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Nokia Strikes a $1.2 Billion Deal with China Mobile

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Deal covers equipment and services

Nokia (NOK) recently signed a one-year equipment and services deal worth ~$1.2 billion with China Mobile (CHL), the world’s largest mobile operator by subscribers.

The deal involves Nokia supplying the mobile operator with equipment and services covering areas such as wireless and fixed networks. Nokia and China Mobile also intend to cooperate in research as they strive to unlock new growth opportunities.

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Revenue fell at Nokia amid weak network sales

Telecom (telecommunications) equipment vendors such as Nokia are struggling to grow sales amid a slowdown in operator investments, as many large operators have completed the rollout of 4G (fourth-generation) networks. While the transition to 5G (fifth-generation) networks offers hope to telecom systems vendors, the meaningful commercial deployment of 5G networks is still years away.

Nokia’s revenue fell 8.4% year-over-year in the first quarter on weak network sales. Its peer Ericsson (ERIC) also reported a 9.2% revenue fall in the quarter.

China vying to lead the 5G network race

Nokia has had a good working relationship with China Mobile for many years. The latest deal expands upon the relationship and is expected to bolster Nokia’s campaigns for operator network spending in China, the world’s second-largest economy. China is vying alongside the United States to be a leader in the 5G network space, implying that there could be huge demand for 5G network equipment in the country.

In a document to the US communications regulator last month, T-Mobile (TMUS) and Sprint (S) appeared to warn that the United States risked falling behind China in the 5G network race should their merger proposal be rejected.

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