When Verizon (NYSE:VZ) announced a 5G supply deal with Samsung, markets assumed Nokia (NYSE:NOK) probably lost out. That is partly true but the stock is down sharply from the $5.00 level. After losing around 20%, the deal with Britain’s BT is a big win.
On Sep. 29, Nokia signed a 5G deal to become BT’s largest infrastructure partner. As the 5G RAN supplier, Nokia "will provide equipment and services at BT radio sites across the U.K." BT will get ahead of the competition by evolving the radio access network to 5G. In doing so, it will offer customers the best network. The win re-affirms Nokia’s 5G offering to the telecom industry.
While Verizon is an important customer, Nokia does not need to compete with Samsung to sell hardware and services at a low margin.
Samsung may afford to lose money, if not break-even in the best-case scenario. The smartphone giant is a diversified conglomerate that may lose on profits to get its name in the networking space.
Nokia is better off without the low-margin deal. It may drop customers that do not add to profits. Besides, Verizon will still need some interoperability solutions from Nokia to ensure compatibility. It will still have some business with Verizon.
Disclosure: the author owns shares of Nokia.
