Samsung joins the 5G RAN big leagues with $6.6bn Verizon deal

Samsung Electronics has won a KRW7.9trn ($6.6 billion) deal to supply network equipment to Verizon.

Nick Wood

September 7, 2020

3 Min Read
Deal Handshake

Samsung Electronics has won a KRW7.9trn ($6.6 billion) deal to supply network equipment to Verizon.

Details are scant; the Korean electronics giant merely disclosed the contract award in a stock exchange filing today. It began on 30 June this year and runs until the end of 2025. Its value is equivalent to 3.4 percent of Samsung’s 2019 group revenue and is – according to Yonhap News Agency – the largest network deal the company has ever won.

We’ve been left to speculate about precisely what this development entails, so that’s exactly what we’re going to do: chances are, Samsung’s success will come at the expense of Nokia.

Until now, Verizon has used Ericsson, Nokia and Samsung in its RAN. However, Rosenblatt analyst Ryan Koontz made headlines in July when he claimed that Verizon was preparing to oust Nokia and split its RAN equally between Ericsson and Samsung.

Unsurprisingly, none of the parties involved were willing to confirm these rumours at the time, but it looks like they were on the money.

On that note, money is one of the clues in all this. Koontz estimated in a report that Ericsson currently supplies around 50 percent of the equipment in Verizon’s RAN under a deal likely to be worth in the region of $1 billion per year. The four-and-a-half-year deal Samsung just bagged is worth just shy of $1.5 billion per year. In short: Samsung is not here to make up the numbers, someone else is going to be left out in the cold, and it looks for all the world like it is going to be Nokia.

Which of course is bad news for the Finnish kit maker. According to its most recent financial report, Nokia generated 34 percent of its revenue in the second quarter from North America, making it Nokia’s single most valuable region, edging out Europe on 31 percent. A blow to its US business is the last thing Nokia needs right now in light of its poor showing in Chinese operators’ recent 5G RAN tenders.

It also makes for a somewhat inauspicious start for Nokia’s new CEO, Pekka Lundmark, who took over from Rajeev Suri at the beginning of August.

With Huawei and ZTE blocked from the US RAN market for security reasons, it has generally been a happy hunting ground for European heavyweights Nokia and Ericsson. Outside Asia, Samsung used to be considered something of an also-ran – or also-RAN, if you like – until it made a strong statement of its intention to elbow its way into 5G when it unveiled an end-to-end network product portfolio in 2017.

In 2018, Samsung was chosen to help Verizon push ahead with its 4G LTE OpenRAN initiative. It was the start of what has been a fruitful open networking partnership: this August, Verizon announced the successful completion of what it claimed was the world’s first fully virtualised, end-to-end 5G data session. Samsung supplied a virtualised Central Unit (vCU); virtualised Distributed Unit (vDU); and radio units. That came a little over a month after Samsung launched its virtualised 5G RAN portfolio.

Now, with a multi-billion-dollar US RAN deal under its belt – and with more telcos steering clear of Huawei – Samsung looks on course to carve out a bigger share of the global networking market.

About the Author(s)

Nick Wood

Nick is a freelancer who has covered the global telecoms industry for more than 15 years. Areas of expertise include operator strategies; M&As; and emerging technologies, among others. As a freelancer, Nick has contributed news and features for many well-known industry publications. Before that, he wrote daily news and regular features as deputy editor of Total Telecom. He has a first-class honours degree in journalism from the University of Westminster.

Get the latest news straight to your inbox.
Register for the newsletter here.

You May Also Like