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A Look at the Nokia–VimpelCom Deal

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Managing the network across Russia

Nokia (NOK) and VimpelCom (VIP) recently struck a multiyear deal that expands Nokia’s managed services contract with the carrier. Under the new agreement, VimpelCom has handed Nokia the responsibility of managing its network operations and providing field maintenance support for its networks across most of Russia. 

The carrier had already tapped Nokia to provide managed services for portions of the network in central Russia. The new deal also means Nokia would manage VimpelCom’s networks running on equipment provided by its rivals.

Financial details of the deal were not disclosed, but it should have a positive impact on Nokia’s top line. The company generated revenues of 23.6 billion euros in 2016. The chart above shows Nokia’s annual revenue trend.

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Enhancing network quality

For VimpelCom, expanding its network management contract with Nokia should help it enhance the quality of its networks and allow it to operate more efficiently.

Opportunity to settle scores

The expanded contract with VimpelCom offers Nokia an opportunity to settle scores with rivals such as Cisco Systems (CSCO), Ericsson, and Huawei. Cisco Systems and Ericsson have particularly threatened Nokia’s business by teaming up to bolster their competition. 

The deal with VimpelCom should not only yield more revenues for Nokia, but it should also give it an opportunity to expand its market share by replacing rival systems from the carrier’s network.

In pursuit of network upgrade contracts

The networking market is heating up as providers work to outdo one another. In particular, they are racing to win contracts from carriers upgrading their networks to support the growing demand for high-speed connections. AT&T (T) and Verizon (VZ) are some of the carriers investing in network upgrades as they push toward 5G network speeds.

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