Ericsson, Deutsche Telekom Sign Multi-Year 5G Deal; Analyst Bullish On ERIC

Ericsson (ERIC) and Deutsche Telekom AG (DTEGY) have announced an expanded partnership with a new multi-year deal to deploy the service provider’s 5G Radio Access Network (RAN) across Germany.

Under the terms of the deal, several mobile sites will be upgraded to the latest 5G technology standard over the next few years using Ericsson Radio System products and solutions. The 5G deal is in addition to a multi-RAN agreement following modernization of Deutsche Telekom’s 2G, 3G and 4G radio networks over the past two years.

ERIC’s Spectrum Sharing solution will also be deployed, allowing Deutsche Telekom to dynamically manage 4G and 5G traffic in its network through efficient use of existing spectrum, enhancing coverage, performance and mobility.

Claudia Nemat of Deutsche Telekom AG commented: “We are pleased to have found a leading 5G supplier in Ericsson as a partner, who has also convinced us in the past in the modernization of our mobile access network. After the reliable and on-time modernization, the bar for the 5G roll-out in the antenna network is naturally also high.”

As well as public mobile networks, the two companies also work closely together when it comes to equipping industrial companies with private mobile networks, so-called campus networks. Most recently, the partners jointly equipped individual BMW and Osram (OSAGF) plant sites.

Deutsche Telekom, the largest telecom service provider in Europe by revenue, has seen shares climb by 9% year-to-date, while Ericsson has surged 34%. Looking ahead, ERIC scores a Strong Buy Street consensus, with Deutsche Telekom showing a slightly more subdued Moderate Buy consensus.

Speaking for the bulls, Charter Equity’s Edward Snyder wrote on July 17 “COVID notwithstanding, 2020 is playing out well for Ericsson.” He made the comment after Ericsson reported a $0.03 beat for the June quarter on strong 5G demand in North America and China. Impact from COVID-19 was minimal in the June period while demand for 5G equipment was strong in North America and China.

Management doesn’t provide financial guidance, but according to Snyder, conference call comments suggest September period (3Q20) revenue and EPS of $6.3B and $0.17 respectively, above consensus revenue and EPS estimates of $6B and $0.15.

The analyst continued: “The lumpy nature of network rollouts makes revenue timing difficult to predict, but between the timing of deployments in China, the U.S. and Europe and changes in the competitive environment, Ericsson’s fortunes in 5G are improving and already off to a strong start in 2020.” (See ERIC stock analysis on TipRanks)   

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Harriet Lefton
Harriet Lefton, originally from the UK, began her career as a journalist specialising in the niche world of metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer. Now she has turned her attention to the world of financial blogging, covering US stocks, analysts and all manner of things finance-related.

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