% operating margin (OP) for 2026 would already be a good defensive victory.

13 Likes
4286

Nokia Cloud RAN and Open RAN Solution Roadmap

The Nokia anyRAN approach ensures high performance, energy efficiency, resiliency, and security across hybrid networks of Cloud RAN and purpose-built RAN.

  • Read our Cloud RAN and Open RAN Solution Roadmap for details about our solution and timeline.

  • NOK Challenges!

IMG_0705
IMG_07051169×1053 229 KB

3 Likes
4287

At this point, one really wishes that Nokia had pulled a rabbit out of a hat.

3 Likes
4288

“According to him, Nokia is strengthening its position in the defense industry by acquiring the US network equipment and software company Fenix. Nokia is not disclosing the value of the deal.”

9 Likes
4289

According to the new target, the operating margin measuring profitability will be at least 13% by 2026, whereas the target was previously 14%.

  • that change doesn’t have much significance when setting the forecast,
    except for the market…

  • what do Nokia & the market believe in?

7 Likes
4290

Not necessarily that big, but defense industry networking products

https://enlightenment-cap.com/2021/06/22/enlightenment-capital-invests-in-edge-network-provider-fenix-group/

16 Likes
4291

https://www.modirum.com/fenix-group-and-modirum-security-technologies-form-strategic-partnership-to-deliver-groundbreaking-tactical-network-c2-solutions-globally/

Nokia intends to accelerate the investments in developing further specific defense solutions leveraging its IPR portfolio following the most advanced 3GPP standards and security requirements.

5 Likes
4292

Surprisingly small change in operating profit. It should support the share price’s upward movement.

10 Likes
4294

Well, with a revenue of ~23.5bn, that’s 4.5 cents of EBIT, so easily 50 cents off the valuation (which has now (partially?) materialized)

but that’s for 2026 → now the market is of course considering how credible that is and what 24 and 25 (+ this year) will look like..

7 Likes
4296

A few of my own thoughts on today’s news.

  • The market is currently digesting, above all, the preliminary assumptions for 2024.
    • Perhaps there is a little uncertainty in Infra (Network Infrastructure) as fixed networks are expected to pick up speed in the US in the second half of the year. If everything goes according to plan, however, Infra will deliver a strong result.
    • AT&T will cause a significant dent in Mobile’s results in the coming years. Costs down, but where will the extra revenue come from? They are competitive, but potentially a bigger rescue here can only come if the private/enterprise side performs very well by, say, 2030. On the other hand, I wouldn’t be surprised anymore if this part was bought out – the sale price could potentially be surprisingly good.
    • Cloud and Network Services are expected to develop well.
    • In Technologies, it’s still a complete question mark whether a settlement will be reached and when.

In the end, this doesn’t provide much new information. For me, perhaps the main takeaway is a slight disappointment regarding that statement on Mobile’s operating profit. But as a whole, Nokia remains competitive and reasonably stable.

  • And then the longer term. The adjusted operating margin target change (for 2026) from 14% → 13% isn’t dramatic in itself, as the market didn’t believe in it anyway. However, AT&T causes that dent, so in that sense, the loss of the RAN account really stings. And in the future, Nokia will now have to compete on price as well, as they can’t afford to lose any other accounts.

  • I haven’t studied Fenix Group closely, but on a conceptual level, it’s an interesting acquisition combined with Finland’s NATO membership and the doors it might potentially open. Is this a competitor to Bittium – an interesting situation in 그 sense as well? If they are, why has the demand been directed at this one when they are side-by-side with Bittium in Oulu? Edit: An analyst commented on the matter in the Bittium thread. So, not a completely direct competitor, and especially the market areas differ, at least for now.

  • Deutsche Telekom..

“We have been out of that network since 2017 and now we are making a comeback there through ORAN technology, so that is a significant win for us,” Lundmark said.

Perhaps the best part here are statements like these. As a contract, it’s certainly not particularly large, at least for now. It’s a different matter if Huawei is ripped out of networks at some point; this could pave the way forward.

Edit: By the way, there is an interesting aspect here: Nokia is collaborating with Fujitsu. And in AT&T’s alleged ORAN network, Ericsson and Fujitsu are combining. In that regard, many are surely following this… and certainly not least AT&T.

This comment from Uitto could be taken as a jab.

Together with our ecosystem of partners, we are providing more choice and a higher performance in Open RAN solutions to our customers than they will see from other RAN suppliers.

:laughing:

26 Likes
4297

Analyst comments on today’s Nokia news:

9 Likes
4298

Fenix Group seems to be active over on LinkedIn, with news posted there from time to time.

They introduce themselves like this:
image

https://www.linkedin.com/company/fenix-group-inc.

16 Likes
4299

The takeaway so far today is, in a word, a disappointment. I still believe that MN should be spun off into its own company, but I won’t go into more detail about that here, as I wrote extensively about it recently (Nokia sijoituskohteena (Osa 3) - #4274 käyttäjältä Mustathmir - Osakkeet - Inderes forum).

@Atte_Riikola also stated that “. The profitability target for Cloud and Network Services is, in our opinion, quite modest, as there should be scalability within the business group.” Let’s remember that already in the 2021 Capital Markets Day, a margin of 8-11% was planned for CNS for 2023, while now the target for 2026 is 7-10%. The target setting is very soft, and thus it will likely be easy to reach the level required for bonuses…

NI will likely continue strongly, but MN is like a millstone that ruins the results of the entire group.

This raises a couple of questions:

  • Is there something positive in Nokia’s targets that I have missed?

  • Does the current management have the ability or even sufficient desire to generate shareholder value?

These are not intended as rhetorical questions; rather, I would be happy to hear open-minded answers with justifications.

5 Likes
4301

Apparently Investtech is rubbing salt in the wounds, the “sell” is Nokia

2 Likes
4302

Tick-tock… the clock is ticking toward the end of the year and not a peep about the patents (apparently) today either, so things are looking good on that front once again.

1 Like
4305

“If negotiations are not concluded by the end of 2023, but are instead resolved in 2024, Nokia expects to benefit more from payments related to prior periods.”
I noticed that myself regarding the patents.
So some kind of discount has been promised to the Chinese if the names are on paper by the end of 2023🤔

5 Likes
4306

I don’t think it means that.

Rather, Nokia provided guidance for patent revenues for 2024 — operating profit over EUR 1.0 billion — on the assumption that agreements with the Chinese companies have been concluded.

However, if the agreements shift to 2024… In that case, the Technologies unit’s result will be very weak in 2023, and on the other hand, particularly strong in 2024, because retroactive payments would cover a two-year period — i.e., an even longer period.

So, here is that guidance:

If these negotiations are concluded by the end of 2023, Nokia expects the Nokia Technologies business group’s 2024 operating profit to be over EUR 1.0 billion. If the negotiations are not concluded by the end of 2023, but are instead resolved in 2024, Nokia expects to benefit more from payments related to previous periods.

And conversely… If the agreements are signed before the end of the year, the Technologies unit’s 2023 result will be particularly strong, as there will be retroactive income covering two years.

I understand your thinking @LaRambla, that wording is a bit tricky.

27 Likes
4307

As an amateur, I’m wondering if it really matters whether the patent payments come in this year or next year? The difference is mainly an accounting one. Secondly, what interests me most at the moment is the distribution of profits—meaning whether Nokia will distribute its fat net cash as dividends or share buybacks, as originally communicated. After all, the stock’s return relies entirely on those two. It seems that no support for shareholder value is coming from the share price performance, at least in the short term.

3 Likes
4309

BARRONS

12.12.2023

  • There was some good news for Nokia—and its shares—as the company said it has begun rolling out its commercial open RAN network with Germany’s Deutsche Telekom.

6 Likes